Banking and Finance Law Commons^™

Financial Contracting With The Crowd, Usha Rodrigues

Scholarly Works

Equity crowdfunding is broken. The current model imposes too many burdens on entrepreneurs in exchange for too little money. For alternative models, this Article looks to the time-tested venture capital financial contract, and the recent experience of initial coin offerings (ICOs). ICOs made headlines over the past two years, as the means by which blockchain technology companies raised billions of dollars to launch new cryptocurrency ventures. Although their novelty as a monetary and investing device is well known, ICOs also presented significant, unappreciated insights into financial contracting.

ICOs furnished an unprecedented experiment into how bargains would look if entrepreneurs raised …

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 …

Coinsensus: The Need For Uniform National Virtual Currency Regulations, Anisha Reddy

Dickinson Law Review (2017-Present)

Google search volume for bitcoin and bitcoin-related keywords increased by as much as 1000 percent in 2017 from previous years. This increased interest comes hand-in-hand with increased regulatory and legislative scrutiny. Currently, there is disparate regulation for virtual currencies across national and state borders alike. States’ promulgation of various and incongruous virtual currency regulations have forced service providers to withdraw from different states within the country. However, transactions are not contained within state lines, and disparate state-by-state regulation is impracticable.

The Uniform Law Commission recognized the need for uniform guidance for those entering the North American market and drafted the …

The Capital Commons: Digital Money And Citizens' Finance In A Productive Commercial Republic, Robert C. Hockett

Cornell Law Faculty Working Papers

All societies must address two questions where the organization of productive activity is concerned. The first is whether production will be mainly publicly managed, privately managed, or 'mixed.' The second is whether the financing of production will be mainly publicly managed, privately managed, or mixed.

In the American commercial republic, we seem more or less to have answered the 'who does production' question to our own satisfaction. From the founding era to the present, we have elected to leave production primarily, though not of course solely, 'in private hands.' Where the financing of production is concerned, on the other hand, …

Financial Regulation In The Bitcoin Era, William Magnuson

Faculty Scholarship

The recent decade has witnessed an extraordinary degree of innovation in the financial sector. Developments in financial technology, computing power, and networking theory have allowed decentralized online platforms such as Bitcoin to fundamentally change the way that financial services are provided. While these innovations have been applauded by many as bringing a welcome degree of competition to a sector long dominated by powerful incumbents, they also create a set of challenges for current financial regulation. How do fiduciary standards apply to algorithms? How does online finance affect the behavior of investors? And more generally, how can regulators monitor and constrain …

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 …

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 …

Lessons From Case Study Of Secured Transactions With Bitcoin, Xuan-Thao Nguyen

Articles

There has been some discussion about the flaws in using secured transactions law, Article 9 of the Uniform Commercial Code (U.C.C.), to govern commercial transactions involving Bitcoins as collateral. Flaws necessitate the urgency of immediately fixing of the existing law. In the case of Bitcoins there is still much to learn about the marketplace for secured transactions with Bitcoins as collateral. The rapid change in technology, the speed of new ideas proposed, the constant announcements of adoption and adaptation of smart contracts in transactions, the volatility in cryptocurrency value, the endless reports of scams, and the rise of dark pools …

The Impact Of Regulatory Measures Imposed On Initial Coin Offerings In The United States Market Economy, Joseph D. Moran

Catholic University Journal of Law and Technology

With the surge of technological advances across the financial market landscape, companies have implemented new ways of raising money that have sparked controversy among investors, legal practitioners, banks, and government regulators. This comment examines the technology behind Initial Coin Offerings (ICO), and discusses the impact they have had on financial markets in the United States and across the globe. This comment also addresses the legal ramifications for companies issuing ICOs, and delves into the benefits of using blockchain technology as a means for transferring digital currencies and making business transactions. This comment further gives examples of current and potential regulations …

The Value Of Cryptocurrencies: How Bitcoin Fares In The Pockets Of Federal And State Courts, Brandon M. Peck

University of Miami Business Law Review

A recent Eleventh Judicial Circuit Court of Florida decision has raised concerns over how both federal and state courts consider the unregulated cryptocurrency, Bitcoin. In State of Florida v. Michell Abner Espinoza, Judge Teresa Pooler held that Bitcoin did not fall under the statutory definitions of “payment instrument” or “monetary instrument” because virtual currency is not directly specified nor could it be included within one of the defined categories listed in Fla. Stat. § 560.103(29) or 896.101(2). Furthermore, Judge Pooler, alluding to the doctrine of lenity, refused to hold Espinoza responsible under a statute that is “so vaguely written …

Bitcoin's Growing Pains: Intermediation And The Need For An Effective Loss Allocation Mechanism, Andrew Kang

