Banking and Finance Law Commons^™

The Very Brief History Of Decentralized Blockchain Governance, Michael Abramowicz

Vanderbilt Journal of Entertainment & Technology Law

A new form of blockchain governance involving the use of formal games that incentivize participants to identify focal resolutions to normative questions is emerging. This symposium contribution provides a brief survey of the literature proposing and critiquing the use of such mechanisms of decentralized decision-making, and it evaluates early laboratory and real-world experiments with this approach.

Table Of Contents, Seattle University Law Review

Seattle University Law Review

No abstract provided.

An Agent-Based Model Of Financial Benchmark Manipulation, Gabriel Virgil Rauterberg, Megan Shearer, Michael Wellman

Articles

Financial benchmarks estimate market values or reference rates used in a wide variety of contexts, but are often calculated from data generated by parties who have incentives to manipulate these benchmarks. Since the the London Interbank Offered Rate (LIBOR) scandal in 2011, market participants, scholars, and regulators have scrutinized financial benchmarks and the ability of traders to manipulate them. We study the impact on market quality and microstructure of manipulating transaction-based benchmarks in a simulated market environment. Our market consists of a single benchmark manipulator with external holdings dependent on the benchmark, and numerous background traders unaffected by the benchmark. …

Table Of Contents, Seattle University Law Review

Seattle University Law Review

No abstract provided.

Blockchain Symposium Introduction: Overview And Historical Introduction, Brian Ray

Cleveland State Law Review

Imagine a world where human drivers can access on-demand micro-insurance contracts tailored to cover only the actual time spent driving. How about a secure, decentralized identity system that allows individuals to purchase a vehicle and obtain insurance without sharing unnecessary private information exposing it to cyber criminals? Take that a step further and consider a system of driverless cars that transact with autonomous gas stations and take payments directly from passengers. These are some of the fascinating applications that blockchain technology could enable. But these applications give rise to significant technical, social, and legal questions, all of which we explored …

Conceptualizing The Regulation Of Virtual Currencies And Providers: Friction Points In State And Federal Approaches To Regulating Providers Of Payments Execution And Custody Services And Products In The United States, Sarah J. Hughes

Cleveland State Law Review

This essay evaluates the state of regulation by the United States government and State legislatures of participants in emerging virtual-currency businesses. It points to friction points as both the federal government and the States experiment with their own regulatory authority over virtual-currency businesses and provides a taxonomy of differing approaches to regulating such businesses. The essay takes the position that the States need to act in the near term if they wish to maintain their longstanding role as regulators of non-depository providers of financial products and services—or they risk being preempted by Congress or federal regulatory actions. This essay also …

A Bit Like Cash: Understanding Cash-For-Bitcoin Transactions Through Individual Vendors, Stephanie J. Robberson, Mark R. Mccoy

Journal of Digital Forensics, Security and Law

As technology improves and economies become more globalized, the concept of currency has evolved. Bitcoin, a cryptographic digital currency, has been embraced as a secure and convenient type of money. Due to its security and privacy for the user, Bitcoin is a good tool for conducting criminal trades. The Financial Crimes Enforcement Network (FinCEN) has regulations in place to make identification information of Bitcoin purchasers accessible to law enforcement, but enforcing these rules with cash-for-Bitcoin traders is difficult. This study surveyed cash-for-Bitcoin vendors in Oklahoma, Texas, Arkansas, Missouri, Kansas, Colorado, and New Mexico to determine personal demographic information, knowledge of …

Nova Law Review Full Issue Volume 42, Issue 3

Nova Law Review

No abstract provided.

Taxing & Zapping Marijuana: Blockchain Compliance In The Trump Administration Part 3, Richard Thompson Ainsworth, Brendan Magauran

Faculty Scholarship

This is the third of a five-part series dealing with the rescission by U.S. Attorney General Jeff Sessions of the Obama-era policy that discouraged federal prosecutors from bringing charges in all but the most serious marijuana cases.

This article focuses on cyber-attacks on the main commercial chain, and the use of a private blockchain using HyperLedger Fabric as a platform.

