Decentralised finance, regulation, and systems theory
DOI:
https://doi.org/10.35295/osls.iisl.1916Keywords:
Cryptocurrency, central bank digital currencies, internal differentiation, dedifferentiationAbstract
Cryptocurrency has sparked expressions of concern from regulators – though sometimes coupled with expressions of interest in state-backed alternatives. This paradoxical situation neatly encapsulates the conundrum confronting regulators as they seek to come to terms with the new world opened up by blockchain and leading ultimately perhaps to decentralised finance. How do we best understand this confusing situation? This paper looks for answers by attempting to conceptualise the phenomenon of decentralised finance in autopoietic systems terms. Insofar as a plausible argument can be made for the proposition that finance represents an example of the internal differentiation of the economy, does decentralised finance in some sense constitute an intensified internal differentiation? Alternatively, and paradoxically, insofar as what we are concerned with is decentralised finance, does it instead in some sense represent an example of dedifferentiation? Answers to these questions will have relevance for efforts to regulate this emerging phenomenon. They will also help to shed light on whether state and central bank experiments in this space will produce positive effects or bring their own challenges.
Downloads
Metrics
Downloads:
14(5)_Paterson_OSLS 11
XML_14(5)_Paterson_OSLS 1
References
Banco Central do Brasil (BCB), 2023. BCB updates the guidelines of the Digital Brazilian Real and releases the directives of its pilot project [online]. Press release, 17 March. Available at: https://www.bcb.gov.br/en/pressdetail/2466/nota
Brainard, L., 2022. Crypto-Assets and Decentralized Finance through a Financial Stability Lens [online]. Bank of England Conference, London, 8 July. Available at: https://fedinprint.org/item/fedgsq/94445
concerned.tech 2022. Letter in support of responsible fintech policy [online]. 1 June. Available at: https://concerned.tech/
Criddle, C., and Oliver, J., 2022, How Ukraine embraced cryptocurrencies in response to war. Financial Times [online], 19 March. Available at: https://www.ft.com/content/f3778d00-4c9b-40bb-b91c-84b60dd09698
Indian Ministry of Finance, 2023. Answer to question on the legalisation of crypto currency [online], 3 April. Available at: https://sansad.in/getFile/annex/259/AU3104.pdf?source=pqars
Karandikar, N., Chakravorty, A., and Rong, C., 2021. Blockchain Based Transaction System with Fungible and Non-Fungible Tokens for a Community-Based Energy Infrastructure. Sensors [online], 21(11), 3822. Available at: https://doi.org/10.3390/s21113822. DOI: https://doi.org/10.3390/s21113822
Kasriel, S., 2022, Where the Metaverse can take FinTech. Medium, 11 May.
Kim, A., Trimborn, S., and Härdle, W.K., 2021, VCRIX — A volatility index for crypto-currencies. International Review of Financial Analysis [online], vol. 78, 2021, 101915, 9. Available at: https://doi.org/10.1016/j.irfa.2021.101915. DOI: https://doi.org/10.1016/j.irfa.2021.101915
King, M., and Thornhill, C., 2003. Niklas Luhmann’s Theory of Politics and Law. Basingstoke: Palgrave. DOI: https://doi.org/10.1057/9780230503588
Kotey, S.D., et al., 2023, Blockchain interoperability: the state of heterogenous blockchain-to-blockchain communication. IET Communications [online], 17(8), 891–914. Available at: https://doi.org/10.1049/cmu2.12594 DOI: https://doi.org/10.1049/cmu2.12594
Luhmann, N., 1987. Closure and Openness: On Reality in the World of Law. In: G Teubner, ed., Autopoietic Law: A New Approach to Law and Society. Berlin: de Gruyter, 335-348. DOI: https://doi.org/10.1515/9783110876451.335
Luhmann, N., 1996. Social Systems. Redwood City: Stanford University Press.
Luhmann, N., 1998. Limits of Steering. Theory, Culture and Society, 14(1), 41-57. DOI: https://doi.org/10.1177/026327697014001003
Luhmann, N., 2004. Law as a Social System. Oxford University Press. DOI: https://doi.org/10.1093/oso/9780198262381.001.0001
Nakamoto, S., 2008. Bitcoin: A peer-to-peer electronic cash system [online]. White Paper. Available at: https://bitcoin.org/bitcoin.pdf
National Payments Corporation of India (NPCI), 2016. Unified Payments Interface (UPI) Product Overview [online]. Available at: https://www.npci.org.in/what-we-do/upi/product-overview
Office of Financial Sanctions Implementation (OFSI), Financial Conduct Authority (FCA) and the Bank of England, 2022. Joint statement from UK Financial Regulation Authorities on Sanctions and the Cryptoasset Sector [online]. 11 March. Available at: https://www.bankofengland.co.uk/news/2022/march/joint-statement-from-uk-financial-regulation-authorities-on-sanctions-and-the-cryptoasset-sector
Paterson, J., 2013, Financial Instruments, Functional Differentiation and Regulatory Challenges. In: A. Febbrajo and G. Harste, eds., Law and Intersystemic Communication: Understanding Structural Couplings. Aldershot: Ashgate, 155-177.
