The Future of Cryptocurrency: An Unregulated Instrument in an Increasingly Regulated Global Economy

Loyola University Chicago International Law Review Loyola University Chicago International Law Review

Volume 16 Issue 1 Article 8

2020

The Future of Cryptocurrency: An Unregulated Instrument in an The Future of Cryptocurrency: An Unregulated Instrument in an

Increasingly Regulated Global Economy Increasingly Regulated Global Economy

D. Towne Morton

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The Future of Cryptocurrency: An Unregulated Instrument in an Increasingly Regulated Global

Economy

, 16 Loy. U. Chi. Int'l L. Rev. 129 (2020).

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TBE

FUTURE

OF

CRYPTOCURRENCY:

AN

UNREGULATED

INSTRUMENT

IN

AN

INCREASINGLY

REGULATED

GLOBAL

ECONOMY

D.

Towne

Morton

I.

Introduction

a.

Scope

Resulting

from

their

dynamic

rise

of their

value

and

international

popularity,

cryptocurrencies

have

unavoidably

come

under

amplified

scrutiny

and

increased

pressure

from

global

regimes

and

a

plethora

of

regulatory

bodies.

International

organizations

and

governing

bodies

have

taken

quite

drastic

and

differing

ap-

proaches

to

cryptocurrencies.

With

questions

of

jurisdiction

and

fraud,

these

enti-

ties

must

ask

if

multinational

policies

are

beneficial

to

world

markets

while

trying

to

carefully

balance

issues

of

national

capitol

control

and

the

perceived

downsides

to

cryptocurrency

such

as:

money

laundering

and

as

a

mechanism

to

fund

terrorism.

This

article

seeks

to

address

the

enigmatic

cybersecurity

of

cryptocurrencies

with

inconsistent

international

regulation

to

this

new

international

phenomenon

regarding

scams,

anti-money

laundering,

and

combating

the

financing

of

terror-

ism.

However,

with

international

regulations

already

in

place,

like

the

European

Union

("EU")

General

Data

Protection

Regulation

("GDPR")

1

,

blockchain

tech-

nology

must

conform

their

anonymity

and

adhere

to

data

security

regulations

or

will

they

become

a

rogue

instrument

in

our

global

economy

and further

used

as

a

tool

of

fraud

and

terrorism.

With

global

markets

and

national

security

in

jeopardy,

countries

and

interna-

tional

actors

must

come

together

to

form

a

uniformed

virtual

currency

framework

with

regulatory

bodies

enforcing

sanctions

and

bringing

forth

criminal

charges

to

enhance

cybersecurity

and

combat

illicit

activities.

H.

Background

on

Cryptocurrencies

and

Blockchain

Technology

a.

Structure

of

the

Cryptocurrency

Process

Blockchain

and

cryptocurrency

are

two

of

many

bywords

used

within

this

growing

sector.

Internationally,

many

countries

are

familiar

with

the

term

"Bitcoin."

Bitcoin

is

the

cryptocurrency

that

relies

on

blockchain

technology.

Cryptocurrency

offers

a

peer-to-peer

payment

option

that

allows

users

to

securely

send

or

receive

electronic

payment.

Cryptocurrency

is

a

decentralized

digital

cur-

l

EU

General

Data

Protection

Regulation

("GDPR"):

Regulation

(EU)

2016/679

of

the

European

Parliament

and

of

the

Council

of

27

April

2016

on

the

protection

of

natural

persons

with

regard

to

the

processing

of

personal

data

and

on

the

free

movement

of

such

data,

and

repealing

Directive

95/46/EC

(General

Data

Protection

Regulation),

OJ

2016

L

119/1

Volume

16,

Issue

I

Loyola

University

Chicago

International

Law

Review

129

The

Future

of

Cryptocurrency

rency

secured

through

encryption

techniques

to

control

the

creation

of

monetary

units

and

to

verify

the

transfer

of

funds.

2

Cryptocurrency

operates

on

a

blockchain,

which

is

merely

an

archive

of

digital

transactions.

3

Fundamentally,

when

thinking

of

blockchains,

think

of

a

ledger.

This

digital

ledger

is

a

database

that

stores

the

transactions

and

can

share

it

among

a

distributed

network

of

com-

puters.

4

Using

blockchain

technology,

users

can

confirm

transactions

without

the

need for

a

central

certifying

authority

-

such

as

a

central

bank.

5

Each

time

a

transfer

is

initiated,

a

cryptocurrency

holder

(i.e.

Bitcoin

user)

combines

his

or

her

wallet

with

a

string

of

data

that

shows

one's

access

to

a

virtual

currency

in

a

specific

wallet;

this

is

analogous

and

can

be

thought

of

as

a

password.

6

The

network

of

the

cryptocurrency,

for

example

Bitcoin,

verifies

the

transaction

and

adds

it

to

a

blockchain

through

cryptography.

The

process

of

verifying

the

transaction

and

adding

it

to

the

blockchain

is

known

as

"mining,"

which

is

all

done

through

sophisticated

computerized

software.

7

Blockchains

tracking

the

transfer

of

cryptocurrencies

maintain

a

similar

ledger,

like

one

of

a

central

certifying

authority

would

keep,

that

keeps

track

of

the

transfer

from

a

transferor

to

a

transferee.

8

The

difference

lies

in

the

blockchain

technology,

and

in

contrast

to

the

central

certifying

authority.

A

blockchain

ledger

is

considered

decentralized,

thus

lacking

a

controlling

party,

because

all

the

transactions

are

stored

on

thousands

of

computers

that

connect

to

the

cryptocurrency

network

via

the

Internet.

9

Since

these

transactions

are

distributed,

decentralized

and

highly

encrypted,

it

is

near

impossible

to

trace

the

funds

used

in

the

cryptocurrency

to

the

buyer

or

the

seller.10

b.

History:

The

Start

of

the

Original

Cryptocurrency

to

Today

Bitcoin,

the

original

cryptocurrency,

came

to

fruition

in

2009.

Invented,

under

the

pseudonym

Satoshi

Nakamato,

Bitcoin's

value

has

exponentially

increased

since

the

commencement.

At

the

start

of

2019,

a

single

Bitcoin

is

valued

around

$4,000.11

Before

Bitcoin,

digital

currencies

and

cryptocurrencies

were

controlled

by

a

central

authority

and

always

centralized.

1

2

Nakamoto

was

not

the

first

per-

2

SHAWN

AMUIAL

ET

AL.,

THE

BLOCKCHAIN:

A

GUIDE

FOR

LEGAL

&

BUSINESS

PRO-

FESSIONALS

GLOSSARYBLOCKCHAIN

TERMINOLOGY

(2016).

3

Justin

E.

Hobson,

Blockchain

and

Cryptocurrency-Two

Road

Converge,

28

J.

MULTISTATE

TAX'N

&

INCENTIVES

40

(2018).

4

AMUILu

et

al.,

supra

note

2.

5

Id.

6

Id.

7

Hobson,

supra

note

3.

8

AMUIAL

et

al.,

supra

note

2.

9

Id.

10

Conor

Desmond,

Bitcoins:

Hacker

Cash

or

the

Currency?

19

PuB.

INT.

L.

RFP.

30,

32

(2013).

11

All

Cryptocurrencies,

COINMARKI-TCAP.,

https://coinmarketcap.com/all/views/all/

(last

visited

Mar.

7

,

2018).