This fraud is a direct, criminal attack; an attack designed to destroy/corrupt records of marijuana inventory and plant tags throughout the supply chain. The attack allows legalized marijuana to escape the system and be sold on the black market. A …

Fintech's Double Edges, Christopher G. Bradley

Chicago-Kent Law Review

This symposium essay examines the double-edged nature of financial technologies in financial transactions, especially transactions involving consumers. There are both benefits and risks—often undiscovered or hidden at first—in each new round of financial technologies. A FinTech tool may benefit consumers and then, applied later or in a different context, threaten consumer interests; a tool that harms consumer interests may then lead to development of a tool that favors them. This double-edged nature is an important but unappreciated structural feature of financial technologies. From the perspective of consumer protection, then, FinTech can neither be fully embraced as friend nor restricted as …

The Rise Of Automated Investment Advice: Can Robo-Advisors Rescue The Retail Market?, Benjamin P. Edwards

Chicago-Kent Law Review

Different types of financial advisers serve the massive and widely dispersed retail investment market. In a market riddled with conflicts of interests, many advisers exploit retail customers by pitching suboptimal products, leading to lower investment returns and lower overall growth—but also to greater profits for the financial advisers collecting kickback-style commissions. New financial technology firms, commonly known as Robo-Advisers, may disrupt this market and these exploitative practices. Still, these potentially disruptive automated investment advice firms face significant regulatory risks.

Computer As Confidant: Digital Investment Advice And The Fiduciary Standard, Nicole G. Iannarone

Chicago-Kent Law Review

Digital investment advisers are the fastest growing segment of financial technology (fintech) and are disrupting traditional investment advisory delivery models. The computer-led investment advisory service model may be growing particularly quickly due to a confluence of social and political factors. Politicians and regulators have increasingly focused on the standards of care applicable to investment advice providers. Fewer Americans are ready for retirement and many lack access to affordable investment advice. At the same time, comfort with digital platforms have increased, with some preferring electronic interaction over human interaction. Claiming that they can democratize retirement service by pro- viding advice meeting …

Regtech, Compliance And Technology Judgement Rule, Nizan Geslevich Packin

Chicago-Kent Law Review

This Article focuses on the rise of Financial Technology, which revolutionized consumer financial service products, and challenged policymakers with regulating the rapidly evolving financial industry. In particular, it explores Regulatory Technology, also known as RegTech, which is the finance industry’s use of technology, especially information technology, in the context of regulatory monitoring, reporting and compliance. RegTech is designed to solve industry needs for a more effective and efficient way to automate corporate governance and compliance processes. Not only has FinTech proven to be a vital revenue source, especially in connection with lending or money transmission services, but it also helps …

Fintech: Antidote To Rent-Seeking?, Jeremy Kidd J.D., Ph.D

Chicago-Kent Law Review

Innovations in financial technology, or Fintech, has been ongoing for decades but has recently begun to accelerate. Some observers have argued that it will soon begin to outstrip the ability of regulators to keep pace. If those predictions are accurate, what would the world look like with a financial sector that cannot be effectively regulated? One possibility—drawn from public choice economics—is that rent-seeking will be inhibited or eliminated. Rent-seeking is the distortion of law and regulation for the benefit of special interests, who expend resources to guarantee those distortions in their favor. Rent-seeking is inefficient and inhibits growth and innovation, …

New Art For The People: Art Funds & Financial Technology, Brian L. Frye

Chicago-Kent Law Review

Fine art sales have reached record levels, with the global art market achieving annual sales of over $60 billion. However, the art market is extremely risky and the most lucrative investment opportunities are typically at the high end of the market. In recent years, financial industry professionals with an interest in the art world have increasingly formed art investment funds, intended to enable smaller investors to take advantage of the opportunity to invest in the art world and diversify their portfolios. Some art funds also allow art investors to borrow against certain assets. About 45 art investment funds currently exist, …

The Promise And Perils Of Algorithmic Lenders’ Use Of Big Data, Matthew Adam Bruckner

Chicago-Kent Law Review

Tens of millions of Americans lack access to traditional forms of credit and must rely on payday and pawn loans instead. “Algorithmic lending 2.0” promises to enable fintech companies to lend to those excluded from traditional forms of credit. Version 2.0 algorithmic lenders claim to use Big Data and machine learning to increase credit access by making better predictions about prospective borrowers’ creditworthiness and decreasing the cost of credit. Supporters also claim that algorithmic lending 2.0 removes human bias from the financial services sector. Detractors have cast doubt on both claims, arguing that there is scant evidence that algorithmic lending …

Tax Compliance In A Decentralizing Economy, Manoj Viswanathan

Georgia State University Law Review

Tax compliance in the United States has long relied on information from centralized intermediaries—the financial institutions,employers, and brokers that help ensure income is reported and taxes are paid. Yet while the IRS remains tied to these centralized entities,consumers and businesses are not. New technologies, such as sharing economy platforms (companies such as Airbnb, Uber, and Instacart)and the blockchain (the platform on which various cryptocurrencies are based) are providing new, decentralized options for exchanging goods and services.

