Report: Exchange Tokens: 23 October 2019

In July 2016, the FMLC published a paper examining how established cryptocurrencies may fit into the traditional categories of property and personal rights established at common law (the “2016 Report”).  In that paper, the Committee expressed the view that virtual currencies which have achieved status as a medium of exchange within a significant user community have a good claim to be regarded as money.

In the years since the publication of those reports, virtual currencies have proliferated in the market.  A number of regulatory authorities have agreed on three broad types of digital assets—exchange tokens, security tokens and utility tokens (more on this in Section 2, below).  In this paper, the FMLC explores the ways in which regulators and legislators have attempted to grapple with the many varieties of virtual currencies and in particular those which have arguably come to function as money for legal purposes.  The definition of “virtual currencies” in the E.U.’s Fifth Money Laundering Directive is used as an example to demonstrate the uncertainties which arise in the regulation, in particular, of exchange tokens.

Available at: PDF.