In today's digitalized world that has seen the inexorable rise of the internet and its related technological advances, it was only a question of time until our financial system would be improved upon by digital technology. The emergence of so-called cryptocurrency, with Bitcoin undoubtably being the most prominent one, has therefore subsequently led to new ways of payment and storage of money.
Especially Bitcoin, however, has had its fair share of illicit and criminal activities. It is for this reason, that Daniel Werner in his work has embarked upon examining the more disadvantageous side of this technology.
He is therefore investigating which dangers might be inherited by Bitcoin and other cryptocurrencies and how regulatory measures could effectively ease those concerns. He stresses how important the management of these questions by governmental administration is, not only with regard to cryptocurrencies but to financial institutions and companies alike.
In this book:
- Cryptocurrency;
- Blockchain;
- Consumer protection;
- Global Regulatory Approaches
Table of Contents
1 Introduction and Analysis of the Status Quo
2 Terminologies and Underlaying Information
2.1 Distinction of Classical Payment Methods
2.2 Terminological Distinction of Cryptocurrencies
2.3 Popular Cryptocurrencies and underlying Technologies
2.3.1 Bitcoin and the Blockchain Technology
2.3.2 Ethereum
2.3.3 Altcoins
2.4 Key Intermediaries in the Bitcoin Ecosystem
2.4.1 Mining Pools
2.4.2 Exchanges
2.4.3 Electronic Wallet Services
3 Necessity of Regulation
3.1 Danger of Criminal Activities
3.1.1 Hacking Attacks and Investment Scams
3.1.2 Price Manipulation in the Bitcoin Ecosystem
3.1.3 Money Laundering, Tax Evasion and Terrorism
3.2 Consumer Protection
3.3 Monetary Policy
3.4 Consideration of Counterarguments and Impediments
4 Regulatory approaches
4.1 Overview of Global Regulation Approaches
4.2 Central Bank issued Cryptocurrency
4.2.1 Design of CBDCs under Observance of Monetary Aspects
4.2.2 Controversial Consideration
4.3 Prohibition or Restriction of Cryptocurrencies
4.3.1 Targeting Key Intermediaries
4.3.2 Banning Cryptocurrencies
5 Conclusions
Research Objectives and Core Themes
This work examines the necessity of implementing stricter regulatory frameworks for cryptocurrencies by analyzing their underlying technologies, associated economic risks, and current legal challenges. It aims to determine whether regulatory intervention is required to mitigate dangers such as illicit activities, market manipulation, and financial instability.
- The functionality and limitations of blockchain and distributed ledger technology.
- Economic and security-related risks, including hacking, fraud, and price manipulation.
- Global regulatory landscape and state-level approaches like the New York BitLicense.
- Potential of Central Bank Digital Currencies (CBDCs) as a regulatory and monetary policy tool.
- The tension between decentralization/anonymity and the need for law enforcement compliance.
Excerpt from the Book
Blockchain Technology
The blockchain is a globally distributed ledger which enables the verification of a data transaction through a decentralized network. The allocation and security of data in the blockchain enables functions of a centrally organized information system to work as a decentralized system. That means, users of the blockchain can perform data transactions without the need of a trusted third party. Although the application area of this new technology is still limited, the blockchain technology could be used wherever an intermediary operates as a trusted third party to manage and verify transactions. When the blockchain technology was first published in 2009 as a technical concept for Bitcoin, its purpose was primarily to facilitate the creation of a decentralized, digital currency. With imitators following Bitcoin’s success, numerous new cryptocurrencies have gone public in the recent years, many of which were based on new, slightly adjusted variations of Bitcoin’s blockchain technology. At the same time, it was quickly acknowledged that the potential of the blockchain technology exceeds the application area of cryptocurrencies by far. Recent publications indicate that several, global companies intend to use the blockchain technology to support or improve their core business; these organizations span from industries like insurance, automobile, and many more.
Summary of Chapters
1 Introduction and Analysis of the Status Quo: Provides the foundation of the work by highlighting the rise of digitalization, the emergence of Bitcoin, and the research objective regarding regulatory necessity.
2 Terminologies and Underlaying Information: Defines core concepts such as blockchain, cryptocurrencies, and key intermediaries like mining pools and exchanges to establish a technical framework.
3 Necessity of Regulation: Analyzes the risks associated with cryptocurrencies, including criminal threats, consumer protection issues, and the impact on traditional monetary policy.
4 Regulatory approaches: Compares international regulatory strategies, including the concept of Central Bank issued Cryptocurrencies (CBDCs) and the pros and cons of bans or stricter oversight.
5 Conclusions: Summarizes the findings, confirming that while blockchain innovation is valuable, the systemic risks necessitate targeted regulatory frameworks.
Keywords
Cryptocurrency, Bitcoin, Blockchain, Distributed Ledger Technology, Regulation, Money Laundering, Consumer Protection, Central Bank Digital Currency, CBDC, Price Manipulation, Mining Pools, Financial Stability, Monetary Policy, Anonymity, AML
Frequently Asked Questions
What is the primary focus of this publication?
The book evaluates the necessity of establishing stricter regulatory frameworks for the cryptocurrency market by analyzing its unique technical nature and the associated risks for global financial systems.
What are the central topics discussed in the book?
It covers the technical basics of blockchain, the role of key intermediaries (exchanges, mining pools), threats like money laundering and hacking, and various governmental approaches to regulation.
What is the core research objective of this work?
The objective is to comprehensively depict the phenomenon of emerging cryptocurrencies and evaluate whether governmental, regulatory measures are required to mitigate risks for law enforcement and consumers.
Which methodology does the author use?
The author performs a thorough literature review of recent scientific research, including technical studies, economic analyses, and reports on regulatory developments to assess the feasibility of policy options.
What is discussed in the main body of the work?
The main body examines the terminology of cryptocurrencies, justifies the need for regulation based on criminal activities and market risks, and explores specific regulatory approaches like CBDCs and stricter licensing laws.
What are the most important keywords for this work?
Key terms include Cryptocurrency, Bitcoin, Blockchain, Distributed Ledger Technology, Regulation, Money Laundering, Consumer Protection, and Central Bank Digital Currency (CBDC).
How does the author view the 51%-attack in the context of Bitcoin?
The author identifies the 51%-attack as a significant threat to the integrity of the network, noting that while it has not successfully destabilized Bitcoin's main network yet, it remains a dangerous vulnerability requiring technical solutions.
What argument does the author present regarding Central Bank Digital Currencies (CBDCs)?
The author presents CBDCs as a potential tool for central banks to maintain control over monetary policy and counteract the risks of private cryptocurrencies while potentially facilitating faster and cheaper cross-border transactions.
- Arbeit zitieren
- Daniel Werner (Autor:in), 2019, Regulation of Cryptocurrencies. Necessity and Approaches, München, GRIN Verlag, https://www.grin.com/document/452180
