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Regulation of digital currency is still at its infancy as authorities around the world grapple with its mechanics, and study its impact and the best method to regulate it. Significant increase in the use of digital cryptocurrency based on Blockchain technology post-Bitcoin phenomenon had challenged the conventional idea of central bank monopoly in currency issuance. This had also raised concern that digital currency being used as an instrumentality of crime given its anonymity feature that allows for the flow of funds without tracing and the fact that it is built on trustless system that provides security of transaction. This concern, plus other consideration including the prospect of issuing central bank digital currency, had driven some authorities around the world to adopt countermeasures either via an outright ban or a regulatory regime that suits the nature of digital currency, which is purely virtual and anonymous. However, in coming out with an appropriate legal regime, authorities faced multiple difficulties especially when the pace of legal development does not sync congruently with the rapid progress of technology. In addition, given the growing prominence of Islamic finance around the world, questions also arise pertaining to the legality of digital cryptocurrency from the Islamic perspective. Through a qualitative study of relevant literatures as well as legislations in different countries, this chapter discusses the various categories of digital currency, its position from the Islamic perspective, regulatory regimes of digital cryptocurrency in selected jurisdictions and challenges faced by authorities around the world in regulating this new medium of exchange.

This chapter examines institutional investors’ considerations while investing or otherwise engaging in the cryptocurrency sector, whether exclusively in bitcoin or the broader universe of crypto or decentralized finance assets. Given the rapid change in legal and regulatory oversight and cryptocurrency and blockchain innovation, offering inviolable advice about due diligence and compliance during commercial engagement is exceedingly difficult. However, general guidelines and rules of thumb are available.

This chapter attempts to clarify and describe the legal and regulatory framework for cryptocurrency with special focus on Malaysia and the threats that it poses from the anti-money laundering perspective. Currently, very few countries have legislations that regulate cryptocurrency. Nonetheless, the crazy surge in prices (to more than 20-folds at some point) has sent both legitimate investors and criminals flocking to cryptocurrencies. This chapter analyses and compares the official reports from various governments, writings of government officials, experts and scholars in journals and newspapers, interviews and draws conclusions on the legal framework of cryptocurrency, and money laundering challenges. The study notes that the decision of the US regulators in allowing Bitcoin futures to trade on major exchanges to be one of the reasons behind the sudden surge. The study also finds that the South Korean regulators’ approach in banning its financial institutions from dealing with virtual currency is a positive one. The chapter stresses that it is not adequate for regulators to warn the public to act with extreme caution and increase their understanding on the risks they take on if they choose to invest in cryptocurrencies. Instead, it is necessary to have comprehensive international and national laws and regulations for the control and management of cryptocurrencies. In addition, the anti-money laundering legal framework must be improved to cater to the new threats posed by cryptocurrency.

Cryptocurrency arose, and grew in popularity, following the financial crisis of 2008 built upon a promise of decentralizing money and payments. An examination of the history of money and banking in the United States demonstrates that stable money benefits from strict controls and commitments by a centralized government through chartering restrictions and a broad safety net, rather than decentralization. In addition, financial crises happen when the government allows money creation to occur outside of official channels. The US central bank is then forced into a policy of supporting a range of money-like assets in order to maintain a grip on monetary policy and some semblance of financial stability.

In addition, this chapter argues that cryptocurrency as a form of shadow money shares many of the problematic attributes of both the privately issued bank notes that created instability during the “free banking” era and the “shadow banking” activities that contributed to the 2008 crisis. In this sense, rather than being a novel and disruptive idea, cryptocurrency replicates many of the systemically destabilizing aspects of privately issued money and money-like instruments.

This chapter proposes that, rather than allowing a new, digital “free banking” era to emerge, there are better alternatives. Specifically, it argues that the Federal Reserve (Fed) should use its tools to improve public payment systems, enact robust utility-like regulations for private digital currencies and limit the likelihood of bubbles using prudential measures.

I. Introduction to the Study of the Economic Role of Government: Alternative Approaches to Law and Economics

In this chapter I would like to recall how I got started on my research on the multinational enterprise (MNE) and outline how my thinking on this important economic institution has evolved through the years.11I thank Sondra Grace of Gracefully Put for editing this manuscript.