European Consumer Law and Blockchain based Financial Services: A Functional Approach against the Rhetoric of Regulatory Uncertainty

Initial coin offerings: an emergent research area

“…The theme "regulation" joins the concepts "regulation", "financial", "regulatory", "governance" and "rights". Due to the uncertainty of the applicable regulatory framework for ICOs, the literature recognizes that ICOs convey risks for the issuers of the tokens, the exchanges (Tiwari, 2018), and for the investors that participate in the token offering (Gikay, 2019). This theme also includes papers that discuss the need for an efficient regulatory environment to protect the participants in financial investments (St anescu 2019) and to promote financial inclusion by promoting additional funding sources for small and medium enterprises (Tjio and Hu, 2020).…”

“…The analysis of papers in law highlights the importance of a regulatory framework to promote financial innovation, protect investors and enhance financial stability simultaneously. To address concerns about regulatory uncertainty (Gikay, 2019), studies mainly address the legal classification of a variety of tokens (equity and utility) according to the existing regulations in the US and Europe (Vandezande, 2020;Tiwari, 2018;Debler, 2018; Essaghoohan, 2019;Verpalu et al, 2020). Other researchers (Thomale, 2018;Gikay, 2019;Boreiko et al, 2019) provide an overview of how countries regulate ICOs, including the 2017 ban in China, soft law in some European countries and the Sandbox in the UK (Mangano, 2018;Truby, 2020).…”

Rethinking the Effectiveness of Consumer Protection Policies and Measures in the Financial Marketplace

“…In this regard, a typical practice among financial institutions is to present terms of financial contracts in an enticing manner, showcasing only the benefits but hardly the risks and side effects associated with the financial products. 25 Being that such deceptive set of practices are often industry-wide, there is hardly any incentive for a financial institution to engage in altruistic behavior of presenting both risks and benefits with equal force, as they fear loss of patronage; consumers are not usually trained to effectively digest financial risks: they mostly prefer to patronize product sellers who do not emphasize on any underlying risks. Therefore, financial institutions have over a long period of time learned to solely communicate the beneficial aspects of the products they sell to their consumers, and allow them to discover the hidden costs and onerous terms at their own expense, usually after they had been exploited for some time.…”

Governing Finance in Europe

“…As a first option, they may pursue a functional approach, whereby in the light of uncertainty stemming from innovation, legal concepts are interpreted broadly so as to incorporate the innovation in existing legal categories in order to prevent regulatory arbitrage and ensure that the objectives of the specific regulatory instrument are attained. As an alternative option, regulatory authorities may adopt a restricted narrow interpretation of the existing framework with a view to restricting the competence at EU level or developing a bespoke regime for the new entities (Marjosola, Chapter 5 in this volume;Möllers 2010;Gikay 2018;Lehmann 2019). Pursuing either such interpretative strategy with regard to cryptocurrencies and ICOs would lead to two possible structural regulatory outcomes, both subject to verification by EU courts.…”