Blockchain and Cryptocurrency: International Legal and Regulatory Challenges

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blank Dedications About the authors Acknowledgements List of Abbreviations 1 Introduction The Internet of Things Blockchain Cryptocurrency Smart contracts Decentralised autonomous organisations Global regulation Initial coin offerings Natural resources industry General Data Protection Regulation The Metaverse 2 What are blockchain and cryptocurrency? Blockchain Introduction Characteristics of DLT Cryptocurrency Introduction 3 Regulatory and legal challenges Regulatory challenges Cryptoassets Regulation of crypto-assets Regulation of DLT Legal challenges Criminal Money laundering Data privacy/protection Does a user’s public key constitute ‘personal data’? Ownership of IP of information contained in the blockchain What is the legal status of decentralised autonomous organisations? Is the data on the blockchain ‘property’ for the purposes of the Law of Property Act 1925? Jurisdictional issues What is the effect of this? Contracts Smart contracts – what are they? Who are the parties to a ‘smart contract’? What are the benefits of a ‘smart contract’? What are the ingredients for a ‘smart contract’? Is a ‘smart contract’ sufficient to govern a contractual relationship on its own? Where does the liability fall under a ‘smart contract’? 4 Global regulation: UK and EU Member States Softly, softly, catchee monkey Choice of jurisdiction Declaration for European Blockchain Partnership The EU Blockchain Observatory and Forum Regulation and treatment in the UK What are the requirements of being an authorised person? How is currency regulated across the EU? MiFID II controversies Regulation in other European jurisdictions (case studies) Estonia France Malta Jersey Tax considerations 5 Global regulation: North America Canada Mexico United States Licensing Money transmission laws Regulatory guidance 6 Global regulation: the rest of the world Introduction Divergent philosophies on cryptocurrency and blockchain regulation China Gibraltar Hong Kong India Israel Japan Kazakhstan, Belarus and Estonia Kyrgyz Republic South Korea Russia Switzerland 7 Initial coin offerings Introduction What is an ICO? What is the regulatory picture in the United States? When is an ICO an investment contract? The ‘Howey Test’ ICOs and the Howey Test Investment companies What is the regulatory position in the UK? How will ICOs be regulated in the UK? Restrictions of marketing an ICO which is a CIS or an AIF E-Money Tokens Unregulated Tokens Facilitating Regulated Payment Systems The limited approach of the European Union Current EU provisions The Chinese case study of prohibition 8 The Internet of Things Introduction What is the IoT? Security problems with the IoT How does a director mitigate this security concern? Who owns the data collected through the IoT? UK regulation of the IoT EU regulation of the IoT How does GDPR apply to the IoT? Will the ePrivacy Regulation apply to the IoT? What is the Cybersecurity Certification Framework? Why does the Network Infrastructure Security Directive (‘NISD’) not apply to the IoT? US regulation of the IoT Voluntary guidance in the US So who owns the data? 9. Right to be forgotten and right to erasure Introduction Right to erasure Right to be forgotten Fundamental issues with right to erasure/right to be forgotten and their enforcement Methods of data protection and data privacy What are the effects on compliance if data is pseudonymised? The right to amendment Other DLTs and GDPR compliance 10. Environmental (Natural resources), Social, and Governance Metrics Introduction Regulatory reform What is the key regulatory question? What other regulatory issues need to be addressed? Decentralisation Areas of application Non-renewables and intermediaries Renewables and electricity The reality Digitisation Information storage, transparency and real-time tracking Distributed technology and the energy market Obstacles for blockchain in the natural resources industry and energy sector Blockchain as a disruptive technology Legal issues Current regulation Strong and weak smart contracts Data privacy Public or private Security implications for nodal location and access Moving forward 11. Decentralised autonomous organisations: regulation and liability Understanding decentralised autonomous organisations The legal status and other issues around DAOs Risks 12. The Metaverse The Metaverse’s Regulatory Framework Contract Intellectual Property Trademarks Copyrights Patents Regulation of behaviour The jurisdictional issue Appendix 1 General Data Protection Regulation Appendix 2 Cryptoassets Taskforce: final report (October 2018) Appendix 3 Cryptocurrencies and blockchain – Legal context and implications for financial crime, money laundering and tax evasion (European Parliament, July 2018) Index