A Middle-Ground for Cryptocurrency Regulation: Using Delaware's Incentive-Driven Private-Ordering Model

By Davidson, Elizabeth | Journal of Corporation Law, Summer 2019 | Go to article overview

A Middle-Ground for Cryptocurrency Regulation: Using Delaware's Incentive-Driven Private-Ordering Model


Davidson, Elizabeth, Journal of Corporation Law


I. Introduction                                               790 II. Background                                                792    A. Cryptocurrency Emerges as an Alternative                792    B. The Necessity, Still, for Regulation                    794    C. Present Manifestations of Regulation                    796      i. Regulation of Cryptocurrency Funding         by the Securities and Exchange                        797         Commission                                            798      ii. Commodities Per the Commodities          Futures Trading Commission                           798      iii. Treasury Part I: Fintech Charter                    799           with the Office of the Comptroller                  800           of the Currency                                     801      iv. Treasury Part II: Financial Crimes                   802          Enforcement Network                                  803      v. New York's State-Sponsored Regulation:         The BitLicense                                        804      vi. Uniform Regulation of Virtual                        805          Currency Businesses Act                              806      vii. The Sandbox as a Place to Play                      807    D. Private Ordering as a Regulatory                        808       Middle-Ground                                           808      i. Private Ordering in the Financial                     809         Sector: Traditional Financial                         811         Innovation as a Cautionary Tale                       812      ii. Private Ordering in Corporate Law                    812      iii. Private Ordering Already Present                    813           Within the Cryptocurrency Space                     814 III. Analysis                                                 816    A. Similarities Between the Financial                      817       Sector and the Cryptocurrency Space                     818      i. Similar Features                                      818      ii. Similar Policy Dialog                                819      iii. Analogous Principals and Agents                     821    B. Private Ordering Lessons in the                         821       Financial Sector Pre-2008                               822      i. Unchecked Private Ordering                            822      ii. LIBOR                                                822      iii. Fitch, Moody's, and Standard & Poor's               823      iv. Hypothetically Applied to the                        823          Cryptocurrency Space                                 823      v. The Sandbox Alone is Insufficient                     824    C. A Better Option: Private Ordering                       825         as Seen in Corporate Law                              825      i. Chipotle's Reputational Divesture                     825      ii. Applied to Lessig's Contribution                     825      IV. Recommendation    A. Private Ordering Fits the Mold for       Cryptocurrency Regulation      i. Decentralized Regulation for a Decentralized System      ii. Technological Agility Stems from the Private Sector      iii. No Clear Jurisdiction    B. Specifications      i. The Shape of the Regulating Institutions      ii. A Centralized Facilitator      iii. Scope of the Regulation    C. Practical Ideas      i. Programming Auditors      ii. Insurance      V. Conclusion 

I. INTRODUCTION

Proposals for domestic regulation of cryptocurrency have been numerous. (1) From these proposals questions emerge: should prudential agencies such as the Office of the Comptroller of the Currency (OCC) establish jurisdiction? Or should states adopt a uniform act, much like the Uniform Commercial Code (UCC)? (2) Or else, have states' customized regulations that are already in effect, such as New York's BitLicenses, worked? (3)

Then what is the ideal silhouette for cryptocurrency regulation? Where "emerging technologies . …

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