Michigan Business & Entrepreneurial Law Review

This paper examines a phenomenon largely overlooked in existing literature: as Bitcoin matures into a mainstream consumer payments system with the rise of intermediation and hosted wallet services, it is slowly transforming from a purely decentralized peer-to-peer currency into something that (ironically) more closely resembles the bank-intermediated payment systems of the past. This paper explains how this transformation creates complicated issues of loss allocation not anticipated by Bitcoin’s founder. Further, it argues for the need of an effective legal mechanism to efficiently and fairly allocate losses between intermediaries and users. The first section of this paper will explain how Bitcoin …

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 …

Conceptualizing Cryptolaw, Carla L. Reyes

Faculty Journal Articles and Book Chapters

Sweden transfers its real property recording system to the blockchain, a software protocol that enables public, cryptographically secure transaction verification without reliance upon a trusted third party. Dubai plans to issue blockchain-based government documents. The United States Department of Health and Human Services investigates blockchain-based systems for managing health data. Illinois explores blockchain-based applications for use in the Illinois government. News of governments and public-private partnerships developing blockchain-based legal applications increasingly splash across the headlines; however the law-makers using blockchain and other Distributed Ledger Technology (DLT) systems to implement legal processes do not systematically consider the broader implications of their …

Distributed Governance, Carla L. Reyes, Nizan Geslevich Packin, Bejamin Edwards

Faculty Journal Articles and Book Chapters

Distributed ledger technology enables disruption of traditional business organizations by introducing new business entities without the directors and officers of traditional corporate entities. Although these emerging entities offer intriguing possibilities, distributed entities may suffer significant collective action problems and expose investors to catastrophic regulatory and governance risks. Our essay examines key considerations for stakeholders and argues that distributed entities must be carefully structured to function effectively.

This essay breaks new ground by critically examining distributed entities. We argue that a distributed model is most appropriate when DLT solves a unique corporate governance problem. We caution against ignoring the lessons painstakingly …

The Bridging Model: Exploring The Roles Of Trust And Enforcement In Banking, Bitcoin, And The Blockchain, Catherine Martin Christopher

Nevada Law Journal

No abstract provided.

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 …

Bitcoin And The Uniform Commercial Code, Jeanne L. Schroeder

University of Miami Business Law Review

No abstract provided.

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 …

Bitcoin: Información Sobre Su Reglamento En Las Américas Y Futuro Crecimiento, Belkenia Candelario

University of Miami Inter-American Law Review

Esta nota se tratará el tema de Bitcoin, la criptomoneda líder que surge en el año 2009 como una alternativa a la moneda fiduciaria. Bitcoin ha crecido considerablemente, tanto en términos de valor como en la conciencia colectiva internacional; sin embargo, los anuncios y regulaciones exploradas afectarían a todas las monedas digitales en general. Primero, esta nota explica el concepto tecnológico y funcional detrás de Bitcoin en términos de fácil acceso para el usuario y proporciona una breve discusión teórica sobre la historia de la aparición del dinero en el comercio. Segundo, analiza algunos de los efectos que tendría la …

Understanding And Regulating Twenty-First Century Payment Systems: The Ripple Case Study, Marcel T. Rosner, Andrew Kang

Michigan Law Review

Ripple is an open-source Internet software that enables users to conduct payments across national boundaries in multiple currencies as seamlessly as sending an email. This decentralized Internet payment protocol could provide a cure to an inefficient cross-border payments system. Although Ripple’s technology can reduce significant risks and costs that exist in the internationalpayments system, regulators should adopt a new regulatory framework that responds to how this technology works. This Note performs two functions to help regulators realize this goal. It first helps regulators and other market participants understand how Ripple operates by explaining what Ripple is and comparing it to …

“Ev’Ry American Experiment Sets A Precedent”: Why One Florida State Court’S Bitcoin Opinion Is Everyone’S Business, Allison Caffarone, Meg Holzer

Scholarly Works

Part I of this article seeks to explain in largely non-technical terms the design of the Bitcoin network. Part II explains the guidance and administrative rulings provided by the United States Department of the Treasury's Financial Crimes Enforcement Network in relation to the issues in the Espinoza case. Additionally, Part II surveys different approaches taken by state legislatures and regulators in seeking to address decentralized virtual currencies, including bitcoin. Careful attention is paid to how the terms "monetary value" and "virtual currency" are defined, and how those definitions have been interpreted. Part II further explores the differences in the way …

Moving Beyond Bitcoin To An Endogenous Theory Of Decentralized Ledger Technology Regulation: An Initial Proposal, Carla L. Reyes

Faculty Journal Articles and Book Chapters

Current regulation of decentralized ledger technology leaves industry actors in confusion, facing high risk, and confronting significant disincentives to innovate. This Article argues that an endogenous regulatory approach offers an avenue for alleviating these obstacles while still providing sufficient tools for government oversight. In particular, this Article proposes regulation that is endogenous at two levels: first, in that it is created through an iterative, cooperative process involving both regulators and industry actors, and second, that it is implemented as regulation-through-code, that is, regulation written into the code itself. In so doing, this Article also investigates whether successful implementation of such …

Empowering Distributed Autonomous Companies, Houman B. Shadab

Other Publications

No abstract provided.

