Chapman Law Review


"A lot of financial innovation is now encompassed by the term 'crypto'—Bitcoin, Ethereum, stablecoins, crypto-exchanges, and digital central bank currencies, to name just a few. But what we should think about these financial innovations and what, if anything, the law should do about them depends on making sharp distinctions among different phenomena that are covered by the same meme. In this brief talk, I will argue that one distinction is central: to what degree are the financial innovations decentralized, in that they are not controlled by the government or any intermediary? If the financial innovations are genuinely decentralized and transparent, there is no longer a need for regulations that are focused on constraining agency costs. Such innovations have created a new mechanism for trust that does not generate the usual principal–agent problems of financial intermediaries. There may still be a need for regulation for other reasons—for instance, to prevent externalities—but much regulation of financial institutions concerns agency costs."



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