This chapter highlights the dangers of linguistic inaccuracies and misunderstandings that permeate discussions on blockchain technology and non-fungible tokens (NFTs), impacting policy and legal outcomes. It identifies two critical issues hindering effective legislation: a lack of comprehension of blockchain technology’s technical nuances and a failure to appreciate the link between blockchain-related terminology and the intricacies of varying blockchain protocols. By borrowing frequently misused terms without questioning their technical accuracy, policy-makers may unwittingly stifle innovation and develop legal regimes that are ill-suited for their intended purpose. This chapter explores six specific language landmines prevalent in blockchain and NFT discussions, urging researchers, lawmakers, industry members, and other stakeholders to bridge the understanding gap. By addressing these linguistic pitfalls, the chapter advocates for informed and comprehensive policy-making that keeps pace with the evolving landscape of blockchain technology and its applications, including NFTs.

Cryptocurrencies are reshaping money and payment systems in unprecedented ways. Catalysts include the launch of Bitcoin in 2009, the evolution of decentralised and centralised technologies, the announcement of Libra in 2019, the ongoing live trials of China’s Digital Yuan, and the COVID-19 pandemic and the related move to presenceless payments.This chapter considers the policy issues and choices associated with cryptocurrencies, stablecoins, and central bank digital currencies (‘CBDCs’) and emphasises that there is no single model for CBDC design. The catalysts reshaping monetary and payment systems challenge regulators. While Bitcoin and its thousands of progenies could be ignored safely by regulators, Facebook’s proposal for Libra, a global stablecoin (‘GSC’), brought an immediate and potent response from regulators globally. This proposal by the private sector to move into the traditional preserve of sovereigns– the creation of currency– was always likely both to trigger such a regulatory response and the development of CBDCs by central banks. China has moved first with its e-CNY– an initiative that may, in time, provoke a chain of CBDC issuance around the globe.

This chapter considers how distributed ledger technologies and blockchain can contribute to the creation of new foundational infrastructure for financial services, including crypto-assets and smart contracts. We classify the new business models, analyse the opportunities, and highlight the regulatory challenges.

Crypto-assets, such as cryptocurrencies and tokens, offer a diverse range of payment and investment services. Particularly, tokenisation simplifies products and processes, making negotiation and exchange easier and reducing inefficiencies and costs. However, this disintermediation does not necessarily reduce the role of banks, but rather transforms it, as the increasing complexity of products and services increases the importance of high-value consulting services. Banks can benefit from entering the distributed ledger technology (DLT) ecosystem and can serve as a reliable reference point for investors, consumers, and issuers. However, banks are also exposed to compliance and reputational risks that can only be managed with clear regulation. Regulatory uncertainty, stemming mainly from confusion regarding the legal classification of crypto-assets, hinders the provision of services by banks, and increases risks for consumers and investors. The regulatory framework should be revised in a technology-neutral manner to address these issues and allow for experimentation of innovative solutions, such as the European MiCAR.

Speculation has been mounting that the digital yuan will be used to displace the US dollar and circumvent sanctions. In retaliation, financial institutions can be targeted whereby US dollar payment or financial system access can be sanctioned. If the United States weaponizes the dollar, the digital yuan will not provide sanction protection beyond the status quo. The digital yuan’s true innovation is the ability to manage capital controls and facilitate financial liberalization. Being a programmable currency, the digital yuan enables Mainland China to open its economy more expeditiously than would normally be possible, while providing the regulatory levers to manage monetary and financial stability. Mainland technology companies are instrumental in the circulation of the digital yuan through electronic payment platforms. These same technology companies have recently established virtual banks and stored value facility payment platforms in Hong Kong. This chapter argues that technology is introducing new risks into Hong Kong’s banking system which pose a material risk to financial stability. To manage these risks, financial data supervision and infrastructure is required which currently does not exist. With the recent growth surge and volatility in cryptocurrency markets, the current approach of neglecting financial stability supervision is erroneous and reckless.

This chapter introduces the concept of networking of carbon markets and analyses the political, legal and practical reasons for using networking as opposed to linking. It also considers how the application of DLT can help to operationalise a networked carbon markets framework.

The spectacular, if erratic, growth in the price of Bitcoin since its first implementation in 2009 has attracted substantial public interest. Unlike the stocks promoted by venture capitalists, it is not simply another instance of a well-established asset class, but rather a completely new asset class. Unlike those stocks, it is not promoted by well-connected finance industry insiders, but has been established by outsiders whose agenda was in part to escape the influence of established institutions. And yet, as this chapter will argue, there are some striking similarities in how its value has been constructed. Above all, the process has depended upon the development of a series of narratives about the value of Bitcoin, which have sought to connect it to lay theories of value or valuation conventions, and those narratives have been marketed to specific groups of potential buyers leading to the construction of an asset circle. This chapter traces some of the narratives that have been told about Bitcoin and how they have contributed to (or, in some cases, undermined) the growth of an asset circle for Bitcoin and thus to its spectacular growth in price.

Iceland is a country of rugged beauty, volcanic mountains, countless waterfalls and, well, ice. Its inhabitants are even more exotic; 54 per cent of Icelanders, for example, believe in elves – or say it’s possible that they exist. Travelling through the desolate landscape, one can easily imagine how such beliefs emerge: Iceland is a country with fewer than 400,000 residents. To put that in perspective, almost double the number of people live in the 33 square kilometres of Macau than in the 100,000 square kilometres of Iceland.

Iceland might seem like a strange place to start a story about the largest global financial crisis since the Great Depression. But Iceland exemplifies both the worst and best of the crisis. The story begins several years before 2008, when Iceland’s bank managers saw an opportunity: they could attract the savings of Europeans, mostly residents of England and the Netherlands, by offering interest rates higher than those of the banks of those countries.

With each passing day, the futures markets continue their transition to largely electronic ecosystems for algorithmic, software robots. The automation of these markets is part of a broader trend in financial services whereby the use of computerized systems is expanding into areas of financial firm operations that had not previously been thought amenable to algorithmic control. That’s not to say that humans are no longer playing important roles in financial services in the markets for futures and other derivatives, but the scope of human roles is diminishing as algo bots become capable of performing more and more tasks that were once the sole responsibility of human traders, derivatives salespeople, risk analysts, and more. As mentioned in the Introduction, the computerization and automation of financial markets is generally associated with the rise of “financial technology,” commonly referred to as “FinTech” or “Fintech.”

This chapter discusses the causes and consequences of financial innovation. Financial innovation involves creating and popularising new financial instruments, as well as new financial technologies, institutions, and markets. There has been a recent increase in financial technology (FinTech), which combines changes in customer contact, for instance using mobile apps, with big data and new methodologies for handling the data. Competition, regulation and deregulation, and technological advances are important drivers of financial innovation. Competition stimulates financial institutions to develop new products and processes. Since regulation may forbid or otherwise restrain financial innovation, deregulation may spur innovation. Indeed, several innovations have been the result of attempts to circumvent regulation. And technological advances have made new instruments possible. While innovation can help foster growth and economic prosperity, some innovative financial instruments have been blamed for their role in the global financial crisis.