12

Robert

Viglione,

Does

Governance

Have

a

Role

in

Pricing?

Cross-Country

Evidence

From

Bitcoin

Markets,

SSRN

1-31

(Sept.

2015).

130

Loyola

University

Chicago

International

Law

Review

Volume

16,

Issue

1

The

Future

of

Cryptocurrency

son

to

attempt

to

create

a

form

of

digital

currency

structure;

however

currency

often

failed

because

they

were

unable

to

combat

double

spend-

ing.

13

Currency

owners

would

spend

the

same

digital

currency

twice,

so

digital

currencies

were

centralized

to

make

sure

double

spending

did

not

occur.

Nakamoto

created

a

system

for

cryptocurrencies,

that

requires

a

complete

con-

sensus

from

all

parties

and

if

there

are

any

disagreements

between

the

parties

the

whole

transaction

breaks

down.

14

Bitcoin

demonstrates

that

there

is

need

for

any

kind

of

central

authority

to

control

digital

currencies

if

there

is

total

agreement

from

all

the

parties

involved.'

5

Cryptocurrencies

have

value

as

long

as

the

users

trust

that

if

they

accept

it

as

a

payment,

they

can

then

use

it

to

purchase

some-

thing

else.

1

6

As

of

November

30,

2018,

there

were

2073

cryptocurrencies,

with

Bitcoin

accounting

for

roughly

half

of

the

total

cryptocurrency

market

capitalization.

17

Cryptocurrencies

have

been

getting

worldwide

attention

and

a

handful

of

central

banks

have

started

implementing

options

to

adopt

these

blockchain

technologies

as a

mode

of

payment

for

retail

and

large-value

purchases.

'

8

With

their

dynamic

rise,

cryptocurrencies

have

come

under

heightened

scrutiny

from

regulatory

bod-

ies.

This

rise

has

induced

an

international

debate

on

jurisdiction

and

analysis

of

whether

cryptocurrency

is

true

currency,

a

security,

or

a

commodity.

HI.

International

Authorities

and

Cryptocurrencies

Due

to

the

international

reach

of

cryptocurrencies:

regulation,

policies,

and

enforcement

jurisdiction

are

vague

and

muddled

throughout

the

world.

Govern-

ments,

therefore,

must

find

ways

to

cooperate

in

establishing

at

least

some

mutu-

ally

agreeable

regulations

that

govern

the

use

of

cryptocurrency

and

give

international

jurisdiction

for

illicit

activities.

The

debate

surrounding

cryptocur-

rency

and

their

benefit

to

the

global

economy

is

nowhere

close

to

finding

a

uni-

formed

solution.

Online

anonymity

is

a

double-edged

sword,

and

laissez-faire

users

and

authorities

must

be

handled

delicately.

As

policy-makers

and

gov-

erning

bodies

address

these

issues,

they

must

address

the

dynamic

and

innovated

field

of

cryptocurrencies

with

a

new

mindset

to

ensure

that

enforcement

agencies

have

the

resources

and

legal

support

to

create

uniformed

regulatory

bodies,

poli-

cies,

and

enforcement

protocols

to

be

able

to

police

illicit

activities

that

arise

from

cryptocurrency

usage.

Blockchain

technology

policy,

like

all

good

policy,

13

Usman

W.

Chohan,

The

Double-Spending

Problem

and

Cryptocurrencies,

UNIV.

NEW

SOUTH

WALEs

1-7

(Dec.

19,

2017).

14

Id.

15

Id.

16

BRIAN

KELLY,

THE

BITCON

BIG

BANG:

How

ALTERNATIVE

CURRENCIES

ARE

ABOUT

TO

CHANGE

THE

WORLD

(2014).

17

All

Cryptocurrencies,

supra

note

11.

18

Jonathan

Chiu

&

Thorsten

Koeppl,

The

Economics

of

Cryptocurrencies

-

Bitcoin

and

Beyond,

CHAPMAN

UNIV.

1-40

(Apr.

2017),

available

at

https://www.chapman.edu/researchlinstitutes-and-cen

ters/economic-science-institute/_files/ifree-papers-and-photos/koeppel-april2017.pdf.

Volume

16,

Issue

1

Loyola

University

Chicago

International

Law

Review

131

The

Future

of

Cryptocurrency

must

be

nuanced

and

thoughtful

to

strike

the

balance

between

the

needs

of

pri-

vacy-minded

users

and

the

government's

responsibility

to

stop

illegal

activity.

a.

International

Actor's

Stances

on

Cryptocurrency

Regulation

As

authorities

around

the

world

change

policies

that

effect

digital

assets,

cryptocurrencies

can

be

greatly

affected

and

major,

positive

or

negative,

impacts

on

the

market

can

ensue.

A

common

theme

is

confusion;

no

major

international

actor

is

confident

what

laws

apply,

how

much

government

influence

is

needed,

when

taxes

must

be

paid,

whether

cryptocurrency

is

an

asset

or

an

investment

or

a

security

or

something

that

is

to

be

determined.

Legal

classifications

of

cryptocurrencies

are

imperative

in

defining

regulatory

policies,

addressing

do-

mestic

legal

certainties

and

applying

rule

of

law.

With

licensed

cryptocurrency

exchange

platforms

that

perform

exchange

of

hard

currencies

to

cryptocurrencies

and

vice-versa,

we

see

the-

emergence

of

a

new

type

of

intermediary.

1

9

These

intermediaries'

rights

are

dependent

on

how

cryptocurrencies

are

classified,

fur-

ther

the

issue

of

taxation,

and

policy

issues

all

vary

on

the

classification

of

cryptocurrencies.

2

0

i.

USA,

EU

&

Canada

With

increased

scrutiny

from

global

regulatory

bodies,

many

countries

will

look

to

the

United

States

("U.S."),

the

EU,

and

Canada

in

their

regulation

and

views

on

digital

assets.

The

U.S.

has

varying

perceptions

of

cryptocurrencies

across

their

federal

enti-

ties

and

laws

vary

state

to

state.

The

U.S.

has

the

second

largest

volume

of

Bitcoin,

nearly

twenty-six

percent.

2

I

However,

the

U.S.

government,

in

compari-

son

to

other

major

powers,

has

retrospectively

set up

no

regulatory

guidelines.

22

This

lack

of

uniform

regulatory

framework

has

not

made

the

country

well

suited

to

welcome

the

global

phenomenon

of

cryptocurrencies.

Without

a

compact

uni-

formed

system

of

rules,

many

blockchain

startups

avoid

the

U.S.

due

to

implica-

tions

of

future

taxations.

2

3

In

observing

some

regulatory

bodies,

we

see

that

the

Financial

Crimes

Enforcement

Network

("FinCEN")

does

not

consider

cryptocurrencies

to

be

legal

tender.

2

4

However,

FinCEN

has

considered

ex-

changes

as

money

transmitters

on

the

basis

that

tokens

are

"other

value

that

sub-

19

Dr.

Asress

Adimi

Gikay,

Regulating

Decentralized

Cryptocurrencies

Under

Payment

Services

Law:

Lessons

from

European

Union

Law,

9

CASE

W.

RESERVE

J.L.

TECH.

&

INTE'1r

1,

35

(2018).

20

Id.

21

CRYPTOCOMPARE,

https://www.cryptocompare.com/

(last

visited

Oct.

24,

2018).

22

Id.

