I. Introduction

Numerous governmental and inter-governmental organizations have already acknowledged on numerous occasssions that decentralised technologies may entail risks to financial stability. Decades before these reports were made public, Lawrence Lessig pointed out that the values, which are at risk due to technological advances, can be generally classified within the four main areas of controversy: intellectual property, privacy, free speech, and sovereignty. More recently, Primavera de Filippi and Aaron Wright have emphasized that blockchain based applications, relying primary or exclusively on
lex cryptographica, in comparison to those relying on existing code-based rules (such as collaborative economy sharing platforms), — will be harder to control and regulate. Blockchains can contribute to creating a more unstable and unregulated financial landscape (De Fillippi, Wright, 2018).

II. Key Observations

a) Only upon certain conditions, such as auditability of technologies and privacy by design and compliance by design framework prerequisities being meet, can the financial sector truly start benefiting from the contribution of emerging technologies to the reduction and prevention of systemic risk in the newly established duo post-crisis framework of regulation,— the area in which the global regulatory efforts have been missing most in the recent decades.

b) New approaches aimed at tackling regulatory and tax uncertainties associated with leveraging the DLT technologies on the market require prompt concurrent work on elaboration of risk management practices and risk management agenda, which are needed to adequately assess and address the related risks.

c) In order to minimize possible negative externalities for the market arising out of mass-leveraging technologies, such as an increased interconnectivity, emerging technologies should be classified as a separate type of micro-level risks within the category of operational risks. This might prompt future revisions not only to the transaction costs doctrine, but also to the notion of the systemic risk.

d) Regulatory environment, innovations and technologies have always had and will continue to have a remarkable impact on the market development. Stimulating growth of new business models and technology-centered economy is quickly becoming a new, additional rationale behind most of the regulatory initiatives undertaken today.

e) Future simplification and revision of supervisory practices is within technology’s reach. Solutions offered by technologies, such as embedded supervision, might not be perfect, but then nor are we.

f) Following a wider adoption of technologies, those transactions generally attributed to a collaborative (sharing) economy business model that could be potentially booming “sharing economy” into the new form of “distributed ledger sharing economy”.

g) Blockchain technologies might cause, in accordance to the different level of distribution of control: from asymmetric to systemic, depending on a relevant topology, i.e. from public, federated or mixed towards the private one, respectively,—some extra issues related to distortion of competition, particularly on a regional scale.

h) In lieu of establishing a new international layer of regulation pursuing the target of global financial stability (as sometimes proposed), those institutions involved in regulation on a domestic level could be ad infinitum innovated thus contributing to facilitating competition between different national regulators. New technology-centered regulatory tools might be particularly instrumental in supporting prudential regulation transformation.

i) Leveraging Decentralized finance (DeFi), which essentially is a system of decentralized applications (DApps) built on top of public smart contract platforms, such as the Ethereum blockchains might ultimately manifest, at least in theory, in egress from the legal systems. This presentation aimes to fill the gap left by the Modern studies on regulatory taxonomy for new technologies, which unfortunately, do not address to a sufficient extent neither code-ification of law, nor the recently raised issues of the unified regulatory framework for Ethereum blockchain.

j) As lex cryptographica operates independently of any centralized authority, differing in this quite significantly from the rule of code, its manifestations on stability and regulatory environment also differs quite substantially. Therefore, it seems necessary to distinguish the questions of regulation of lex cryptographica -centered business models from FinTech, TechFin and RegTech businesses.