The Future of Crypto-Asset Regulation Under WTO Law

By: Ines Willemyns

PDF: The Future of Crypto

Crypto assets (sometimes referred to as cryptocurrencies) were created shortly after the 2008 financial crisis to provide an alternative financial system that was completely decentralized, trustless, and did not require any regulatory oversight. Since their inception, crypto assets have been plagued by violent value fluctuations and instances of severe negligence and fraud, causing billions of dollars in losses for investors every year. Despite the significant risks, the crypto-asset economy has grown considerably over the past two decades, with more and more people around the world investing in crypto assets. The growth of the crypto-asset economy, its increased interconnection with the traditional financial sector, and the lack of prudential safeguards in most countries, has prompted international financial institutions to increasingly voice their concerns regarding the risks to consumers and financial stability. Without a globally coordinated approach to the regulation of crypto assets, policy responses have diverged considerably. While the European Union recently enacted the Markets in Crypto Assets Regulation, imposing strict transparency, oversight and consumer protection requirements, the United States is trending toward “light-touch” regulation of crypto assets under the second Trump Administration.

The diverging regulatory approaches of the EU and the United States create significantly different crypto-asset landscapes within their domestic markets but also impact consumers and service suppliers in third countries. Whereas the EU’s strict regulation of the supply of crypto-asset services discriminates against foreign service suppliers and limits access to the EU market, the United States’s “light-touch” regulatory approach exposes foreign investors and consumers to the risks associated with underregulated crypto-asset services and increases the exposure of the global economy to financial instability risks. This Article will address the question of what role international trade law can play in limiting the cross-border impact of crypto-asset regulation, both in the case of discriminatory "overregulation" and risk-increasing "underregulation." The Article explains the relevance of countries' rights and obligations regarding crypto-asset regulation under the General Agreement on Trade in Services (GATS) and evaluates the EU and US regulatory approaches to crypto assets under this agreement.