Asia-Pacific (Online) Panel Discussion on Blockchain and Cryptocurrencies
Friday, September 3, 2021
1200 to 1400 hrs IST/1630 to 1830 hrs AEST
The regulation of Blockchain and Cryptocurrency, two closely related technological developments, is a one of the pressing issues in technology law and policy. It is a question being examined by practitioners, regulators and academics alike. This panel discussion aimed to bring these diverse perspectives to the same table to share and combine their diverse insights, across jurisdictions.
For the uninitiated, a blockchain is a decentralized digital ledger of all transactions, stored across a peer-to-peer network. Using this technology, participants can confirm transactions without a need for a central clearing authority. Applications of this technology include cryptocurrency, smart contracts, voting etc. Cryptocurrency is a medium of exchange, created and stored digitally in blockchain, using encryption to control the creation of monetary units and to verify transfers. Bitcoin, Ethereum and Dogecoin are prominent examples of cryptocurrencies. In India, cryptocurrencies are not legal tender, and their regulation is still under consideration. In 2018, the Reserve Bank of India attempted to ban trading of cryptocurrencies by Indian entities. However, in 2020, the Supreme Court of India, reversed this prohibition and allowed exchanges to function.
This panel discussion aimed to examine the question of how to regulate cryptocurrencies. The panel shall also examine the scope for cross-border regulatory coordination, analyse the competition law and economics implications and the private law challenges that exist, in treatment of cryptocurrencies.
(Click here to view the conference report)
On cryptocurrencies: cryptocurrencies cannot be classified as a currency, asset or commodity, they have no intrinsic value, are volatile and driven by speculation. Their impact on the market has to be considered.
On regulation of cryptocurrencies: they cannot be regulated in their entirety. They have inherent features that undermine anti money-laundering guidelines.
On blockchain: blockchain is the underlying technology for cryptocurrencies, which may have other legitimate uses.
On terminologies: terms such as virtual currencies, digital currencies, distributed ledger technology (“DLT”) and blockchain are almost used synonymously, and are yet different.
On sovereign digital currencies: involves converting the fiat currency issued by the state into a digital currency by using blockchain technology. They have the risk of extracting liquidity from private markets, yet have advantages such as better access and reduced dependency.
On the economic and legal perspective: entities are shifting away from a proof of work model to proof of stake, which can mitigate environmental concerns. The risk of collusion shall remain, a balance of trust and distrust will have to be maintained
On regulatory design: there are 4 approaches being utilized today – complete ban, warning, regulation by analogy and bespoke regulation. India and Australia use a combination of warnings and regulation by analogy. There is now a move towards a principles based regulation, focusing on the user entities rather than the technology itself. Gibraltar has been innovative in regulating distributed ledger technology. We need to ensure that parties do not game the system. We need to achieve the right balance between human involvement, human supervision, and an appropriate amount of regulation or involvement by technology.
On smart contracts and private law implications: there is a difference between Permissioned Ledgers and Open Ledgers. An open network may appear more desirable. However, the risks of using open ledgers to form contracts are acute. Smart contracts have negative automation and cannot be interfered with, which may not be always desirable.
On proof of stake: We cannot escape questions of governance in an open ledger model. If we are to determine who is to be part of the network, we need internal governance structures.
On competition law and blockchain: blockchain has introduced new kinds of business models. It eases information exchange and validations. Exchange of business-sensitive information on real time basis using blockchain may facilitate collusion. There are factors like barriers to entry in a blockchain and network effects that have to be taken into account. The decentralised nature of blockchain would make it difficult to control, may require cross-border cooperation.
On regulatory convergence: there has been an increase in cross border regulatory cooperation arrangements entered into - with respect to Fintech and other areas of innovation. There has, however, been divergence in areas such as ICOs and peer-to-peer lending. While bespoke regulations may seem attractive, their practicality is doubtful from a law and economics perspective.
Prof. Andrew Godwin
Prof. Godwin serves as Associate Professor, Director of Transactional Law, Director of the Graduate Program in Banking and Finance Law, and Associate Director of the Asian Law Centre, at the Melbourne Law School, Australia
Prof. Tatiana Cutts
Prof. Cutts’s research spans law and technology, private law and legal theory. She has written extensively on blockchain technology and cryptoassets. She received her D.Phil, BCL and LLB from the University of Oxford.
Mr. Anuj Ranjan
Mr Ranjan currently serves as General Manager, Reserve Bank of India.
Mr. Mukul Sharma
Mr. Sharma currently serves as the Joint Director (Economics), Advocacy Division at the
Competition Commission of India.
Prof. Rahul Singh
Prof. Singh is currently Associate Professor of Law at the National Law School of India University, Bangalore (NLSIU). He is a member of the Competition Commission of India’a Advisory Committee on Regulation. He graduated with a Master of Laws (LLM) degree from Harvard Law School and a BA.LLB degree from NLSIU.
Prof. Tatheer Fatima (Moderator)
Prof. Fatima is Assistant Professor of Law at the School of Law, Mahindra University. She is pursuing her PhD in National Law University, Delhi, in regulation of Cryptocurrencies. She holds a Master of Laws (LLM) degree from NLSIU.