23

Rachel

McIntosh,

The

Good,

the

Bad,

and

the

Ugly:

Crypto

Regulation

in

the

USA,

FINANCE

MAGNATES

(Sept.

1,

2018),

https://www.financemagnates.com/cryptocurrency/newsgood-bad-ugly-

crypto-regulation-usa/.

24

APPLICATION

OF

FINCEN'S

REGULATIONS

TO

PERSONS

ADMINISTERING,

EXCHANGING,

OR

USING

VIRTUAL

CURRENCIES,

FINANCIAL

CRIMES

ENFORCEMENT

NETWORK

(Mar.

18,

2013),

available

at

https://

www.fi

ncen.gov/resources/statutes-regulations/guidance/application-fincens-regulations-persons-

administering.

132

Loyola

University

Chicago

International

Law

Review

Volume

16,

Issue

1

The

Future

of Cryptocurrency

stitutes

for

currency"

25

In

contrast,

the

Intern

Revenue

Services

("IRS"),

regards

cryptocurrencies

as

property

and,

in

March

2018,

issued

a

formal

statement

to

remind

taxpayers

to

report

virtual

currency

transactions.

2

6

Furthermore,

multiple

federal

bodies

in

cryptocurrency

exchange

regulations

sphere

have

claimed

juris-

diction.

The

Securities

and

Exchange

Commission

("SEC")

reported

that

they

consider

cryptocurrencies

to

be

securities.

2 7

While

on

the

other

side

of

the

coin,

the

Commodities

Futures

Trading

Commission

("CFTC")

considers

Bitcoin

to

be

a

commodity.

28

The

U.S.,

due

to

their

limited

uniformed

federal

legal

framework

and

confusion

of

what

cryptocurrencies

are,

have

put

crypto

users

and

their

citi-

zens

at

risk

of

illicit

activities.

Without

sweeping

federal

laws,

states

are

left

to

make

their

own

regulations

on

the

usage

and

classification

of

cryptocurrencies.

When

analyzing

each

state's

laws,

there

is

distinct

divide

on

the

approach

of

regulation

which

can

be

separated

into

three

groups:

(1)

flexible

approach

states;

(2)

strict

regulators;

and

(3)

states

without

regulations

(these

states

have

yet

to

embrace

virtual

currency

and

do

not

have

regulations).

The

Uniform

Law

Com-

mission

("ULC")

created,

the

Uniform

Regulation

of

Virtual-Currency

Busi-

nesses

Act

("URVCBA"),

a

restatement

like

template

that

state

governments

may

use

to

integrate

cryptocurrency

companies

into

the

regulatory

framework.

2

9

The

EU

Parliament

published

an

in-depth

analysis

of

virtual

currencies

stating,

"Policy

makers

and

regulators

should

not

ignore

VCs,

nor

should

they

attempt

to

ban

them.

Both

extreme

approaches

are

incorrect.

"30

This

report

defines

virtual

currencies

("VCs")

as

private

digital

monies

and

that

they

should

be

treated

by

regulators

as

any

other

financial

instrument.

31

Furthermore,

it

expresses

the

im-

portance

to

harmonize

regulations

across

jurisdiction

due

to their

global

nature

and

trans-border

character.

32

The

authors

recommend

that

cryptocurrencies

should

be

taxed

in

a

similar

fashion

to

investment

in

other

financial

as-

sets.

33

According

to

European

Central

Bank

President,

Mario

Draghi,

no

member

25

Id.

26

IRS

reminds

taxpayers

to

report

virtual

currency

transactions,

INTERNAL.

REVENUE

SERVICE

(Mar.

23,

2018),

https://www.irs.gov/newsroom/irs-reminds-taxpayers-to-report-virtual-currency-transactions.

27

Jay

Clayton,

Statement

on

Cryptocurrencies

and

Initial

Coin

Offerings,

U.S.

SECURITIES

AND

Ex-

CHANGE

COMMISSION

(Dec.

11,

2017),

https://www.sec.gov/news/public-statement/statement-clayton-

2017-12-11.

28

Bitcoin,

U.S.

COMMODITY

FUTURES

TRADING

COMMISSION,

https://www.cftc.gov/Bitcoin/in

dex.htm

(last

visited

Apr.

20,

2019).

29

NATIONAL

CONFERENCE

OF

COMMISSIONERS

ON

UNIFORM

STATE

LAWS,

Uniform

supplemental

Commercial

Law

for

the

Uniform

Regulation

of

Virtual-Currency

Businesses

Act

(2018).

See

also

Bal-

lard

Spahr,

Uniform

Act

to

Regulate

Virtual

Currency

Businesses

Ready

for

State

Adoption,

JDSuPRA

(Jan.

10,

2018),

https://www.jdsupra.comlegalnews/uniform-act-to-regulate-virtual-68645/

(explaining

the

proposed

act

and

stating

the

act

"contains

a

three-tiered

regulatory

structure

that

is

designed

to pro-

vide

legal

stability

to

virtual

currency

transactions

while

accommodating

innovation.").

30

MAREK

DABROWSKI

&

LuKASz

JANIKOWSKI,

VIRTUAL

CURRENCIES

AND

CENTRAL

BANKS

MONE-

TARY

POLICY:

CHALLENGES

AHEAD

(European

Parliament

June

2018),

available

at

http://

www.europarl.europa.eu/cmsdata/149900/CASE-FINAL%20publication.pdf

(emphasis

added).

31

Id.

at

26.

32

Id.

at

5.

33

Id.

Volume

16,

Issue

1

Loyola

University

Chicago

International

Law

Review

133

The

Future

of

Cryptocurrency

state

can

introduce

its

own

currency

in

the

EU.

3

4

Many

EU

leaders,

including

Vice

President

of

the

European

Commission

Valdis

Dombrovskis,

have

ex-

pressed

concern

about

how

digital

assets

can

be

used

for

money

laundering

and

the

financing

of

illicit

activities.

3

5

On

December

15,

2017,

the

European

Council

and

the

European

Parliament

agreed

amend

the

4th

Anti-Money

Laundering

("AML")

Directive,

3

6

and

thus

the

5th

AML

Directive

37

was

brought

to

fruition.

This

directive

will

bring

virtual

currency

exchanges

and

custodian

wallet

provid-

ers

under

the

umbrella

of

the

existing

European

AML

legislation.

38

Once

incor-

porated

into

national

legislation

of

the

EU

member

states,

these

exchanges

and

custodians

will

be

obligated

to

register

with

the

appropriate

authority

within

their

jurisdiction

and

must

comply

with

a set

of

guidelines

that

will

give

national

in-

vestigators

greater

access

to

information,

in

their

fight

against

illicit

activities.

39

The

5th

AMIL

Directive

contains

the

first

legally

binding

definition

of

VCs

for

EU

member

states

and

is

the

most

significant

regulatory

action

implemented

in

the

rules

of

VCs

on

the

supranational

level.

4

°

The

European

Court

of

Justice

("ECJ")

has

held

41

that

for

tax

purposes,

VCs

should

be

treated

as

a

currency

rather

than

a

commodity;

having

exemption

from

the

Value

Added

Tax

("VAT")

according

to

the

current

EU

laws

and

regulations.

42

The

ECJ

has

been

recognized

without

objection

by

the

totality

of

EU

member

states

and

their

courts,

thus

VCs

will

be

exempt

from

taxation

across

all

jurisdictions

of

the

EU.

