Cryptocurrency: Consequence and Regulation

Alexander Hermann Zobel & Thor Rowland Haugaard

Student thesis: Master thesis

Abstract

Decentralised ledger technology has enabled cryptocurrencies to become a new form of money that is privately issued, digital and permits peer-to-peer transactions. Risks arise due to the possibility of anonymity and unregulated use of the cryptomarket. This ultimately could affect the overall financial stability and integrity in the European Union. EU legislators have addressed the main issues by making crypto exchanges and custodial-wallet providers obliged entities under 5AMLD. This thesis will determine the adequacy of the applicable regulatory framework by evaluating the efficiency against the Unions overall political targets. By analysing the function of traditional monetary systems, the purpose is to develop an understanding of the main differences between crypto- and fiat currency. It is sought to derive any major financial consequences to national economies as well as EU’s single market as a whole. Opinions of competent authorities in comparison with macroeconomic theory and the legal framework regulating fiat currencies seeks to answer raised issues. The study finds that the volume of transactions within the cryptomarket remains insignificant in terms of contending official currencies. However, shortcomings could possibly be corrected in the future to increase the popularity and reach of cryptocurrencies. With respect to cryptocurrencies, this thesis argues that these cannot undermine the ability of central banks to conduct monetary policy. They do, however, raise consumer protection issues. Legislation must not add to the cryptomarket credibility in order not to promote associated risks. The technology associated with cryptocurrencies, however, generates innovation and could ultimately shift the entire basis of trust involved in any financial transactions. This thesis finds that EU legislators' choice of legal framework is efficient in the context of not promoting the cryptomarket and to limit illegal exploitation of anonymity. However, the thesis finds that other entry-points do exist which are not regulated by any jurisdiction. Thus, the cryptomarket remains a possible platform for conducting illegal activities. This thesis recommends that competent authorities intensify their work in issuing warnings to consumers.

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2018
Number of pages103
SupervisorsAndrej Savin