By Sebastian Estrada
Cryptocurrency has undoubtedly taken our world by storm. Notwithstanding its relatively new existence, “crypto” has surpassed a mere trend or fad. Many of us remember when Bitcoin was simply an urban legend, known as a “get rich quick” investment for a lucky few. Today, however, crypto is equivalent to any conventional currency, if not viewed as a more valuable alternative. Consequently, public interest in cryptocurrencies like Bitcoin or Ethereum continuously increases as major industries endeavor capitalize off the new tech.[1]
For years countries have attempted to regulate and mitigate cryptocurrencies. Nevertheless, one intrinsic feature of this new monetary power—often touted as its main benefit—is its regulatory impermeability.[2] In essence, blockchain technology has provided “the means to cut out the middlemen (banks and governments) in peer-to peer transactions.”[3] As such, cryptocurrencies have attracted intense attention from international coalitions, central banks, and economic regulators at the transnational level.[4] Today, the global legal and regulatory response could be characterized as fragmented with a patchwork of uncoordinated initiatives arising in varying jurisdictions.[5] In the US and Asian markets, legislative action is continuously developed. The EU, Australia, and Canada have shown potential to act as gateways between conventional currencies and cryptocurrencies, such as exchange platforms, to be declared subject to anti-money laundering and counter-terrorist financing requirements.[6] Other countries and regions of the world, however, either prohibit or heavily restrict cryptocurrency altogether.[7] The question becomes: how has cryptocurrency affected international trade and the globalized economy, and how has international law accounted for these changes?
The vague and muddled crypto regulations, policies, and enforcement jurisdictions throughout the world have forced governments to find ways to cooperate.[8] Specifically, world governments have been forced to establish mutually agreeable regulations that govern the use of cryptocurrency and give international jurisdiction for illicit activities.[9] For instance, the U.S., Australia, Canada, the United Kingdom, and the Netherlands, have come together to form the Joint Chiefs of Global Tax Enforcement.[10] Through this coalition, countries can share information to reduce the likelihood of organized criminals and tax evaders using new technology to manipulate the system and exploit vulnerable persons for their illegal gain.[11] Likewise, the European Parliament established the GDPR in 2018. It set forth regulations which addressed individual privacy concerns, and repealed and replaced the European Commission’s Data Protection Directive.[12] Under this framework, data-processors within blockchain related service providers would be affected by regulations due to the transnational nature of blockchains and cryptocurrency engagements.[13] However, it soon became clear that cryptocurrency was not compatible with the GDPR. Specifically, because decentralized blockchains do not rely on a central authority to process data, their third-party nature prevents cryptocurrencies from adhering to GDPR regulations.[14]
Cryptocurrencies non-compliance with the GDPR is only one of many obstacles faced by international regulation. Other obstacles stem from differing ideological principles regarding individual rights to privacy. The EU places emphasis on the individual rights to privacy because it is considered a fundamental right;[15] while the U.S., on the other hand, looks at personal data as property of the entity holding said data—making data transfer between different countries and their entities much more complex.[16] Accordingly, the inherent issues associated with cryptocurrency only intensify the need for international cohesion. Although the benefits associated with cryptocurrency may be significant, the downsides of crypto are likewise vast. These issues include using cryptocurrency to (i) illicit crimes, such as financing terrorism, and money laundering; (2) promote tax evasion; (iii) engage in market manipulation through fraud; etc. [17]
It is clear that the presence cryptocurrency is only continuing to expand. More and more cryptocurrencies are being generated, and more trading platforms are allowing for everyday investing into the crypto market. Consequently, the need for international collaboration on regulatory measures will only intensify. Cryptocurrency transcends boarders, and domestic regulators. Therefore, countries must look beyond their domestic laws and their varying ideological differences on data rights. These steps are crucial in order to catalyze a global coordination and harmonization of uniformed regulations in response to the proliferate expansion of cryptocurrency.
[1] Freeman Law, https://freemanlaw.com/legal-issues-surrounding-cryptocurrency (last visited Nov. 12, 2021).
[2] Michael Miglio, The Current And Future Implications Of Cryptocurrency For The Legal Industry, Forbes, (last updated Apr. 8, 2019), https://www.forbes.com/sites/theyec/2019/04/08/the-current-and-future-implications-of-cryptocurrency-for-the-legal-industry/?sh=22a9db4368f9.
[3] Id.
[4] Regulation of cryptocurrencies, Norton Rose Fulbright, https://www.nortonrosefulbright.com/en/knowledge/publications/b0264cac/a-global-legal-and-regulatory-guide-to-cryptocurrencies (last visited Nov. 12, 2021).
[5] Id.
[6] Id.
[7] Id.
[8] D. T. Morton, The Future of Cryptocurrency: An Unregulated Instrument in an Increasingly Regulated Clobal Economy, 16 Loy. U. Chi. Int’l L. Rev. 129, 131 (2020).
[9] Id. at 131.
[10] Id. at 141.
[11] Id. at 142.
[12] Id. at 139.
[13] Id.
[14] Id. at 140.
[15] Id. at 142.
[16] Id.
[17] Id. at 143.