43

The

EU,

very

publicly

and

in

the

international

lens,

have

been

working

hard

on

creating

a

uni-

formed

set

of

guidelines

and

laws

within

the

EU

that

work

to

create

an

optimal

environment

for

cryptocurrencies.

Canada,

being

the

first

country

in

the

world

to

establish

tax

laws

that

apply

to

virtual

currencies,

perhaps

has the

most

cohesive

and

developed

system

of

regu-

34

Mario

Draghi,

President

of

the

ECB

&

Vftor

Const~ncio,

Vice-President

of

the

ECB,

Press

Con-

ference

at

Frankfurt

am

Main

(Sept.

7,

2017)

(transcript

available

at

European

Central

Bank,

https://

www.ecb.europa.eu/press/pressconf/2017/html/ecb.is170907.en.html.)

35

Vladis

Dombrovskis,

Vice-President

Eur.

Comm'n,

Remarks

at

the

Roundtable

on

Cryptocur-

rencies

at

Brussels

(Feb.

26,

2018)

(transcript

available

at

European

Commission,

http://europa.eu/rapid/

press-releaseSPEECH-18-1242_en.htm).

36

Directive

of

the

European

Parliament

and

of

the

Council,

EUR.

PARL.

Doc.

(EU

2015/849)

(2015),

available

at

https://eur-lex.europa.eulegal-content/EN/TXT/PDF/?uri=OJ:JOL_2015141_R

0003&

from=ES.

37

Directive

of

the

European

Parliament

and

of

the

Council,

EUR.

PARL.

DOC.

(COM

2016/028)

(2016),

available

at

https://eur-lex.europa.eulegal-content/ENfrXT/PDF/?uri=CELEX:52016PC0450

&from=EN.

38

Stefan

Stankovic,

Cryptocurrency

Regulation

in

the

European

Union,

CRYPTo

BRFING

(Aug.

23,

2018),

https://cryptobriefing.com/cryptocurrency-regulation-european-union/.

39

Id.

4

Id.

41

Case

C-264/14,

Skatteverket

v.

Hedqvist,

2015

E.C.R.

718,

available

at

http://curia.europa.eu/

juris/document/document.jsf?docid=

170305&doclang=EN.

42

Directive

of

the European

Parliament

and

of

the

Council,

EUR.

PARL.

DOC.

(COM

2016/028)

(2016).

43

Id.

134

Loyola

University

Chicago

International

Law

Review

Volume

16,

Issue

1

The

Future

of

Cryptocurrency

lations.

44

Cryptocurrencies

are

not

considered

legal

tender

in

Canada,

but

the

usages

of

digital

currencies

are allowed.

45

The

Canada

Revenue

Agency

publicly

stated

and

characterized

cryptocurrency

as

a

commodity.

46

Further,

the

agency

asserted

that

the

use

of

cryptocurrency

to

pay

for

goods

or

services

should

be

treated

as

a

barter

transaction.

47

The

Canada

Revenue

Agency

added

that,

**[w]here

digital

currency

is

used

to

pay

for

goods

or

services,

the

rules

for

barter

transactions

apply.

A

barter

transaction

occurs

when

any

two

persons

agree

to

exchange

goods

or

services

and

carry

out

that

exchange

without

using

legal

currency.

For

example,

paying

for

movies

with

digital

currency

is

a

barter

trans-

action.

The value

of

the

movies

purchased

using

digital

currency

must

be

in-

cluded

in

the

seller's

income

for

tax

purposes.

The

amount

to

be included

would

be

the

value

of

the

movies

in

Canadian

dollars.

4

8

As

noted

above,

because

cryptocurrencies

are

a

commodity

under

Canadian

law,

Canadian

citizen

must

report

any

gains

or

losses

generated

from

the

disposi-

tion

of

cryptocurrency,

and

cryptocurrency

should

be

treated

as

capital

when

fil-

ing

taxes.

49

Companies

dealing

with

cryptocurrencies

are

required

to

register

with

the

Financial

Transactions

and

Reports

Analysis

Centre

of

Canada

("Fin-

trac")

and

must

comply

with

record

keeping,

reporting,

and

a

variety

of

other

compliance

programs

under

Bill

C-31,

which

was

given

the

Royal

Assent

in

2014.

50

This

law

also

applies

to

virtual

currency

exchanges

operating

outside

of

Canada

that

their

service

effects persons

or

entities

in

Canada.

51

However,

be-

cause

of

Canada's

parliamentary

system,

Bill

C-31

and

its

changes

were

never

"commenced."

52

Examined

further,

Parliament

passes

legislation,

the

Governor

General

gives it

Royal

Assent

and

it

becomes

a

law.

However,

the

law

does not

go

into

force

until

it

"commences.

'53

Bill C-31's

virtual

currency

amendments

are

currently

classified

as

"Amendments

Not

in

Force."

Thus,

corporations

that

deal

in

cryptocurrencies

are

not

regulated

money

services

businesses

("MSBs")

under

the

law.

5

4

44

Mariam

AI-Shikarchy

et

al.,

Canadian

Taxation

of

Cryptocurrency...

So

Far,

LEXOLOGY

(Nov.

14,

2017),

https://www.lexology.com/library/detaii.aspxg=6283077e-9d32-4531-81a5-56355fa54f47

(stating

that

in

Canada

digital

currencies

are

subject

to

the

Income

Tax

Act

and

the

Exercise

Tax

Act).

45

Digital

Currency,

FINANCIAL

CONSUMER

AGFNCY

OF

CANADA,

https://www.canada.ca/en/finan

cial-consumer-agency/services/payment/digital-currency.html

(last

visited

Apr.

20,

2019).

46

Mariam

A-Shikarchy

et

al.,

supra

note

44.

47

Id.

48

Guide

for

cryptocurrency

users

and

tax

professionals,

CANADA

REVENUE

AGFNCY,

https://www.

canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/digital-currency/

cryptocurrency-guide.html

(last

visited Apr.

20,

2019).

49

Id.

50

Economic

Action

Plan,

R.S.C.

2014,

c.

31

(Can.).

51

Id.

at

§

255(2).

52

Christopher

Casper,

Bitcoin

and

Cryptocurrency

Laws

in

Canada

-

A

Comprehensive

Guide,

CoINIQ

(JULY

23,

2018),

https://coiniq.com/bitcoin-and-cryptocurrency-laws-in-canada/.

53

Id.

54

Id.

Volume

16,

Issue

1

Loyola

University

Chicago

International

Law

Review

135

The

Future

of

Cryptocurrency

ii.

China

&

Japan

China

has

not

passed

any

legislation

in

relation

to

the

regulation

of

cryptocur-

rencies

and

regulators

are

not

recognizing

cryptocurrencies

as

legal

tender.

55

In

2013,

the

People's

Bank

of

China

("PBOC")

ruled

that

cryptocurrencies

are

not

currency,

but

rather

a

VC.56

The

practice

of

acquiring

a

profit

through

initial

coin

offerings

("ICOs")

is

completely

banned

in

China.

57

Chinese

central

government

regulators

issued

the

"ICO

Rules",

which

state,

ICOs

that

promote

cryptocur-

rencies

through

the

sale

and

circulation

of

tokens

are,

in

essence,

engaging

in

the

illegal

acts

of

public

financing

without

official

authorization.

58

The

ICO

Rules

prohibit

cryptocurrency

trading

platforms

from:

engaging

in

the

conversion

of

legal

tender

into

cryptocurrencies

or

vice

versa,

purchasing

or

selling

cryptocur-

rencies,

setting

prices,

or

providing

any

other

services.

