Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments October 7, 2022 erstellt
Description:
The cryptocurrency market has proven notoriously challenging to regulate. Even as “crypto-winter” extinguished two trillion dollars in value, leaving ordinary savers wiped out and crypto-ventures collapsing, regulation has shown itself to be woefully under-protective to either mitigate risks ex ante or help cover the damage ex post. This Article makes the case for mandating self-regulation by crypto-exchanges as a first step toward comprehensive reform of exchange themselves as well as of the cryptocurrency markets in which they play an anchoring role. It offers three rationales in support. Firstly, a public mandate for self-regulation brings crypto-exchanges in line with traditional financial exchanges that have long supervised their market – and been forced to clean their own houses in order to do so. This public mandate to deliver private oversight is rationally rooted. By promising a safe venue, exchanges can more fully perform their core economic function of enabling fluid trading, drawing users, helping them transact on predictable terms and building network effects as numbers grow in response to increasing efficiencies and integrity. This designation of exchange-as-regulator thus helps align the private self-interest of exchanges with the public good. Secondly, crypto-exchanges occupy a unique position from which to perform oversight. As a centralizing firm connected to an array of crypto-users, technologies and ventures, exchanges possess systemic perspective and economic power. Especially within an ecosystem comprised of more decentralized infrastructure, the highly centralized and connected set-up of most crypto-exchanges lowers their cost of delivering oversight and increases its disciplinary power. Finally, by bringing crypto-exchanges within the regulatory perimeter, a publicly-overseen mandate for self-regulation creates a cost on exchanges for failing to comply. It forces venues to create standards for safety and to re-structure their own governance and operational practices in response, placing them – and, by extension the market – on a surer, more organized footing. In concluding, this Article lays out a roadmap for regulation to introduce a public mandate for self-regulation in crypto-markets, setting out strategies to overcome administrative hold-up. While recognizing that self-regulation has serious shortcomings, especially given the risks of crypto-exchanges themselves, it views exchange oversight as a first step toward comprehensive reform – one that is urgently needed to address the significance of the crypto-economy and its deeper entanglement within the financial system and in the lives of everyday savers