Digital Currency Industry Self-Regulation: Not All Consensus is Automatic
Abstract
The appropriate boundary between public and private regulation has long been of interest to law and economics scholars. Especially relevant for understanding the private regulatory dynamics of the digital currency industry are the ways in which self-regulation has existed in financial markets. These studies suggest that too much market concentration and too much competition both diminish the possibility for self-regulation in the interest of consumers. Similarly, certain exchange roles give rise to permission of market manipulation by sub-classes of actors in a way that make exchange self-regulation less likely. Nonetheless, the unique technical features of blockchain networks, and the way in which consumers and industry participants uniquely value transparency and immutability means the possibility for productive self-regulation to benefit retail consumers may be greater than skeptics make it out to be. Furthermore, industry self-regulation can preempt or substitute for more distortionary or ill-fitting regulation emanating from public authorities. Finally, given the inevitability of public regulation, this suggests that developing digital currency industry complementarities along the lines of those studied in banking and commodities and securities exchanges is likely to shed light on the emergent dynamics of industry self-regulation most likely to benefit consumers.