59

Financial

institutions

are

prohibited

from,

in

any

form,

providing

any

type

of

service

to

cryptocurrencies.

60

Cryptocurrencies

have

been

highly

regulated,

and

even

re-

cently,

China

has

moved

to

discourage

Bitcoin

mining.

61

In

January

2018,

China's

Leading

Group

of

Internet

Financial

Risks

Remediation

requested

that

local

governments

remove

existing,

preferential

policies

for

Bitcoin

mining

com-

panies

and

actively

direct

the

withdrawal

of

such

companies

from

the

Bitcoin

mining

business.

6

2

Due

to

these

increased

regulations

by

local

governments,

many

Bitcoin

mines

in

China

have

stopped

operating.

On

July

6,

2018

the

Peo-

ple's

Bank

of

China

reported

that

eighty-eight

VCs

trading

platforms

and

eighty-

five

ICO

platforms,

have

all

withdrawn

from

the

market.

6

3

China

was

once

the

55

Laney

Zhang,

Regulation

of

Cryptocurrency:

China,

THE

LAW

LIBRARY

OF

CONGRESS,

https://

www.loc.gov/law/help/cryptocurrency/china.php#_finl

(last

updated

July

13,

2018).

56

TipRanks,

Crypto

In

China:

Past,

Present,

And

Future,

NASDAQ

(Dec.

17,

2018),

https://

www.nasdaq.com/article/crypto-in-china-past-present-and-future-cm

1070028.

57

PBOC,

CAC,

MIIT,

SAIC,

CBRC,

CSRC,

and

CIRC,

Announcement

on

Preventing

Financial

Risks

from

Initial

Coin

Offerings

(Sept.

4,

2017),

http://www.pbc.gov.cn/goutongjiaoliu/113456/113469/

3374222/index.html

(in

Chinese),

archived

at

https://perma.cc/N88N-5CV5

(hereinafter

Announcement

on

ICOs).

Saheli

Roy

Choudhury,

China

bans

companies

from

raising

money

through

ICOs,

asks

local

regulators

to

inspect

60

major

platforms,

CNBC

(Sept.

4,

2017),

https://www.cnbc.com/2017/09/04/chi-

nese-icos-china-bans-fundraising-through-initial-coin-offerings-report-says.html.

See

Greg

Pilarowski&

Lu

Yue,

China

Bans

Initial

Coin

Offerings

and

Cryptocurrency

Trading

Platforms,

Ph

IAR

LAW

(Sept.

21,

2017),

http://www.pitlarlegaipc.com/en/news/20l7/09/21/china-bans-initial

-coin-offerings-and-

cryptocurrency-trading-platforms/

(describing

the end

of

Bitcoin

in

China

and

noting

that

BTCChina,

world's

second

largest

Bitcom

exchange

by

voluine

as

of

October

2014,

completed

shutdown

by

Septem-

ber

30,

2017

giving

its

customers

less

than

two

weeks

notice).

58

Announcement

on

ICOs,

supra

note

5?1.

59

Id.

60

Xie

Xu,

China

to

Stamp

Out

Cryptocurrency

Trading

Completely

with

Ban

on

Foreign

Platforms,

S.

CHINA

MORNING

POST

(Feb.

7,

2018),

http://www.scmp.com/businessbanking-finance/article/

2132009/china-stamp-out-cryptocurrency-trading-completely-ban.

61

Bitcoin

Mining

is

used

interchangeably

with

cryptocurrency

mining

throughout

this

paragraph.

62

Wu

Yujian

et

al.,

China

Clamps

Down

on

Preferential

Treatment

for

Bitcoin

Mines,

CAIXIN

(Jan.

4,

2018),

https://www.caixinglobal.com/2018-01-04/china-clamps-down-on-preferential-treatment-for-

bitcoin-mines-101

193622.html.

63

Laney

Zhang,

China:

Government

Indicates

All

Virtual

Currency

Plaforms

Have

Withdrawn

from

Market,

THE

LAW

LIBRARY

OF

CONGRESS

(July

12,

2018),

https://www.loc.gov/law/foreign-news/article/

china-government-indicates-al

l-virtual-currency-platforms-have-withdrawn-from-market/.

136

Loyola

University

Chicago

International

Law

Review

Volume

16,

Issue

1

The

Future

of

Cryptocurrency

most

active

market

for

cryptocurrency

trading

on

exchanges

(mainly

Bitcoin).

Further,

Bitcoin

that

was

traded

with

Chinese

Yuan,

at

one

point,

accounted

for

over

ninety

percent

of

the

global

trading

in

Bitcoin

and

now

has

plummeted

to

near

extinction

at

a

mere

one

percent

of

global

trading.

64

In

Contrast

to

China,

Japan

arguably

has

the

world's

most

progressive

regula-

tory

climate

for

cryptocurrencies.

Since

April

2017,

cryptocurrency

exchange

businesses

operating

in

Japan

have

been

regulated

by

the

Payment

Services

Act

("PSA").

6

5

Under

the

PSA,

cryptocurrency

exchange

businesses

must

be

regis-

tered,

keep

records,

take

security

measures,

and

take

measures

to

protect

custom-

ers

66

Further,

the

PSA

defines

"cryptocurrency"

as

a

property

value

and

not

legal

tender.

6

7

In

December

2018,

the

Financial

Services

Agency

("FSA")

published

a

draft

report

which

outlined

the

newest

framework

for

addressing

cryptocurrencies

and

ICOs.

68

In

the

report,

the

FSA

addresses

the

fact

that

technological

advancements

are

transborder

and

reflects

on

the

importance

of

collaboration

with

other

interna-

tional

regulatory

bodies

in

the

world

of

cryptocurrencies.

6

9

The

FSA,

in

regards

to

ICO

regulation,

explained

that

specific

tokens

are

subject

to

regulation

based

on

how

they

are

structured.

70

ICOs

would

be

under

the

purview

of

the

Financial

Instruments

and

Exchange

Act.

71

As

of

now

there

is

little

to

no

opposition

to

the

proposed

measures

and

the

draft

is

expected

to

form

the

new

regulations.

In

Au-

gust

2018,

the

FSA

commissioner,

explained

that

the

agency

has

no

plans

to

hinder

to

shut

down

the

cryptocurrency

sector

and

would

like

to

see

this

sector

grow

under

appropriate

regulation.

72

b.

Issues

of

the

Current

Non-uniformity

&

Recap

on

Classifications

As

we

have

seen,

the

growth

of

cryptocurrencies

has

been

met

with

countless,

different,

legislative

and

regulatory

frameworks.

Many

international

bodies

re-

spond

with

approval

of

the

functionality

of

cryptocurrencies,

while

other

national

jurisdictions

prohibit

and

restrict

the

use

of

blockchain

technology

and

cryptocur-

rencies.

The

array

of

different

perspectives

shines

light

on

the

inadequate

govern-

ance

and

oversight

of

a

uniformed

authority.

Given

the

decentralized

nature

over

cryptocurrencies,

international

bodies

struggle

with

the

idea

of

independent

ver-

64

Id.

65

Payment

Services

Act,

Act

No.

59

of

2009,

amended

by

Act

No.

62

of

2016.

66

Id.

67

Id.

