Private Digital Currencies and Closed Payment Communities: Law, Regulation and Financial Exclusion After Bitcoin

University Of California-Irvine, Irvine CA

Investigators

Abstract

Bitcoin is the most famous of several new online, cryptographic currency or electronic payment system experiments based on an open-source database protocol referred to as a blockchain. The blockchain permits transactions to take place without a central authority, relying instead on a decentralized network of peers verifying and authorizing them. It permits "trust" without trusted third-parties or mediators. In addition, Bitcoin and systems like it are membership-based means of value transfer and only work if people actively join them. This project examines new forms of private digital currency, exploring shifts in blockchain-based systems, and how innovators and regulators have participated in, advanced, and challenged them. The research examines how a new cadre of corporate and regulatory professionals are creating, understanding, monitoring, and regulating blockchain-based experiments in payment and in legal services. Studying the interface between law and technology, this research is important not just for what it will reveal about law and regulation in the context of rapid technological change. It is also important because innovations with the bitcoin protocol raise broad questions about the changing nature of money, property, and law, and throw open for debate questions lawmakers thought settled at the end of the 19th century about the state's role in issuing money and the nature of contract. Broader impacts include training of graduate students and the creation and opening of a public-facing portal to a database and archive of compiled regulatory, policy, and industry documents. As bitcoin-like systems move into the domain of law to create law-like substitutes, this research is designed to answer several questions. Do new digital currencies create new social and economic exclusions? What do these innovations say about changing understandings of money and law? What happens when new corporate entrants into payment imagine they are innovating in money, not just its transmission, and seek to "disrupt" not just payment, but professions like notaries and escrow agents? How do regulators respond to concomitant challenges to the public interest in payment and in law itself? The principal research activities are interviews with lawyers, regulators, and payments industry professionals, participant-observation at industry conferences, and code walkthroughs during which the researcher will follow programmers as they build new functionality into the blockchain.