European Consumer Law and Blockchain Based Financial Services: A Functional Approach against the Rhetoric of Regulatory Uncertainty

Abstract

A decade after the financial market started experimenting with blockchain, the prevailing view of EU regulators has been that blockchain based transactions do not fit into the current regulatory regime. This was illustrated by the European Banking Authority’s warning to the consumers issued in 2013 of the absence of specific legal regime designed to protect the consumers dealing with exchange platforms. A similar position was adopted by the European Securities and Market Authority in its 2017 investor alert indicating that ICO operating in unregulated spaces pose several risks the consumers should be aware of. By Examining developments until December 2018, this article argues that the extent of regulatory uncertainty is overstated and recommends a functional approach to regulation. It posits that although blockchain and cryptocurrencies are new technologies, the legal transactions they enable are not entirely novel and could largely be regulated under the existing legal rules without the need for sweeping reform.