$=€=Bitcoin?

Bitcoin (and other virtual currencies) have the potential to revolutionize the way that payments are processed, but only if they become ubiquitous. This Article argues that if virtual currencies are used at that scale, it would pose threats to the stability of the financial system—threats that have been largely unexplored to date. Such threats will arise because the ability of a virtual currency to function as money is very fragile—Bitcoin can remain money only for so long as people have confidence that bitcoins will be readily accepted by others as a means of payment. Unlike the U.S. dollar, which is backed by both a national government and a central bank, and the euro, which is at least backed by a central bank, there is no institution that can shore up confidence in Bitcoin (or any other virtual currency) in the event of a panic. This Article explores some regulatory measures that could help address the systemic risks posed by virtual currencies, but argues that the best way to contain those risks is for regulated institutions to out-compete virtual currencies by offering better payment services, thus consigning virtual currencies to a niche role in the economy. This Article therefore concludes by exploring how the distributed ledger technology pioneered by Bitcoin could be adapted to allow regulated entities to provide vastly more efficient payment services for sovereign currency-denominated transactions, while at the same time seeking to avoid concentrating the provision of those payment services within “too big to fail” banks

Regulatory Managerialism Inaction: A Case Study of Bank Regulation and Climate Change

In November of 2029, Hurricane Penelope struck New York City as a category two storm. Work had started on a wall to protect Manhattan from rising sea levels and storm surges, but the work was incomplete, and significant damage to Manhattan real estate was sustained. While almost all that real estate was insured, insurance companies were compromised by the sheer magnitude of the losses. Even with significant federal subsidies, they were unable to meet their full commitments on insurance policies. Some commercial real estate firms, who had never really recovered from the shift to remote working during the Covid pandemic, decided to cut their losses and file for bankruptcy. Banks with outstanding loans to these firms were left to foreclose upon the damaged properties. At the same time, given their own difficulties, many insurance companies were drawing down revolving lines of credit from their banks. Many of these insurance companies also refused to renew policies, undercutting the value of the foreclosed properties

The \u27Merge\u27 did not Fix Ethereum

The Ethereum blockchain that facilitates much of the crypto world last month finally accomplished the long-promised and oft-delayed “Merge”, a technical switch in the way it works

Beware the Proposed US Crypto Regulation— It May be a Trojan Horse

Following the spectacular failure of crypto exchange FTX International, there have been renewed calls for crypto legislation (including from the industry itself).But many of the proposals so far would be worse than the status quo — at least for the general public. Crypto firms such as FTX were involved in drafting many of the mooted US bills. The exchange’s implosion should not become a pretext for rushing these into law

Regulatory Innovation and Permission to Fail: The Case of Suptech

The recent U.S. Supreme Court decision West Virginia v. EPA has cast a pall over the discretion of administrative agencies at a very inopportune time. The private sector is currently adopting new technologies at a rapid pace, and as regulated industries become more technologically complex, administrative agencies must innovate technological tools of their own in order to keep up. Agencies will increasingly struggle to do their jobs without that innovation, but the private sector is afforded something that is both critical to the innovation process, and often denied to administrative agencies: “permission to fail.” Without some grace for the inevitable stumbles that come with developing new technological solutions, regulatory agencies will increasingly be unable to discharge their statutory mandates, resulting in failures of in-action that could harm the public interest. To illustrate this point, this Article uses “suptech” case studies drawn from the world of financial regulation. After articulating both the necessity and pitfalls of suptech, this Article argues that we need to extend permission to fail to administrative agencies when similar failures are recognized as a necessary part of the private sector innovation process. This Article argues that “permission to fail” cannot be a purely legal construct, and so it seeks to spur an interdisciplinary debate about how to construct both law and public opinion in a way that allows the regulatory state to develop the technological tools it needs to respond to technological developments in regulated industries