68

Japan

Reveals

Expectations

for

Crypto

Industry

Self-Regulation,

CRYProcURRENCY,

https://cripto

globalcurrency.com/2018/12/27/japan-reveals-expectations-for-crypto-industry-self-regulation/

(last

vis-

ited

Dec

12,

2018).

69

Id.

70

Id.

71

Id.

72

Samburaj

Das,

No

'Excessive'

Regulation:

Japan's

New

FSA

Chief

Backs

Crypto

Industry

Growth,

CCN

(Aug.

24,

2018),

https://www.ccn.com/no-excessive-regulation-japans-new-fsa-chief-backs-crypto-

industry-growth/.

Volume

16,

Issue

1

Loyola

University

Chicago

International

Law

Review

137

The

Future

of

Cryptocurrency

sus

dependent

oversight.

The

lack

of

clear

legal

class

for

cryptocurrencies

could

lead

to

differential

treatment

and

repercussions

of different

International

financial

institutions,

governments

and

authorities.

While

analyzing

the

international

perspective

of

classifications,

since

cryptocurrencies

are

used

for

exchanges

of

goods

and

services

online

and

fulfil-

ling

all

the

characteristics

of

the

economic

definition

of

money,

many

argue

cryptocurrencies

should

be

treated

as

money.

73

Institutions

like

the

CFTC

and

the

Central

bank

of

Finland

have

classified

cryptocurrencies

as

commodities.7

4

Many

believe

classifying

cryptocurrencies

as

commodities

rather

than

money

avoids

anti-money

laundering

laws.

75

The

emergence

of

complex

ICOs,

where

investors

who

invest

in

a

new

token

(cryptocurrency)

are

given

numerous

rights,

such

as

dividends

from

investment

and

voting

rights,

have

been

ruled

as

investment

con-

tracts.

76

The

U.S.,

SEC

in

particular,

have

stated

these

contracts

are

under

securi-

ties

and

the

European

Securities

Law

Market

Authority

have

stated,

depending

on

how

the

token

is

structured,

it

may

fall under

their

securities

laws.

77

In

sum,

the

discussion

around

legal

classification

is

extremely

polarized,

within

and

across

borders

causing

extreme

chaos

and

confusion

for

international

regulations

and

governance.

Many

countries

have

tried

to

implement

regulations

to

better

address

blockchain

technology

and

strengthen

data

security.

IV.

GDPR

Fosters

Conversations

for

a

Uniformed

Regulatory

System

on

Data

Security

The

EU's

new

GDPR

will

be

applied

to

every

company

across the continent.

78

This

top-down

set

of

regulations,

that

addresses

individual

data

privacy

concerns,

repeals

and

replaces

the

European

Commissions'

("EC")

Data

Protection

Direc-

tive

95/46/EC.

79

The

GDPR

treats

digital

privacy

as

a

fundamental

right,

thus

the

law

is

extended

to

any

business

or

consumer

that

exchanges

data

within

the

EU.

80

The

GDPR

went

into

effect

on

May

25,

2018.81

73

Gikay,

supra

note

19.

74

Id.

75

Id.

76

Id.

77

Id.

78

Michael

Roque,

Why

GDPR

Matters

for

Cryptocurrencies,

CRYPTOLERANCE

(Mar.

25,

2018),

https://www.cryptolerance.com/why-gdpr-matters-for-cryptocurrencies/.

79

Dalmacio

V.

Posadas,

Jr.,

The

Internet

of

Things:

The

GDPR

&

the

Blockchain

may

be

incompati-

ble.

21

No.

11

J.

INTERNET

LAW

1

(May

2018)

(explaining

that

as

the

Internet

of

Things

("oT"')

contin-

ues

to

rapidly

expand

one

of

the

many

concerns

is

data-security

and

privacy.

The

author

further

suggests

that

some

believe

that

Blockchain

Technology

can

provide

adequate

data-security

and

privacy,

in

the

same

way

it has

provided

data-security

and

privacy

for

Bitcoin

while

others

believe

the

GDPR

provides

sufficient

protections).

80

Id.

81

GDPR,

supra

1

138

Loyola

University

Chicago

International

Law

Review

Volume

16,

Issue

1

The

Future

of

Cryptocurrency

a.

Background,

Territorial

Scope

&

Compliance

After

three

years

of

negotiations,

on

December

17,

2015,

the

European

Parlia-

ment

came

to

an

agreement

on

the

final

draft

of

the

GDPR.

82

The

GDPR

has

a

far-reaching

effect

in

that

it:

"applies

to

the

processing

of

personal

data

of

data

subjects

who

are

in

the

[EU]

by

a

controller

or

processor

not

established

in

the

[EU]."83

The

GDPR

embodies

this

international

push

for

a

more

unified

framework

of

addressing

individual's

privacy

concerns

due

to

emergent

technology

and

the

use

of

the

internet.

The

GDPR's

reach

is

far

beyond

the

EU

because

many

data

processors

reach

the

EU,

subsequently

being

subject

to

their

laws.

84

Further,

ex-

traterritorial

applicability

in

the

framework

of

the

GDPR

means

that

data

proces-

sors

within

the

blockchain

providers

will

be

affected

by

the

regulations

due

to

the

transnational

nature

of

blockchains

and

cryptocurrency

engagements.

8

5

GDPR

compliance

is

costly.

Small

data-driven

businesses

within

the

EU

may

be

doomed

due

to

the

cost

of

compliance,

and

then

non-compliance

fees.

86

Worldwide

companies

based

outside

the

EU,

which

are

subject

to

EU

law,

may

decide

to

block

Europeans

from

using

their

services

or

even

terminate

their

EU

operations.

87

A

recent

survey,

of

U.S.

businesses,

shows

that

seventy

percent

of

businesses

will

spend

anywhere

between

$50,000

to

$1

million

to

comply

with

the

GDPR

standards.

8 8

Interestingly

enough,

compliance

is

much

cheaper

than

non-compliance

and

the

infringement

penalties

can

reach

as

high

as

$22

mil-

lion.

89

However,

the

financial

consequences

do

not

outweigh

the

societal

benefits

of

the

GDPR.

Under

this

new

framework,

EU

citizens

have

fundamental

rights

to

their

data,

to

rectify,

to

object,

and

access

at

will.

90

b.

GDPR

vs.

Blockchain

Technology

Blockchains

immutability,

as

an

inherent

characteristic,

makes

it

not

compati-

ble

with

the

GDPR.

The

right

to

be

forgotten

is

a

major

concept

that

comes

from

the

rights

given

to

consumers

from

the

GDPR.

Article

17

of

the

GDPR

mandates

that

the

data

subject

.

."shall

have

the

right

to

obtain

from

the

controller

the

82

Id.

83

General

Data

Protection

Regulation

2016/679,

art.

3(2).

84

Posadas,

supra

79.

85

Stefan

Stankovic,

GDPR

vs.

Blockchain

-

Technology

Against

The

Law,

CRYPTo

BRmFING

(June

19,

2018),

https://cryptobriefing.com/gdpr-vs-blockchain-technology-against-the-law/.

86

Id.

87

Id.

88

Robert

Abela,

Netsparker

Surveys

US

Based

C-Levels

on

GDPR

Compliance

Find

vulnerabilities

in

your

websites

before

hackers

do,

NETSPAKER

(Apr.

12,

2018),

https://www.netsparker.com/blog/web-

security/gdpr-compliance-2018-survey-results/.

89

Id.

