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2021 | OriginalPaper | Buchkapitel

5. Regulation of Blockchain Technology: An Overview

verfasst von : Pierluigi Martino

Erschienen in: Blockchain and Banking

Verlag: Springer International Publishing

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Abstract

The adoption of blockchain technology by the banking industry entails significant regulatory issues, since the technology can pose several challenges to existing legal and regulatory frameworks. This chapter addresses the main regulatory issues in blockchain technology. After presenting the main risks and problems associated with the use of the technology and its main applications, the chapter outlines the responses undertaken by regulators and authorities around the world with a specific focus on both the US and the EU context.

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Vorheriges Kapitel Blockchain and Banking Business Models

Nächstes Kapitel Final Remarks

Such risks are tied not to the blockchain itself, however, but rather to the nature of cryptocurrencies.

The registration provisions require that people disclose certain information to investors and that the information be complete and not materially misleading.

The commission and federal courts frequently use the “investment contract” analysis to determine whether unique or novel instruments or arrangements, such as digital assets, are securities subject to federal securities laws. Specifically, based on the Howey Test formulated by the US Supreme Court, an “investment contract” exists when money is invested in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others. Accordingly, whether a particular digital asset at the time of its offer or sale meets the Howey Test depends on the specific facts and circumstances of the case.

CFTC Backgrounder on Oversight of and Approach to Virtual Currency Futures Markets.

As set forth in Section 2(c)(2)(D)(ii)(III)(aa) of the Commodity Exchange Act, pursuant to Section 742(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

“2011 MSB Final Rule”. Bank Secrecy Act Regulations—Definitions and Other Regulations Relating to Money Services Businesses, 76 FR 43585 (21 July 2011).

FinCEN’s regulations define the term “money transmitter” to include a “person that provides money transmission services” or “any other person engaged in the transfer of funds”.

The Guidance introduced the term “convertible virtual currency”, defining it as “a type of virtual currency that either has an equivalent value as currency, or acts as a substitute for currency, and is therefore a type of ‘value that substitutes for currency’”. Thus, as money transmission involves the acceptance and transmission of value that is a substitute for currency by any means, transactions denominated in convertible virtual currencies will be subject to FinCEN regulations.

For instance, it provides examples of how FinCEN’s money transmission regulations apply to several common business models involving transactions in CVCs (e.g. P2P exchangers, CVC wallets, etc.) and how specific business models involving CVC transactions may be exempt from the definition of money transmission (e.g. CVC P2P trading platforms, dApp developer status, etc.).

AMLD5 was published in the Official Journal of the European Union on 19 June 2018, and Member States had to transpose this new EU Directive in their national AML/CFT legislation by 10 January 2020.

The survey questions were designed to determine how a given Member State had transposed MiFID II into its national law and, based on that transposition, whether a sample set of six crypto-assets issued in an ICO qualified as “financial instruments” under their respective national laws.

“Financial instruments” are defined in Article 4(1)(15) of MiFID II as those “instruments specified in Section C of Annex I”. These include “transferable securities”, “money market instruments”, “units in collective investment undertakings” and various derivative instruments.

Where crypto-assets qualify as transferable securities or other types of MiFID financial instruments, a full set of EU financial rules, including the Prospectus Directive, the Transparency Directive, MiFID II, the Market Abuse Directive, the Short Selling Regulation, the Central Securities Depositories Regulation and the Settlement Finality Directive, are likely to apply to their issuer and/or firms providing investment services/activities to those instruments.

The results of the survey highlighted that, in the course of transposing MiFID into their national laws, the Member State NCAs did not define the term financial instrument in the same way. Some employed a restrictive list of examples to define transferable securities, while others used broader interpretations.

A crypto-asset will qualify as electronic money as defined in point (2) of Article 2 of the EMD2 only if it satisfies each element of the definition: Electronic money means “electronically, including magnetically, stored monetary value as represented by a claim on the issuer which is issued on receipt of funds for the purpose of making payment transactions as defined in point 5 of Article 4 of [PSD2], and which is accepted by a natural or legal person other than the electronic money issuer”.

These amendments came into force on 1 April 2017.

The act was amended in 2016 together with the PSA.

Japan’s FSA began enforcing the 2019 changes to the PSA and FIEA in May 2020.

The concept refers to the rights set forth in Article 2, paragraph 2 of the FIAE that are represented by the proprietary value transferable by means of an electronic data processing system but limited only to proprietary values recorded in electronic devices or otherwise by electronic means.

Under the FIAE, tokens issued in STOs are understood to constitute “collective investment scheme interests”, which form when the following three requirements are met: (i) investors (i.e. right holders) invest or contribute cash or other assets to a business (ii) the cash or other assets contributed by investors are invested in the business, and (iii) investors have the right to receive dividends of profits or assets generated from investments in the business. Thus, tokens issued under STOs would constitute ERTRs if these three requirements are satisfied.

