Abstract
The crypto revolution has reignited the debate over the function and scope of financial regulation.
First, there has been re-discussion as to what a security is with regard to the regulatory framework applicable to crypto-assets. If crypto-assets were to be considered securities, the whole crypto market ecosystem would fall under financial regulation. If not, it should be assessed whether they can be considered equivalent to money, when they cease to be money and become something else, and when instead they are to be considered financial instruments. As we will see, after a heated debate, Regulation 2023/EU/1114 of 31 May 2023 on markets in crypto-assets (MiCAR) has sought to deal with these issues.
Second, it should be assessed whether the crypto revolution is indeed such a revolution. It should be understood whether crypto markets differ from legacy capital markets and whether they are exposed to the same market failures that have required the massive regulatory intervention of today’s financial markets.
In the last half decade, all these issues have been in the spotlight of academic research and policy discussions. This chapter will attempt to cover them from a broad perspective. It proceeds as follows: Section 1.2 will discuss crypto-assets and the recent history of the debate on their legal characterisation as securities. Section 1.3 will analyse crypto markets, their current features, and the reason why they tend to present all the features of traditional capital markets. Section 1.4 will deal with the market failures that are common to legacy financial markets and crypto markets, and the regulatory solutions. Section 1.5 will discuss the new European regulatory framework. Section 1.6 will conclude