90

Stankovic,

supra

85.

Volume

16,

Issue

1

Loyola

University

Chicago

International

Law

Review

139

The

Future

of

Cryptocurrency

erasure

of

personal

data

concerning

him

or

her

without

undue

delay

and

the

con-

troller

shall

have

the

obligation

to

erase

personal

data

without

undue

delay."

91

The

GDPR's

right

to

be

forgotten

is

evidently

designed

for

a system

where

data

is

centrally

stored

and

processed.

Thus,

this

right

to be

forgotten

is

incom-

patible

with

decentralized

blockchains

and

cryptocurrencies.

92

To

break

this

down,

decentralized

blockchains

do

not

rely

on

a

central

authority

(like

the

World

Bank)

to

process

data, therefore,

this

idea

of

a

third

party

or

data

control-

ler

to

erase

personal

data

from

a

blockchain

is

not

accomplishable

and

doesn't

comply

with

GDPR

regulations.

Further,

the

backlash

from

laissez

fair

minded

citizens

would

be

detrimental

to

society,

and

pro

GDPR

authorities,

due

to

the

fundamental

ideology

of

blockchain

technology.

The

question

begs:

does

the

transnational

transfer

of

data

due

to

the

blockchain

of

the

cryptocurrency

directly

oppose

the

provisions

of

the

GDPR?

If

the

answer

is

yes,

then

jurisdiction

and

compliance

issues

come

directly

into

effect.

Consequently,

blockchains

and

the

GDPR

cannot

work

under

the

same

framework.

V.

Cryptocurrency

Fosters

Criminality

Cryptocurrencies

non-compliance

with

the

GDPR

is

not

the

only

obstacle

in

their

way.

Many

national

authorities

have

targeted

cryptocurrencies

as

a

tool that

enables

illicit

activities.

Cryptocurrencies,

just

by

their

design,

makes

it

very

at-

tractive

for

parties

to

perform

illicit

transactions.

Criminals

and

terrorist

can

use

cryptocurrencies

as

a

mechanism

to

move

and

store

illicit

funds

while

evading

regulatory

and

criminal

guidelines

in

place.

With

no

central

authority

there

is

no

oversight

to

properly

police

the

perpetrators.

Tracking

and

tracing

funds

to

the

criminals

creates

heavy

burdens

on

law

enforcement

as

there

are

no

uniformed

or

easy

way

to

properly

pinpoint

the

acts

of

money

laundering

and

other

criminal

activities.

Cryptocurrencies,

intrinsically,

have

a

pseudonymous

nature

to

them,

which

means

that

it

is

wholly

anonymous

other

than

the

owner's

public

key

on

the

blockchain

93

There

are

an

array

of

complex

methods

of

camouflaging

transactions

through

"tumbling"

and

"mixing"

that

further

safeguards

the

user's

privacy

and

makes

the

transacting

untraceable

on

the

blockchain.

94

Individual's

identities

re-

main

anonymous

due

to

these

peer-to-peer

transactions.

95

a.

Virtual

Terrorism-

Dark

web

To

date,

there

has

been

no

indication

that

cryptocurrencies

have

been

used

to

fund

criminal

activity,

but

independent

acting

terrorists

that

have

used

cryptocur-

91

General

Data

Protection

Regulation

2016/679,

art.

17.

92

Stankovic,

supra

85.

93

Joan

Murphy

et

al.,

Silk

Road

101:

How

the

"Darknet"

Works,

USA

TODAY

(last

updated

Jan.

27,

2015),

https://www.usatoday.com/story/tech/2015/01/1

6/siik-road-ross-ulbricht/2

1824475.

94

Id.

95

Id.

140

Loyola

University

Chicago

International

Law

Review

Volume

16,

Issue

1

The

Future

of Cryptocurrency

rencies.

These

actions

foreshadows

frightening

possibilities

of

transnational

crimes

in

the

future.

9

6

A

2015

Europol

report

highlights

the

fact

that

Bitcoin

has

been

a

tool

in

"high-

profile"

investigations

involving

payments

of

criminals.

Further,

cryptocur-

rencies

were

used

in

over

forty

percent

of

illicit

transactions

in

the

EU.

9

7

Users

of

cryptocurrencies

may

access

dark

websites,

which

is

a

publicly

downloadable

router

network

implanted

to

conceal

Internet

Protocol

("IP")

addresses

for

the

users.

9

8

Thus,

the

network

conceals

the

identity

and

location

of

those

using

cryptocurrencies

on

the

dark

web.

Marketplaces,

like

the

Silk

Road,

are

used

as

a

forum

to

buy

and

sell

illicit

goods

and

services.

99

In

many

of

these

marketplaces

cryptocurrencies

are

the

only

acceptable

currency

used.

1

00

To

convert

these

funds

from

cryptocurrencies

to

dollars,

users

must

seek

the

services

of

a

crypto

ex-

changer.

There

is

a

plethora

of

unlicensed

money

transmitters

which

allows

users

further

anonymity

during

the

transaction

through

the

exchange.

101

Consequently,

these

unlicensed

money

transmitters

and

the

users

are

subject

to

criminal

prosecution.

1

0

2

VI.

Proposed

Steps

for

a

Uniformed

Regulatory

Framework

There

are

no

norms,

or

jus

cogens,

regarding

the

use

of

cryptocurrencies

in

international

law.

Thus,

it

is

key

that

countries

and

international

actors

come

together

to

expose

options

for

regulatory

frameworks

to

address

rise

in

concern

of criminal

activities

and

transnational

compliance

issues.

With

varying

views

to

regulating

Bitcoin,

with

countries

like

Japan

fully

supporting

the

digital

market

currency

to

countries

like

China

who

have

led

countless

strikes

against

the

mar-

ket,

regulation

becomes

increasingly

difficult.

Already

we

are

seeing

initiatives

of

international

collaboration

to

combat

the

threat

of

cryptocurrency

tax

crimes.

10 3

Countries

such

as

the

U.S.,

Australia,

Ca-

nada,

the

United

Kingdom,

and

the

Netherlands,

have

come

together

to

form

the

Joint

Chiefs

of

Global

Tax

Enforcement

(J5).1

04

This

initative

is

incredibly

im-

96

Nikita

Malik,

How

Criminals

And

Terrorists

Use

Cryptocurrency:

And

How

To

Stop

It,

FORBES

(Aug.

31,

2018),

https://www.forbes.com/sites/nikitamalik/2018/08/

3

1/how-criminals-and-terrorists-use-

cryptocurrency-and-how-to-stop-it/#7b0482

I

f3990.

97

EUROPOL,

THE

1I

rERNE"

ORGANISED

CRiME

THREAT

ASSESSMENT

(IOCTA)

(2015),

available

at

https

://www.europol.europa.eu/activities-

services/main-reports/intemret-organised-crime-threat-assess-

ment-iocta-2015

(last

visited

Jan

1,

2019).

98

Nina

Marino,

Jennifer

Lieser,

Casey

Clark,

The

Dark

Side

of

Bitcoin,

41-SEP

L.A.

LAW

36,

38

(2018)

(referring

to

the

U.S.

DEP'T

OF

HOMELAND

SEC.,

RISKS

AND

THREATS

OF

CRYPTOCURRENCY

(2014);

FIN.

ACTION

TASK

FORCE,

VIRTUAL

CURRENCIES:

KEY

DEFI-

NITIONS

AND

POTENTIAL

AMLJCFT

RISKS

(2014)).

