Douglas Arner et al on The financialisation of Crypto: Designing an international regulatory consensus (CLSR)

"The financialisation of Crypto: Designing an international regulatory consensus"
Douglas Arner, Dirk A Zetzsche, Ross P Buckley, Jamieson M Kirkwood
Computer Law and Security Review, Volume 53
Published online: May 2024

Abstract: Bitcoin was presented in 2008 as a technology-driven alternative to the weaknesses of the traditional monetary, payment and financial systems dramatically highlighted by the Global Financial Crisis of 2008. The underlying technology – blockchain and distributed ledger technology – was posed as a technological solution to the problems of trust, confidence, transparency and behaviour traditionally addressed in finance through a framework of law, regulation and institutions (including markets and the state). Cryptocurrencies, blockchain, distributed ledger technology and decentralised finance were designed to address the weaknesses and risks in traditional finance. Yet fifteen years of evolution culminating in the Crypto Winter of 2022–23 have demonstrated that crypto is neither special nor immune and has come to feature all the classic problems of traditional finance. As the crypto ecosystem has evolved, the market failures and externalities of traditional finance have emerged – a process we term the ‘financialisation’ of crypto. These include conflicts of interests, information asymmetries, centralisation and interconnections, over-enthusiastic market participants, plus agency, operational and financial risks. We argue that (a) in order to develop successfully going forward, the crypto ecosystem needs to assimilate the centuries of experience of underpinning traditional finance with law and regulation, and (b) in the aftermath of the Crypto Winter, an international consensus is crystalising in respect of the regulation of the crypto ecosystem. We argue regulatory systems are now being instituted to ensure the proper functioning of crypto and its interconnections with traditional finance. The lessons of the financialisation of crypto also apply more broadly: appropriately designed regulatory systems are central to financial market functioning and development.

Zetzsche, Buckley, Arner, Didenko & Romburg on Sovereign Digital Currencies: The Future of Money and Payments? (SSRN)

"Sovereign Digital Currencies: The Future of Money and Payments?"

Dirk A. Zetzsche, Ross P. Buckley, Douglas W. Arner, Anton N. Didenko, Lucien van Romburg

University of Hong Kong Faculty of Law Research Paper No. 2020/053

Published in October 2020

Abstract: Technology is reshaping money and payment systems in unprecedented ways. Catalysts include the launch of Bitcoin in 2009, the evolution of both decentralised and centralised technologies, the announcement of Libra in 2019, live trials of China’s Digital Yuan, and COVID-19, both in 2020.

     This paper focusses on how technology might reshape money and payments going forward. It considers the policy issues and choices associated with cryptocurrencies, stablecoins and sovereign digital currencies and emphasises there is no single model for sovereign digital currency design. The catalysts reshaping monetary and payment systems challenge regulators. While Bitcoin and its thousands of progenies could be ignored safely by regulators, Facebook’s proposal for Libra, a global stablecoin, brought an immediate and potent response from regulators globally. This proposal by the private sector to move into the traditional preserve of sovereigns – the creation of currency – was always likely to trigger such a regulatory response and also the launch of sovereign digital currencies by central banks. China has moved first with its Digital Yuan – an initiative that may well in time provoke a chain of central bank digital currency issuances around the globe.

     COVID-19 is driving digitalisation to new heights, particularly in electronic payments. In this context, we argue that central banks should focus not on rolling out novel new forms of sovereign digital currencies, but rather on transforming their payment systems. Further into the future, we expect domestic money and payment systems to involve public central banks cooperating with (new and old) private entities to launch digital currencies which underpin better monetary and payment systems at the domestic and international levels.

"Hong Kong Shaping up to Become the Next Fintech Hub"

"Hong Kong Shaping up to Become the Next Fintech Hub"

Diana Ngo
The Cointelegraph
22 May 2015

Earlier this month in Hong Kong, the Office of the Hon Charles Mok, Legislative Councillor (IT), and the Office of the Hon Kenneth Leung, Legislative Councillor (Accountancy), joined hands and organized a seminar to discuss the opportunities and regulatory challenges that are surrounding financial innovation startups, or the so-called fintechs.

     The event, sponsored by KPMG and prominent startup and Internet organizations, was intended to gather actors from various niches composing the market and hear their insights regarding the overall fintech industry.

     The purpose was also to explore how Hong Kong's law and regulation needs to be shaped in order to meet with the city's latest ambition of becoming the next financial technology hub....

     Professor Douglas Arner from the Faculty of Law, HKU, a speaker at the seminar, believes that Hong Kong is a world leader in many fields, including infrastructure, payments and settlements, data and security, privacy policy and risk management, and regulation.

     According to many of the speakers, Hong Kong, a traditional financial center, has valuable resources and the capacity to "[become] Asia's fintech hub." However, the city lags behind when it comes to Internet finance and innovative fintech business models....  Click here to read the full article.