Paterson, J., and Teubner, G., 1998. Changing Maps: Empirical Legal Autopoiesis. Social and Legal Studies [online], 7(4), 451-486. Available at: https://doi.org/10.1177/096466399800700401 DOI: https://doi.org/10.1177/096466399800700401
People’s Bank of China (PBC), 2021a. Notice on Further Preventing and Disposing of the Risk of Virtual Currency Transaction Speculation [online]. 24 September. Available at: http://www.pbc.gov.cn/goutongjiaoliu/113456/113469/4348556/index.html
People’s Bank of China (PBC), 2021b. Progress of Research and Development of E-CNY in China [online]. Working Paper, July. Available at: http://www.pbc.gov.cn/en/3688110/3688172/4157443/4293696/2021071614584691871.pdf
Schinckus, C., Nguyen, C.P., and Ling, F.C.H, 2020. Crypto-currencies Trading and Energy Consumption. International Journal of Energy Economics and Policy [online], 10(3), 355-364. Available at: https://www.econjournals.com/index.php/ijeep/article/view/9258 DOI: https://doi.org/10.32479/ijeep.9258
Smith, S., 2020. Blockchain, Artificial Intelligence and Financial Services: Implications and Applications for Finance and Accounting Professionals. Cham: Springer.
Sonvilla-Weiss, S., 2009. (In)visible: Learning to Act in the Metaverse. Vienna: Springer.
Spencer Brown, G., 1972. Laws of Form. New York: The Julian Press.
Teubner, G., 1983. Substantive and Reflexive Elements in Modern Law. Law and Society Review [online], 17(2), 239-85. Available at: https://doi.org/10.2307/3053348 DOI: https://doi.org/10.2307/3053348
Teubner, G., 1985. After Legal Instrumentalism: Strategic Models of Post-Regulatory Law. In: G Teubner, ed., Dilemmas of Law in the Welfare State. Berlin: de Gruyter. DOI: https://doi.org/10.1515/9783110921526
Teubner, G., 1992. Regulatory Law: Chronicle of a Death Foretold. Social and Legal Studies [online], 1, 451-475. Available at: https://doi.org/10.1177/096466399200100401 DOI: https://doi.org/10.1177/096466399200100401
Teubner, G., 2000. Contracting Worlds: The Many Autonomies of Private Law. Social and Legal Studies [online], 9(3), 399-417. Available at: https://doi.org/10.1177/096466390000900305 DOI: https://doi.org/10.1177/096466390000900305
Teubner, G., 2007. In the Blind Spot: The Hybridization of Contracting. Theoretical Inquiries in Law [online], 8(1), 51-71. Available at: https://doi.org/10.2202/1565-3404.1143 DOI: https://doi.org/10.2202/1565-3404.1143
Unsworth, R., 2019. Smart Contract This! An Assessment of the Contractual Landscape and the Herculean Challenges it Currently Presents for “Self-executing” Contracts. In: M. Corrales, M. Fenwick and H. Haapio, eds., Legal Tech, Smart Contracts and Blockchain. Perspectives in Law, Business and Innovation [online]. Singapore: Springer. Available at: https://doi.org/10.1007/978-981-13-6086-2_2 DOI: https://doi.org/10.1007/978-981-13-6086-2_2
Vogel, E.F., 2011. Deng Xiaoping and the Transformation of China. Cambridge, MA: Harvard University Press. DOI: https://doi.org/10.4159/harvard.9780674062832
Wilson, C., 2022. Blockchain and Sustainability. Company Secretary’s Review, 45(12), 186-188.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2023 John Paterson
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
OSLS strictly respects intellectual property rights and it is our policy that the author retains copyright, and articles are made available under a Creative Commons licence. The Creative Commons Non-Commercial Attribution No-Derivatives licence is our default licence, further details available at https://creativecommons.org/licenses/by-nc-nd/4.0 If this is not acceptable to you, please contact us.
The non-exclusive permission you grant to us includes the rights to disseminate the bibliographic details of the article, including the abstract supplied by you, and to authorise others, including bibliographic databases, indexing and contents alerting services, to copy and communicate these details.
For information on how to share and store your own article at each stage of production from submission to final publication, please read our Self-Archiving and Sharing policy.
The Copyright Notice showing the author and co-authors, and the Creative Commons license will be displayed on the article, and you must agree to this as part of the submission process. Please ensure that all co-authors are properly attributed and that they understand and accept these terms.