Without legislative and agency intervention, these technologies pose a critical threat to the reporting system underlying domestic and international tax compliance. Until now, legal …

Fintech: Antidote To Rent-Seeking?, Jeremy Kidd

Articles

Fintech is a reality of our modern society, and will likely become even more so in the future. Peer-to-peer lending, cybercurrencies, smart contracts, algorithmic lending, and more, have required adaptation by consumers and producers of financial services. Our modes of doing business will continue to be challenged and changed by these and other Fintech innovations, almost certainly expanding beyond merely “promot[ing] financial inclusion, expand[ing] access to capital for individuals and small businesses, and more broadly reshap[ing] how society interacts with financial services.” By reducing transaction costs, advancing technology opens the doors to innovations the likes of which we might not …

Perfecting Bitcoin, Kevin V. Tu

Georgia Law Review

Bitcoin is still here. The price of Bitcoin rebounded-
setting a record high of $19,783.21 per Bitcoin in
December 2017 before dropping to a price of $8,690 per
Bitcoin as of March 22, 2018. Moreover, legal and
regulatory developments, like New York's BitLicense and
federal taxation of virtual currency as property, can be
viewed as legitimizing its use. The normalization of
virtual currency is evidenced by its increasingly
mainstream applications. Virtual currency can be used
as a faster and lower cost method of transferringfunds
domestically and internationally. A growing number of
retailers now accept virtual currency as a method of …

Blockchain, Bitcoin, And Vat In The Gcc: The Missing Trader Example, Richard Thompson Ainsworth, Musaad Alwohaibi

Faculty Scholarship

Blockchain is coming to tax administration and will cause fundamental change. This article considers the potential for blockchain technology as it applies to the introduction of a value added tax in the Gulf Cooperation Council.

Blockchain technology disrupts centralized ledgers. Blockchain improves efficiency, security and transparency. Perhaps no centralized ledger system presents more challenges than that of the modern tax administration. The central data storage system of a modern tax authority contains all return, payment, and audit activity for all taxpayers arranged tax-by-tax for three years or longer periods of time.

It is likely that blockchain will come first to …

Preserving Human Agency In Automated Compliance, Onnig H. Dombalagian

Brooklyn Journal of Corporate, Financial & Commercial Law

As technology transforms financial services, so too must it transform the regulation of financial markets and intermediaries. The imperative of real-time, prophylactic regulation increasingly compels reallocation of regulatory and compliance budgets to surveillance and enforcement technology. At the same time, in light of the well-known weaknesses of automated systems, securities firms (and their regulators) must temper investment in automation with efforts to augment the agency of compliance professionals. This symposium contribution considers how investment in the professional development of compliance personnel can better integrate automated tools within established compliance and supervisory structures and thereby advance regulatory and operational objectives.

Vatcoin: The Gcc's Cryptotaxcurrency, Richard Thompson Ainsworth, Musaad Alwohaibi, Mike Cheetham

Faculty Scholarship

Bitcoin is the world’s first peer-to-peer cryptocurrency. VATCoin is similar, but it is used in tax compliance. Both Bitcoin and VATCoin are distributive ledger applications built upon blockchain technology. Bitcoin’s ledger is public; VATCoin’s is private. If adopted, VATCoin could well become the world’s first government-mandated cryptotaxcurrency. Unlike Bitcoin, VATCoin will not be a speculative currency. It is always fixed to the home currency.

