The regulation of crypto-assets in the EU – investment and payment tokens under the radar
| Published date | 01 June 2020 |
| Date | 01 June 2020 |
| DOI | 10.1177/1023263X20911538 |
| Author | Valeria Ferrari |
| Subject Matter | Articles |
Article
The regulation of crypto-assets
in the EU – investment and
payment tokens under
the radar
Valeria Ferrari, PhD*
Abstract
Based on the guidelines issued by the European Securities and Market Authority and by the
European Banking Authorit y, the article deals with th e legal qualification of bloc kchain-based
crypto-assets under EU law. Focusing on crypto-assets that function as a) investment instru-
ments (that is, investment tokens) and as b) electronic money (that is, payment tokens), the work
outlines shortages and drawbacks in the applicability and enforcement of existing EU legal fra-
meworks regulating investment activities and payment services. With such analysis, the article
seeks to inform the ongoing debate within European institutions on the need of regulatory
intervention in this area, and it points out pressing questions to be tackled by further research.
Keywords
Crypto-assets, cryptocurrencies, financial regulation, enforcement, EU law, fintech
1. Introduction
Blockchain technology, with its fundamental proposition of transparency and cryptographically-
secured systems of rights’ enforcement, has fuelled hyped attention across many areas, spanning
from trade to copyright protection. In so far, however, the most widespread and disruptive innova-
tion introduced by the technology remains so called cryptocurrencies and, more in general, the
possibility to create units of value that circulate on a world-wide, peer-to-peer digital network.
* Candidate at the Institute for Information Law (IvIR), Faculty of Law, University of Amsterdam, Nieuwe Achtergracht, WV
Amsterdam, North Holland 1000 GG Netherlands
Corresponding author:
Valeria Ferrari, PhD, candidate at the Institute for Information Law (IvIR), Faculty of Law, University of Amsterdam, Nieuwe
Achtergracht 166, 1018 WV Amsterdam, North Holland 1000 GG Netherlands.
E-mail: v.ferrari@uva.nl
Maastricht Journal of European and
Comparative Law
2020, Vol. 27(3) 325–342
ªThe Author(s) 2020
Article reuse guidelines:
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DOI: 10.1177/1023263X20911538
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Rooted into open-source cultures, the raise of blockchain-based financial networks expresses a
neo-libertarian response to the post-2008 crisis of trust in political and financial institutions.
1
Among the speculations on what this technology could deliver, is the believe that it can nurture
new, horizontal socio-economic organ izations
2
and help increase transparency in ins titutional
processes.
3
The development of the industry, however, shows that the inherent values of decen-
tralization and transparency are increasingly challenged at all layers of the socio-technical block-
chain stack.
4
Without the appropriate legal safeguards, the ‘privatisation of money’ that blockchain
enables could entail the concentration of financial and political power in the hands of few unac-
countable actors.
5
When new ‘disruptive’ technologies emerge, regulators must identify inherent risks and
develop policy strategies to balance the various interests that innovation touches upon. To do
so, it is critical to take distance from techno-solutionism and look beyond the ideological narratives
on ‘decentralized money’ as emancipatory social artefact, to scrutinise how actual entities, eco-
nomic relationships and technological solutions develop vis-`a-vis existing institutions and market
players.
In light of the rapid development of the blockchain industry and of the interest, from the part of
European institutions, in promoting the use of the technology for financial applications (FinTech),
the present work provides an overview of the most important legal frameworks that are applicable
to blockchain-based financial applications under European law. Exposing shortages and draw-
backs in the applicability of existing regulation, the study seeks to inform the current debate on the
need of regulatory intervention at the EU level in this domain.
To bring the reader into context, Section 2 introduces the notions of crypto-assets, their use
cases and the main legal issues emerging around them. Section 3 deals with the legal qualification
of crypto-assets under the EU legal framework, describing the typology of tokens accepted by EU
financial institutions. Section 4 and Section 5 draw on the guidelines issued by the European
Securities and Market Auth ority (ESMA) and by the Europe an Banking Authority (EBA) to
provide an overview of the legal treatment of tokens that qualify as investment instruments and
as electronic money. In this context, legal and enforcement issues raised by blockchain-based
financial applications are outlined. The conclusion summarises the major findings and highlights
issues of relevance for policy development and further research.
2. Crypto-assets: definition, use cases and legal issues
Blockchain-based tokens can be described as digitally scarce units of value the properties and
circulation of which are prescri bed via computer code. As their po ssible uses are potentially
1. I. Faria, ‘Trust, Reputation and Ambiguous Freedoms: Financial Institutions and Subversive Libertarians Navigating
Blockchain, Markets, and Regulation’, 12 Journal of Cultural Economy (2019), p. 119.
2. P. De Filippi and A. Wright, Blockchain and the Law: The Rule of Code (Harvard University Press, 2018).
3. K. Werbach, The Blockchain and the New Architecture of Trust (The MIT Press, 2018).
4. B. Bod´o and A. Giannopoulou, ‘The Logics of Technology Decentralization - The Case of Distributed Ledger Tech-
nologies’, in M. Ragnedda and G. Destefanis (eds.), Blockchain and Web 3.0: Social, Economic,and Technological
Challenges (Routledge, 2019).
5. V. Lehdonvirta and G. Vidan, ‘Mine the Gap: Bitcoin and the Maintenance of Trustlessness’, 21 New Media and Society
(2019), p. 42–59; A. Walch, ‘Deconstructing ‘‘Decentralization’’:Exploring the Core Claim of Crypto Systems’, in C.
Brummer (ed.), Crypto Assets: Legal, Regulatory and Monetary Perspectives (OUP, forthcoming).
326 Maastricht Journal of European and Comparative Law 27(3)
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