Cryptocurrencies: An Introduction For Policy Makers, Brian Conley, Jeffrey Echert, Andrew Fuller, Heather Lewis, Charlotte Lunday

Technology Law and Public Policy Clinic

Cryptocurrencies are open-source, peer-to-peer digital currencies. Two of their most distinctive features include the use of public key cryptography to secure transactions and create additional currency units, as well as the decentralized nature of their digital payment systems. The underlying technical system which all cryptocurrencies are modelled after is that of the original cryptocurrency,

Bitcoin.

Bitcoin was created by “Satoshi Nakamoto” a person or group credited with writing the first paper on the digital currency in 2008. Certain key elements differentiate cryptocurrencies from traditional electronic currency systems such as electronic banking and PayPal, most notably their decentralized control mechanisms. That …

Barter, Bearer, And Bitcoin: The Likely Future Of Stateless Virtual Money, Cara R. Baros

University of Miami Business Law Review

Over the past few years, virtual money has emerged via the Internet. Although currently unregulated, Internal Revenue System Notice 2014-21 will most likely cause virtual money to lose its mass appeal in the United States. Historically, other means of tax avoidance, including barter transactions and bearer bonds, have suffered the same fate. Virtual money will likely have more success as a technology than as a means of value.

Smart Contracts, Bitcoin Bots, And Consumer Protection, Joshua A.T. Fairfield

Washington and Lee Law Review Online

Trustless public ledgers (“TPLs”)—the technology underneath Bitcoin—do more than just create online money. The technology permits people to directly exchange money for what they want, with no intermediaries, such as credit card companies. Contract law is the law of bargained-for exchange, so a technology that enables direct exchange online will change the reality of online contracting. The current problem with consumer contracting online is that courts and companies have collaborated to create an online system in which consumers cannot bargain. Under the current regime, consumers have no choice but to click the “I Accept” button. Online, contract law is not …

Did New York State Just Anoint Virtual Currencies By Proposing To Regulate Them, Or Will Regulation Spoil Them For Some?, Sarah Jane Hughes

Washington and Lee Law Review Online

This Essay previews issues raised by the general subject of regulating virtual currencies and the specific efforts of New York State’s Department of Financial Services’ proposed Virtual Currency Regulatory Framework (the BitLicense) in particular. It focuses on five topics in the proposal and their interplay with the current regulation of “money services” and “money transmission” in other states, using the Commonwealth of Virginia and the State of Washington approaches on a few common topics for comparison purposes. It also asks whether regulation of virtual currencies is likely to cause more widespread adoption of virtual currencies or to frustrate the proponents …

Speculative Tech: The Bitcoin Legal Quagmire & The Need For Legal Innovation, Paul H. Farmer Jr.

Journal of Business & Technology Law

No abstract provided.

Virtual Currencies Bitcoin & What Now After Liberty Reserve, Silk Road, And Mt. Gox?, Lawrence Trautman

Richmond Journal of Law & Technology

During 2013, the U.S. Treasury Department evoked the first use of the 2001 Patriot Act to exclude virtual currency provider Liberty Reserve from the U.S. financial system. This article will discuss: the regulation of virtual currencies, cybercrimes and payment systems, darknets, Tor and the “deep web,” Bitcoin; Liberty Reserve, Silk Road, and Mt. Gox. Virtual currencies have quickly become a reality, gaining significant traction in a very short period of time, and are evolving rapidly.

Bitcoin Financial Regulation: Securities, Derivatives, Prediction Markets, And Gambling, Jerry Brito, Houman B. Shadab, Andrea Castillo

Articles & Chapters

The next major wave of Bitcoin regulation will likely be aimed at financial instruments, including securities and derivatives, as well as prediction markets and even gambling. While there are many easily regulated intermediaries when it comes to traditional securities and derivatives, emerging bitcoin denominated instruments rely much less on traditional intermediaries such as banks and securities exchanges. Additionally, the block chain technology that Bitcoin introduced for the first time makes completely decentralized markets and exchanges possible, thus eliminating the need for intermediaries in complex financial transactions. In this Article we survey the type of financial instruments and transactions that will …