This paper proposes that the Gulf Cooperation Council (GCC) adopt VATCoin in its VAT Framework. The GCC is expected to have multiple 5% VATs in place by January 1, 2018. There is an ample amount of …

Bringing Continuity To Cryptocurrency: Commercial Law As A Guide To The Asset Categorization Of Bitcoin, Evan Hewitt

Seattle University Law Review

This Note will undertake to analyze bitcoin under the Uniform Commercial Code (UCC) and the Internal Revenue Code (IRC)—two important sources of commercial law—to see whether any existing asset categories adequately protect bitcoin’s commercial viability. This Note will demonstrate that although commercial law dictates that bitcoin should—nay must—be regulated as a currency in order to sustain its existence, the very definition of currency seems to preclude that from happening. Therefore, this Note will recommend that we experiment with a new type of asset that receives currency-like treatment, specifically designed for cryptocurrencies, under which bitcoin can be categorized in order to …

Balance And Team Production, Kelli A. Alces

Seattle University Law Review

For decades, those holding the shareholder primacy view that the purpose of a corporation is to earn a profit for its shareholders have been debating with those who believe that corporations exist to serve broader societal interests. Adolph Berle and Merrick Dodd began the conversation over eighty years ago, and it continues today, with voices at various places along a spectrum of possible corporate purposes participating. Unfortunately, over time, the various sides of the debate have begun to talk past each other rather than engage with each other and have lost sight of whatever common ground they may be able …

The Boundaries Of "Team" Production Of Corporate Governance, Anthony J. Casey, M. Todd Henderson

Seattle University Law Review

We examine the cooperative production of corporate governance. We explain that this production does not occur exclusively within a “team” or “firm.” Rather, several aspects of corporate governance are quintessentially market products. Like Blair and Stout, we view the shareholder as but one of many stakeholders in a corporation. Where we depart from their analysis is in our view of the boundaries of a firm. We suggest that they overweight the intrafirm production of control. Focusing on the primacy of a board of directors, Blair and Stout posit a hierarchical team that governs the economic enterprise. We observe, however, that …

The Team Production Model As A Paradigm, Brian R. Cheffins

Seattle University Law Review

Margaret Blair and Lynn Stout suggested a few years after the publication of their 1999 Virginia Law Review article, A Team Production Theory of Corporate Law, that their team production model was poised to emerge as part of a new corporate law “paradigm.” In so doing, they specifically invoked Thomas Kuhn’s well-known analysis of scientific revolutions. This Article revisits Blair and Stout’s team production theory by offering a critique of their claim that their model is destined to become a new corporate law paradigm in the Kuhnian sense. In so doing the Article draws upon key corporate law theories and …

Testing The Normative Desirability Of The Mediating Hierarch, Zachary J. Gubler

Seattle University Law Review

In their influential article, A Team Production Theory of Corporate Law, Professors Margaret Blair and Lynn Stout explained how corporate law might be viewed as an attempt at solving what is known as the team production problem. At its core, this problem has to do with the opportunistic behavior that arises when multiple economic actors make investments—whether of labor, capital, or otherwise—in a business venture where these investments are said to be “firm specific” because they cannot be easily withdrawn and redeployed in other projects. The problem is how to construct a governance regime that will create incentives for the …

Team Production & The Multinational Enterprise, Virginia Harper Ho

Seattle University Law Review

Margaret Blair and Lynn Stout’s path-breaking article, A Team Production Theory of Corporate Law, advances a dual thesis: first, that team production theory does a better job than its competitors (in particular, principal–agent theory) of explaining the advantages of the public corporation and key features of corporate law; and second, that, as a matter of corporate law, corporate boards are charged with advancing the collective interest of all the contributors to the corporate enterprise rather than the shareholders’ interests alone. Its central insight is that the role of the independent, or insulated, corporate board is to serve as a “mediating …

Hostile Takeovers And Overreliance, Anthony Niblett

Seattle University Law Review

Commentators have argued that employees should be compensated in the event of a hostile takeover; otherwise, the threat of such a takeover will fail to incentivize firm-specific investments by employees. Such deferred compensation is analogous to the payment of damages following a breach of contract. The analogous breach, here, is the breach of an implicit contract between management and employees. Employees trusted management to compensate them for firm-specific investments not explicitly contracted for. This Article uses a familiar result from the contract law literature: There is no measure of damages for breach of contract that can generate both efficient breach …

Buying Teams, Andres Sawicki

Seattle University Law Review

The Sixth Annual Berle Symposium reflects on Margaret Blair and Lynn Stout’s classic article: A Team Production Theory of Corporate Law. Blair and Stout recast the modern law of public corporations through the lens of the team production theory of the firm. Here, I apply Blair and Stout’s insights—emphasizing the value of team production, independent monitors, and intellectual property rights—to a novel corporate transaction structure: the acqui-hire. In an acqui-hire, a publicly owned technology firm wants to add a start-up’s engineers. Instead of simply hiring them, though, it buys the start-up, discards most of its assets, and retains the start-up’s …