Digital Currencies: Approaches to Regulation in International Financial Law

Abstract

In an era where the adage 'cash is king' is increasingly challenged by digitalisation, the rise of digital currencies underscores a tectonic shift in international financial systems. From the innovative inception of Bitcoin's decentralised blockchain to the advent of stablecoins and Central Bank Digital Currencies (CBDCs), the landscape of monetary transactions is undergoing unprecedented change. Despite their rapid adoption and potential for reshaping the global financial architecture, digital currencies present unique regulatory conundrums. These challenges range from the inherent decentralisation that disrupts traditional oversight mechanisms to the potential misuse of pseudonymity and cross-border operability challenges. Drawing upon the evolution from Bitcoin to CBDCs, this dissertation interrogates how international financial law can adapt to this burgeoning realm. Exploring various regulatory stances adopted globally reveals the opportunities and pitfalls of differing approaches. While some nations embrace a laissez-faire attitude, fostering innovation but potentially overlooking risks, others tread a restrictive path, prioritising security over potential technological advancements. Amid these divergent pathways lies the necessity for robust, adaptive, and anticipatory regulatory strategies. By juxtaposing legal precedents with current developments, this study offers a holistic view of the digital currency domain, culminating in policy recommendations integrating cutting-edge technology, environmental considerations, and international collaboration. As the world ventures into this digital currency-driven future, the role of international financial law becomes crucial – not just as a guardian of financial stability but as a beacon guiding towards innovation, inclusivity, and systemic harmony.