Editorial

Date07 May 2019
Pages174-175
Published date07 May 2019
DOIhttps://doi.org/10.1108/JMLC-02-2019-0010
AuthorAndrew Haynes
Editorial
The times they are a changing
The emergence of blockchain and bitcoin and an association of electronic-based currencies
and assets may be the rst sign of a fundamental series of changes on the way in which
corporate equites, bonds and other aspects of nance are changed. This in turn will lead to
related developmentsin law and regulation.
Since blockchain, there have been furtherdevelopments in distributed ledger technology
(DLT), and these normally combine several key elements, namely, data distribution, where
participants keep an electronic ledger which they can access or read; decentralised
platforms, where subject to controls those participating can update a ledger; and
cryptography active systems and computer-coded automated systems which can
automatically trigger the terms of an agreement, e.g., by making payments. Such
arrangements are normally what is termed permissionedbecause permission is required
to access or update the network. The earlier systems such as the one on which Bitcoin is
based are termed permissionlessbecause anyone can become a participant.
In the context of DLT, the emerging issue is larger than electronic currencies. Firstly,
there are a range of disparate new assets that can be traded.These can be termed exchange
tokens, security tokens and utility tokens. The rst of these uses a DLT platform and is
merely a means of investment or exchange. The second are rights of ownership, repayment
or entitlement to a share in prots. They are now caught by the denition of specied
investments[1]in the UK and are therefore regulated under the nancial services regime.
Finally, there areutility tokens which can be redeemed against a productor service.
From the regulatory point of view, the two key issues are the protection of
consumers and the nancial stability of the markets. The former is the remit of the
Financial Conduct Authority (FCA) and the latter is that of the Prudential Regulation
Authority (PRA) and the Bank of England. There is also a wider regulatory area here, in
that regulated rms which engage in cyptoassets generally will nd some of the
existing regulatory regime applying to them.KeyelementsherewillbethePRA/FCA
Principles for Business and the Senior Managers and Certication Regime, which
means the regulators can hold senior managers to account. There are the systems and
controls provisions which bring under regulatory control such areas as organisation,
risk control, record keeping and employees. Finally, the nancial promotionsregime
covers any adverts that are issued in this context and requires such communications to
be fair, clear and not misleading; a balanced view of the investment concerned and the
relevant warnings must be given. Internal compliance rules, for example, regarding
staff trading on their own account may also need to be applied here.
Additional legal issue that will arise as a result of DLT is already partly covered by the
General Data Protection Regulation, which protects peoplespersonal information and
regulates the way that it is stored. Contract law issues also arise, for example,in relation to
enforceabilityof the type of contracts being discussed.
Criminal law issues are also relevant. The 5th EU laundering Directive will, once it has
come into force, increase the transparency regarding cryptocurrencies. It will also require
the threshold for anonymous prepaid cards being reduced to e150 from e250, and this is
unlikely to be affected in the UK by our leaving the EU. Knowyour clientchecks will need
to be carried out for remote payment transactions,or withdrawals exceeding e50. It will also
require virtual currency exchangeplatforms and custodian wallet providers to perform due
JMLC
22,2
174
Journalof Money Laundering
Control
Vol.22 No. 2, 2019
pp. 174-175
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-02-2019-0010

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