Hegemony, Self-Regulation or Responsive Regulation: International Regulatory Competition in Crypto-finance I R I S
H - Y
C H I U *
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Professor of Corporate Law and Financial
persuade their regulatory constituents to state
Introduction
Regulation, University College London, PhD,
a position and remain instead of threatening
LLM (Cambridge).
to exit.20
————————————————— Initial coin offerings (ICOs),1 which
regulatory policy that may be susceptible to
We do not adopt a singularly Tieboutian21
became popular in 2017, introduced a
regulators’ engagement with competition vis
model of proactive regulatory competition in
new financial asset known as the “token”
a vis each other.
this article in order to examine international
or “cryptoasset.”2 The cryptoasset has its
It may be argued that regulatory diversity
regulatory developments for cryptoassets.
origins in cryptocurrency, such as Bitcoin,
3
is not necessarily due to “competition” in
This article takes the view that the observed
which has galvanised imagination in relation
the form of races to the top or bottom.10
regulatory diversity in relation to cryptoassets
to an alternative economic order powered
This presumes that regulators are designing
reflects signs of incentive-based approaches
by privately supplied money.4 Although
regulatory regimes on a calculative basis to
to regulatory policy. After all, regulators are
cryptocurrency has been introduced as an
augment their market share, especially in
mindful of the need to attract mobile assets,
innovation since 2009, its penetration
the era of globalisation.11 Regulators face
such as finance which is perceived to be useful
into mainstream commerce and economic
demand-side pressures12 and have incentives
for financial and economic development in
life has been limited. Cryptoassets have
for generating regulatory policies.13 Such
any jurisdiction.22 Regulatory diversity in
now captured the attention of mainstream
policies can be proactive14 or reactive15 but
this space seems to be consistent with the
financiers,7 and an explosion in their market
is not necessarily poised to lead a “race.”
explanations for regulatory diversity in other
capitalisation has led regulators to consider
Moreover, regulators face institutional
bodies of financial regulation, such as bank
how they may address cryptoassets in their
constraints in political contexts16 and do
regulation discussed by commentators. 23
regulatory repertoire.
not always respond to global regulatory
However, regulatory diversity also reflects
Regulators in different jurisdictions
developments in a manner that treats their
a mixture of regulatory goals, such as the
have taken rather different approaches
regulatory regimes as competitive products.17
protection of existing institutions and social
towards cryptoassets.9 In critical exploration
Further, even in an incentive-based context
compacts.24
of such regulatory diversity, this article
where regulatory constituents can vote
This article takes the view that
inquires into whether the differences reflect
with their feet due to their mobility, 18
regulators should not assume that the same
signs of regulatory competition amongst
constituents’ preferences for regulators range
considerations in other areas of financial
jurisdictions. As Section A explains, the
from the law in books—the legal standards
regulatory competition necessarily apply to
characteristics of cryptoassets do not easily
and frameworks—to the law in action —
the cryptoasset markets. In this experimental
cohere with established financial product
referring to regulators’ enforcement policies,
space, regulators need to address aspects
categories that are subject to regulation. This
as well as more informal attributes such as
of novelty that cryptoassets bring. The
compels regulators to consider if regulatory
their accessibility and willingness to engage
paradigm of regulatory competition should
extension or reform may be appropriate,
for discussion and guidance. 19 Hence,
not be treated as “same old,” and it should
giving rise to an opportunity for generating
regulators can engage in different ways to
not be assumed that familiar strategies
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6
8
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Currents 24.2 2021