99

Id.

100

Id.

101

Id.

102

Id.

t03

Jimmy

Aki,

International

Coalition

Set

to

Tackle

Cryptocurrency

Tax

Crime,

BITCOIN

MAGAZIINE

(July

3,

2018),

https://bitcoinmagazine.com/articles/intemational-coalition-set-tackle-cryptocurrency-tax-

crime/.

104

Id.

Volume

16,

Issue

1

Loyola

University

Chicago

International

Law

Review

141

The

Future

of

Cryptocurrency

portant

as

the

world

has

seen

a

rapid

increase

in

cybercrimes

especially

at

the

hands

of cryptocurrencies.

Through

the

Joint

Chiefs

of

Global

Tax

Enforcement,

countries

can share

information

to

reduce

the

likelihood

of

organized

criminals

and

tax

evaders

using

new

technology

to

manipulate

the

system

and exploit

vul-

nerable

persons

for

their

illegal

gain.

Cryptocurrencies

enables

a

new

global

criminal

community

that transcends

boundaries.

Thus,

global

leaders

must

come

together

to

increase

pressure

and

reach

to

inhibit

illegal

activity.

The

effect

of

regulations,

such

as

the

GDPR,

has

been

felt

all

around

the

world

in

the

cryptocurrency

community.

The

EU with

the

GDPR

places

emphasis

on

the

individual

rights

to

privacy.

Data

protection

in

the

EU

is

considered

a

funda-

mental

right.

On

the

other

side

of

the

coin,

the

U.S.

looks

at

personal

data

as

property

of

the

entity

holding

said

data;

thus,

making

data

transfer

between

dif-

ferent

countries

and

their

entities

much

more complex.

A

solution

to

counteract

this

apparent

incongruity

is

to

determine

a

suitable

framework

for

blockchain

technology

itself

since

the

regulatory

and

legal

issues

with

cryptocurrencies

are

governed

by

existing

domestic

frameworks.

In

this

new

wave

of

cyber

currency,

with

transnational

differences

on

the

topic,

global

har-

monization

is

vital

for

this

global

market.

Common

policy

is

needed

to

prevent

risk

of

criminal

activities

and

to empower

predictability

and

common

practices

between

all

parties

involved

in

the

transaction

to

avoid

jurisdiction

issues

in

this

borderless

market.

An

international

agreement

on blockchain

principles

would

allow

for

uniform-

ity

across

jurisdictions

and

require

countries

to

adhere

to

the

newly

created

inter-

national

regulatory

norms.

An

international

agreement

would

establish

common

standards

while

allowing

each

signatory

to

impose

additional

regulations

as

de-

sired.

Without

an

international

agreement,

money

launderers,

tax

evaders,

and

terrorist

can

take advantage

of

the

definitional

challenges

and

different

views

on

regulation

internationally.

As

cryptocurrency

is

a

global

concept

with

exchanges

possible

in

any

country,

without

uniformity,

mass

confusion

exists

and

the

mar-

ketplace

remains

out

of

control.

Ultimately

there

needs

to be

guidance

and

conversation

of

uniformed

regula-

tions

at

the

G20

level.

These

regulations

need

to

cover

the

issuance

of

digital

money

by

ICOs

and

create

rules

to protect

against

market

manipulation.

Organi-

zations

like

the

Financial

Action

Task

Force

("FATF"),

an

intergovernmental

body

formed

to

fight

money

laundering

and

terrorist

financing,

must

take

the

lead

to

regulate

cryptocurrencies.

While

many

actors

in

the

virtual

currency

industry

oppose

regulation

because

of

the

costs

of

compliance

and

fears

that

regulation

will

hinder

innovation,

the

complex

relationship

between

technology

and

govern-

ance

is

much

more

than

innovation

and

statutory

definitions.

Developing

countries

around

the

world

have

passed

stringent

regulations

on

blockchain

and

cryptocurrency

solutions.

Many

countries

around

the

world

have

banned

ICOs

and

cryptocurrencies,

while

the

U.S.

regulates

ICO's

in

the

same

manner

that they

regulate

other

securities.

These

approaches

have

only

served

as

a

mode

of

removing

the

benefits

of

ICO's

while

not

fully

addressing

the

criminal

aspects.

142

Loyola

University

Chicago

International

Law

Review

Volume

16,

Issue

1

The

Future

of

Cryptocurrency

a.

The

Solution

Broken

Down

International

policymakers

at all

levels

of

governments

must

consider

utilizing

new

solutions,

such

as

blockchain

technology,

to

prevent

future

data

breaches.

These

legislators

should

enact

a

uniformed

data-breach

notification

and

data

pro-

tection

statute

that

preempts

an

international

data-breach

law.

This

statute

should

be

designed

and

implanted

by

an

array

of

hybrid

international

authorities

in

cryptocurrencies,

money

laundering,

terrorist

financing

and

ICO's.

This

statute

would

act

as

the

promulgator

of

regulation

concerning

data

collection,

blockchain

regulation

on

anonymity

and

right

of

erasure,

and

would

create

a

specific

department

for

international

cybersecurity.

A

specialized

Department

for

International

Cybersecurity

could

promote

international

compliance,

harmoniza-

tion

on

laws

and

jurisdiction,

and

serve

as

an

information

clearinghouse

for

busi-

nesses

regarding

data-breach

Like

the

GDPR

regulations,

the

statute

must

require

businesses

to

notify

all

affected

consumers

of

a

data-breach

occurrence

that

results

in

personal

information

disclosure,

within

a

reasonable

time

of

no

more

than

thirty

days

from

breach.

With

no

international

means

of

uniformed

jurisdiction,

this

statute

should

suggest

significant

civil

procedures

and

penalties

against

companies

who

do

not

comply

with

data-breach

regulations.

VII.

Conclusion

While

countries

continue

to

express

ambivalence

about

cryptocurrency

tech-

nology

and

struggle

to

come

to

grip

with

blockchain

regulatory

solutions,

we

see

an

increase

worry

in

data

security

protection.

The

main

question

arises:

will

in-

ternational

regulators

work

together?

As

blockchain

technology

and

cryptocur-

rencies

transcends

borders,

domestic

regulators

must

tackle

breaches

of

their

laws

by

facilitating

global

coordination

and

harmonizing

a

uniformed

set

of

regu-

lations

regarding

data

security.

Figuring

out

how

to

regulate

and

enforce

laws

in

a

virtual

currency

world

that

can

operate

anonymously

across

borders

causes

se-

vere

issues.

These

issues

include

using

cryptocurrency

to:

(1)

illicit

crimes,

such

as,

financing

terrorism,

and

money

laundering;

(2)

promote

tax

evasion

by

hiding

income;

and

(3)

defraud

individuals

and

companies

through

market

manipula-

tions.

Regulation

is

needed,

not

to

change

the

decentralized

nature,

but

to

in-

crease

security

levels.

The

aim

of

a

uniformed

set

of

regulatory

practices

is

to

bring

legal

order

to

a

currently

unregulated

market.

The

uniformed

framework

needs

to

be

implemented

to

oversee

the

main

service

provider

activities,

ICO's,

as

well

as

intermediaries,

wallet

providers,

exchanges

and

other

bodies

or

indi-

viduals

in

these

digital

financial

regulations.

Volume

16,

Issue

1

Loyola

University

Chicago

International

Law

Review

143