The People’s Bank of China (PBOC), the Ministry of Industry and Information Technology (MIIT), the China Banking Regulatory Commission (CBRC), the China Securities Regulatory Commission (CSRC) and the China Insurance Regulatory Commission (CIRC).

Information Sheet 225 Initial coin offerings and crypto-assets (INFO 225), updated in May 2019.

ICOs and crypto-assets that are not financial products, meaning that they are not regulated under the Corporations Act, may be still subject to other regulations and laws, including the Australian Consumer Law, which relates to the offering of services or products to Australian consumers and prohibits misleading or deceptive conduct in a range of circumstances, including in the context of marketing and advertising.

In its Risk Assessment Report (2019), the EBA presented the status of the adoption of new technologies, such as blockchain, in EU banks.

This regulation replaced the Data Protection Directive 95/46/EU, which had been adopted in 1995.

This study was written by Dr Michèle Finck at the request of the Panel for the Future of Science and Technology (STOA) and managed by the Scientific Foresight Unit within the Directorate-General for Parliamentary Research Services (EPRS) of the Secretariat of the European Parliament.

The right to erasure (“right to be forgotten”) provides that an individual can request that an organisation delete his/her personal data in some circumstances—e.g. where they are no longer necessary for the purposes for which they were originally collected or where the individual has withdrawn their consent.

Specifically, Finck argues that it can be easier for private and permissioned blockchains to comply with these legal requirements than with public and permissionless blockchains, since it is easier to design private and permissioned blockchains in a manner that is compatible with EU data protection. As explained in previous chapters, this is because private blockchains are closed systems between pre-defined participants in which a single entity who sets the rules can have ownership and control over the whole blockchain, thus allowing the data to be treated in a compliant manner.

The EDPB is an independent European body that contributes to the consistent application of data protection rules throughout the EU and promotes cooperation between the EU’s data protection authorities.

Article 8-ter, Law 11 February 2019, no 12 (Simplification Law). According to the law, smart contracts satisfy the requirement of written form prior computerised identification of interested parties by means of a process with requirements established by the Digital Italy Agency with guidelines; the guidelines must be adopted within 90 days from the entry into force of the conversion law of this Legislative Decree. However, the Agid has yet to issue any such guidelines.

The reference is to the “Study on Blockchains: legal, governance and interoperability aspects (SMART 2018/0038)” carried out by the Spark Legal Network, Michèle Finck, Tech4i2 and Datarella (together also referred to as the Consortium).

Contract law applies to smart contracts provided that they qualify as legal contracts.

Similarly to the GDPR, the California Consumer Privacy Act of 2018 (CCPA) gives consumers more control over the information that businesses collect about them by granting new privacy rights to California consumers, including the right to know which personal information a business collects about them and how it is used and shared, the right to delete personal information collected about them (with some exceptions) etc.

AB 2658 (Calderon, Chapter 875, Statutes of 2018, G.C. 11546.9) required that the Secretary of the Government Operations Agency appoint a blockchain technology working group and chairperson by 1 July 2019.

The UETA aims to remove legal barriers that prevented the effective use of electronic media by making electronic records and signatures equal to paper records and wet signatures. Like the UETA, the ESIGN establishes legal parity between electronic records and signatures and their paper and ink counterparts.

HB 2417. An Act amending Section 44-7003, Arizona revised statutes; amending Title 44, Chapter 26, Arizona revised statutes, by adding Article 5; relating to electronic transactions.

The Blockchain Provisions apply to blockchain information services in China, which are defined as services providing information to the public through websites or applications based on blockchain technology or systems.

The regulatory framework requires entities to have adequate technological resources and risk management arrangements, as well as the necessary human resources and organisational competence.

Including privacy (a key regulatory challenge for privacy and blockchain systems in Australia is the need to comply with the Privacy Act 1988), security of blockchain systems, integrity of data and the legal status of smart contracts.

For instance, the Financial Action Task Force (FATF) has issued global, binding standards to prevent the misuse of virtual assets for money laundering and terrorist financing in order to ensure that virtual assets are treated fairly by applying the same safeguards as the financial sector.

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Titel: Regulation of Blockchain Technology: An Overview
verfasst von: Pierluigi Martino
Verlag: Springer International Publishing
Buch: Blockchain and Banking
Print ISBN: 978-3-030-70969-3

Electronic ISBN: 978-3-030-70970-9

Copyright-Jahr: 2021
DOI: https://doi.org/10.1007/978-3-030-70970-9_5