This Essay previews issues raised by the general subject of regulating virtual currencies and the specific efforts of New York State’s Department of Financial Services’ proposed Virtual Currency Regulatory Framework (the BitLicense) in particular. It focuses on five topics in the proposal and their interplay with the current regulation of “money services” and “money transmission” in other states, using the Commonwealth of Virginia and the State of Washington approaches on a few common topics for comparison purposes. It also asks whether regulation of virtual currencies is likely to cause more widespread adoption of virtual currencies or to frustrate the proponents and current users and so reduce the use of virtual currencies.
Washington and Lee Law Review - Roundtables
by Joshua A.T. Fairfield
Trustless public ledgers (TPLs)—the technology underneath Bitcoin—do more than just create online money. The technology permits people to directly exchange money for what they want, with no intermediaries, such as credit card companies. Contract law is the law of bargained-for exchange, so a technology that enables direct exchange online will change the reality of online contracting. The current problem with consumer contracting online is that courts and companies have collaborated to create an online system in which consumers cannot bargain. Under the current regime, consumers have no choice but to click the “I Accept” button. Online, contract law is not the law of bargained-for exchange; it has become the law of company-dictated exchange. Smart contracts—automated computer programs able to execute trades through TPLs—may offer a solution. This brief Essay explores the possibilities of smart contracts and their potential to correct the badly off-course law of online contract.
by Shawn Bayern
Most legal analysis of Bitcoin has addressed public-law and regulatory matters, such as taxation, securities regulation, and money laundering. This essay considers some questions that Bitcoin raises from a private-law perspective, and it aims to show that technological innovation may highlight problems with conceptualistic, classical rules of private law.
by Edward Castronova
A “digital value transfer system” (DVT) is a computer program that moves purchasing power from one person to another by exchanging different forms of virtual currency. In this Essay, I will give examples of DVTs and explain how they work. Then I will use the economic theory of budgets to explain how DVTs increase the liquidity and reach of all forms of virtual money. In effect, DVTs make all forms of currency, from dollars to frequent-flyer miles, essentially equivalent in terms of purchasing power. I conclude with a brief discussion of the possible implications of DVTs for the economy and for government policy.