Crypto assets pose a risk to the state

Crypto assets exist for a single purpose: regulatory arbitrage. Effectively to undermine the rule of law and circumvent controls that nation states have put in place to safeguard the public and protect their economic interests. These include controls like sanctions enforcement, know your customer, anti-money laundering and counter-terrorism financing.

Dark flows of crypto assets outside of the regulatory perimeter undermines these controls by allowing criminals to circumvent the law and engage in illicit financing and avoid law enforcement controls. This undermines the rule of law and the capacity of the state to protect its national interests.

While crypto assets don't pose an existential threat to the state per se, they do enable crime and undermine policy which weakens trust in democratic institutions and threatens the way of life for law-abiding citizens.

References

  1. Bindseil, Ulrich, Patrick Papsdorf, and Jü rgen Schaaf. 2022. ‘The Encrypted Threat: Bitcoin’s Social Cost and Regulatory Responses’.
  2. Diehl, Stephen. 2021a. ‘The Political Case for a Blanket Cryptocurrency Ban’. 30 March 2021. https://www.stephendiehl.com/blog/banbitcoin.html.
  3. ———. 2021b. ‘How to Destroy Bitcoin’. 13 July 2021. https://www.stephendiehl.com/blog/destroy-bitcoin.html.
  4. ‘Guidance on Cryptoassets’. 2019. Financial Conduct Authority. https://www.fca.org.uk/publication/consultation/cp19-03.pdf#page=11.
  5. Hacker, Philipp, and Chris Thomale. 2018. ‘Crypto-Securities Regulation: ICOs, Token Sales and Cryptocurrencies under EU Financial Law’. European Company and Financial Law Review 15 (4): 645–96.
  6. Huang, Sherena Sheng. 2021. ‘Crypto Assets Regulation in the UK: An Assessment of the Regulatory Effectiveness and Consistency’. Journal of Financial Regulation and Compliance.
  7. Rae, Shaela W, and Lorraine Mastersmith. 2019. ‘Crypto Asset Trading in Canada: Entering a New Era of Regulation’. Banking & Finance Law Review 35 (1): 153–85.
  8. Shri T Rabi Sankar. n.d. ‘Cryptocurrencies – An Assessment’. Reserve Bank of India. Accessed 2 March 2022. https://rbi.org.in/Scripts/BS_SpeechesView.aspx?Id=1196.
  9. Zwitter, Andrej, and Jilles Hazenberg. 2020. ‘Decentralized Network Governance: Blockchain Technology and the Future of Regulation’. Frontiers in Blockchain 3. https://www.frontiersin.org/article/10.3389/fbloc.2020.00012.
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