Cryptocurrencies and its underlying distributed ledger technology (DLT) introduces innovations to digital property and methods of information storage. Although capable of many uses, its most famous implementation is creating a new digital asset that underpins a system of direct 'peer-to-peer' online payments. This emerging technology disrupts the existing centralised digital payments system; itself underpinned by a model of 'trust' derived from state-franchised institutions. In this emerging world of cryptocurrencies, 'trust' does not derive from state-franchised institutions or intermediaries, but the technology and its network. Cryptocurrencies pose a range of conceptual and regulatory challenges. For instance, it challenges orthodox theoretical explanations of money. Furthermore, it re-enacts tensions between state control of monetary operations and private involvement in payments. Significantly, cryptocurrencies raise concerns regarding the adaptability of law in responding to emerging problems of financial crime, privacy protection and socio-economic participation.
This thesis assesses the extent to which existing legal frameworks for digital payments can respond to the cryptocurrency phenomenon. It focuses on the Electronic Money and Payment Service Regulations of 2011 and 2017, respectively. The thesis also analyses Common Law rules governing bank payments to ascertain the extent of applicability and suitability. The thesis argues that the underpinning private nature of cryptocurrencies make current legal frameworks incompatible. It also argues that, by mostly pursuing economic goals of efficiency, existing regulatory tools are inadequately prepared to respond to peculiar concerns thrown up by cryptocurrencies. As such, in its current framework, orthodox regulatory responses seem incapable of resolving the myriad of issues associated with the complex relationships between asset holders and crypto institutions. Ultimately, by prioritising efficiency over other values like privacy and inclusion, existing legal and regulatory rules implicitly protect the positional power of incumbents and preserve the hierarchical structure of the financial system. In this regard, the law has become an instrument deployed in curtailing cryptocurrencies from widespread adoption, for the benefit of the state and its franchise institutions.
Legal reform is necessary. However, the thesis argues that such reform must not solely focus on economic goals which underpin market-focused legal interventions. Instead, an intervention must aim to promote innovation, protect consumers, widen participation and preserve personal liberties. The policymaker must first objectively assess the benefits that cryptocurrencies introduce into the payments system. By conducting such an objective assessment, this thesis ultimately concludes that, given the growing decline in cash use, cryptocurrencies are a viable alternative online payment instrument inbuilt with more robust protections and encouraging participation.
