Standardizing a Global Regulatory Framework: Lessons Learned from a Comparative Study of the U.S., the E.U., and South Korea’s Regulation of Crypto Assets
ABSTRACT
Since 2009, various crypto currency tokens (commonly called coins) have emerged, utilizing innovative technologies like blockchain and distributed ledger technology to establish decentralization of finance. The starting point of decentralization was Satoshi Nakamoto’s Bitcoin paper about payment without intermediaries. Since Bitcoin boomed, many experts have predicted that blockchain-based crypto currencies such as Bitcoin, will replace current payment methods and facilitate a shift from centralized to distributed systems of transactions. Furthermore, the public recognizes crypto assets as new objects of investment.
In response to these changes, global market players are developing new financial instruments and systems, and governments have been establishing regulatory frameworks for over ten years. The United States (U.S.) has utilized existing regulations, such as commodities regulation, to respond quickly, while the European Union (E.U.) and South Korea have pursued regulation through new legislation to regulate crypto asset industries.
A fundamental inquiry arises as to whether these tokens, which failed as a payment method, should be regulated as commodities and securities. Suppose new and similar digital things, such as blockchain-based Pokémon or sports trading cards, emerge and are frequently traded in. Should they be subject to these commodities or securities regulations? In situations with uncertain regulatory direction, crypto assets regulation is necessary because huge transactions, similar to those of other financial instruments, are being made between global investors, and investors should be protected from various crimes, such as fraud.
Lastly, the regulatory direction should focus on stabilizing the market, preventing unfair practices, and ensuring investor protection. Moreover, continuous monitoring and international cooperation are needed for the evolving crypto asset industry.
In this paper, I argue that we need a standardized global framework to regulate crypto assets. This conclusion is drawn from analyzing cases in the U.S., the E.U., and South Korea with global regulatory approaches. Specifically, the pros and cons of each country’s regulations covering the “creation and sale of crypto assets,” “crypto asset-related business,” and “investor protection” were examined.