The regulation of virtual currencies in comparative perspective: new private money or niche technological innovation?
| DOI | https://doi.org/10.1108/JMLC-09-2020-0101 |
| Published date | 04 November 2020 |
| Date | 04 November 2020 |
| Pages | 712-724 |
| Subject Matter | Accounting & finance,Financial risk/company failure,Financial compliance/regulation,Financial crime |
| Author | Hicham Sadok,Mohammed El Hadi El Maknouzi |
The regulation of virtual
currencies in comparative
perspective: new private money
or niche technological innovation?
Hicham Sadok
Mohammed V University, Rabat, Morocco, and
Mohammed El Hadi El Maknouzi
Abu Dhabi University, Abu Dhabi, United Arab Emirates and
Mohammed V University, Rabat, Morocco
Abstract
Purpose –This paper aims to situate virtual currencies(VCs) in a landscape of regulatory questions that
help orient the directionand purpose of a possible legal approach, vis-à-vis this relativelyrecent technological
and financialphenomenon.
Design/methodology/approach –The triangulation of historical overview and comparative
examination of regulatoryinterventions allows to situate VCs in relation to a range of regulatorytopics: from
monetary policy, to fundraisingand money laundering. First, the paper charts the emergenceof VCs in time,
and situates this innovation on a continuum with historically observed forms of private money. Second, it
providesan overview of different regulatory approaches that can be observedon a comparativelandscape.
Findings –At present, several features of VC schemes (particularlytheir deflationary character and fixed
supply) prevent them from working as private money, competitive with sovereign currency. Instead, three
specific kindsof uses –as security tokens, utility tokensand currency tokens –offer a more realistic picture of
the risksand potentials associated with differentforms of use.
Originality/value –The paper puts forth an integrated framework for devising a more sensitive
regulatoryapproach towards VCs.
Keywords Virtual currency, Regulation, Sovereignty, Private money, Tokens
Paper type Viewpoint
Introduction
Regulation of virtual currencies(VCs) is not only a controversial subject: it can be downright
inflammatory. As VCs are a relatively new financial and technological innovation, interest
on the part of national law enforcement agencies,tax authorities and financial regulators is a
comparatively new phenomenon (Bank of England, 2014). This recent, but mounting,
interest around the legal approach to be taken towards VCs justifies a deeper investigation
into the nature of thismonetary innovation (De Juvigny and Vigna, 2014).
Enduring uncertainty remains around the place of VCs in the contemporary financial
landscape. For instance, mainstream economists have hesitated to classify VCs as
“currencies”, as they have not yet reached the point where they are able to fulfil widely
acknowledged functions of currencyproper: medium of exchange, store of value and unit of
account (Carreau and Kleiner, 2017). This uncertainty reverberates on the regulatory
approach that might best suit VCs,as a clear framework of reference is still lacking. This is
JMLC
24,4
712
Journalof Money Laundering
Control
Vol.24 No. 4, 2021
pp. 712-724
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-09-2020-0101
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