Beyond financial regulation of crypto-asset wallet software: In search of secondary liability external link

Barbereau, T. & Bodó, B.
Computer Law & Security Review, vol. 49, num: 105829, 2023

Abstract

Since Bitcoin, the blockchain space considerably evolved. One crucial piece of software to interact with blockchains and hold private-public key pairs to distinct crypto-assets and securities are wallets. Wallet software can be offered by liable third-parties (‘custodians’) who hold certain rights over assets and transactions. As parties subject to financial regulation, they are to uphold Anti-money Laundering and Combating the Financing of Terrorist (AML/CFT) standards by undertaking Know-Your-Customer (KYC) checks on users of their services. In juxtaposition, wallet software can also be issued without the involvement of a liable third-party. As no KYC is performed and users have full ‘freedom to act’, such ‘non-custodial’ wallet software is popular in criminal undertakings. They are required to interact with peer-to-peer applications and organisations running on blockchains whose benefits are not the subject of this paper. To date, financial regulation fails to adequately address such wallet software because it presumes the existence of a registered, liable entity offering said software. As illustrated in the case of Tornado Cash, financial regulation fails to trace chains of secondary liability. Alas, the considered solution is a systematic surveillance of all transactions. Against this backdrop, this paper sets forth an alternative approach rooted in copyright law. Concepts that pertain to secondary liability prove of value to develop a flexible, principles-based approach to the regulation of non-custodial wallet software that accounts for both, infringing and non-infringing uses.

blockchain, Crypto-assets, decentralised finance, non-custodial wallet, Regulation, secondary liability

Bibtex

Article{nokey, title = {Beyond financial regulation of crypto-asset wallet software: In search of secondary liability}, author = {Barbereau, T. and Bodó, B.}, url = {https://www.sciencedirect.com/science/article/pii/S0267364923000390}, doi = {https://doi.org/10.1016/j.clsr.2023.105829}, year = {2023}, date = {2023-06-22}, journal = {Computer Law & Security Review}, volume = {49}, number = {105829}, pages = {}, abstract = {Since Bitcoin, the blockchain space considerably evolved. One crucial piece of software to interact with blockchains and hold private-public key pairs to distinct crypto-assets and securities are wallets. Wallet software can be offered by liable third-parties (‘custodians’) who hold certain rights over assets and transactions. As parties subject to financial regulation, they are to uphold Anti-money Laundering and Combating the Financing of Terrorist (AML/CFT) standards by undertaking Know-Your-Customer (KYC) checks on users of their services. In juxtaposition, wallet software can also be issued without the involvement of a liable third-party. As no KYC is performed and users have full ‘freedom to act’, such ‘non-custodial’ wallet software is popular in criminal undertakings. They are required to interact with peer-to-peer applications and organisations running on blockchains whose benefits are not the subject of this paper. To date, financial regulation fails to adequately address such wallet software because it presumes the existence of a registered, liable entity offering said software. As illustrated in the case of Tornado Cash, financial regulation fails to trace chains of secondary liability. Alas, the considered solution is a systematic surveillance of all transactions. Against this backdrop, this paper sets forth an alternative approach rooted in copyright law. Concepts that pertain to secondary liability prove of value to develop a flexible, principles-based approach to the regulation of non-custodial wallet software that accounts for both, infringing and non-infringing uses.}, keywords = {blockchain, Crypto-assets, decentralised finance, non-custodial wallet, Regulation, secondary liability}, }

The regulation of crypto-assets in the EU – investment and payment tokens under the radar external link

Ferrari, V.
Maastricht Journal of European and Comparative Law, 2020

Abstract

Based on the guidelines issued by the European Securities and Market Authority and by the European Banking Authority, the article deals with the legal qualification of blockchain-based crypto-assets under EU law. Focusing on crypto-assets that function as a) investment instruments (that is, investment tokens) and as b) electronic money (that is, payment tokens), the work outlines shortages and drawbacks in the applicability and enforcement of existing EU legal frameworks regulating investment activities and payment services. With such analysis, the article seeks to inform the ongoing debate within European institutions on the need of regulatory intervention in this area, and it points out pressing questions to be tackled by further research.

Crypto-assets, cryptocurrencies, enforcement, EU law, financial regulation, fintech, frontpage, Technologie en recht

Bibtex

Article{Ferrari2020, title = {The regulation of crypto-assets in the EU – investment and payment tokens under the radar}, author = {Ferrari, V.}, url = {https://journals.sagepub.com/doi/10.1177/1023263X20911538}, doi = {https://doi.org/https://doi.org/10.1177/1023263X20911538}, year = {0521}, date = {2020-05-21}, journal = {Maastricht Journal of European and Comparative Law}, abstract = {Based on the guidelines issued by the European Securities and Market Authority and by the European Banking Authority, the article deals with the legal qualification of blockchain-based crypto-assets under EU law. Focusing on crypto-assets that function as a) investment instruments (that is, investment tokens) and as b) electronic money (that is, payment tokens), the work outlines shortages and drawbacks in the applicability and enforcement of existing EU legal frameworks regulating investment activities and payment services. With such analysis, the article seeks to inform the ongoing debate within European institutions on the need of regulatory intervention in this area, and it points out pressing questions to be tackled by further research.}, keywords = {Crypto-assets, cryptocurrencies, enforcement, EU law, financial regulation, fintech, frontpage, Technologie en recht}, }