Legal challenges relating to the evolution of money in the Fourth Industrial Revolution (FIR): a new analytical framework
View/ Open
LazcanoIC_2021.pdf (3.582Mb)
Date
31/07/2021Item status
Restricted AccessEmbargo end date
31/07/2023Author
Cedillo Lazcano, Israel
Metadata
Abstract
In Clerke v Martin, Lord Holt, facing a diffusion of promissory notes, stated that these
instruments were only an invention of “Lombard Street, which attempted in these matters of
bills of exchange to give laws to Westminster-Hall.” Certainly, we could present a similar
argument for “cryptoassets” and their obfuscated codes, which are being offered as a crypto
lex mercatoria for the “Fourth Industrial Revolution”. However, authors like Sir Roy Goode,
exhort us- building upon the commercially accepted practices -to not close the list of
monetary instruments available to fulfil contractual obligations in different contexts.
Therefore, if we want to be propositive, first, we need to answer two common, but key
questions: “what is money?” and “are these innovations money?”
To answer these questions, money tends to be defined in terms of its economic
functions. In this thesis, we will argue that this is a good starting point; however, these
elements by themselves are not enough to define money and “cryptoassets” in law. Money
does not emerge nor evolve in isolation through these functions; it needs a set of
infrastructures and social agreements that take us to ask a complementary set of questions:
“who can create money?” and “how can it be created?” With that in mind, legal scholarship
tends to rely on different theories with the aim to answer these questions. Among the most
famous “money theories,” we can mention the Mengerian/Metallist, the State/Chartalist, and
the Societary theories.
Throughout this research, we will argue that both the State theory and the Societary
theory of money are partially correct. Both are accurate but incomplete approaches that
complement each other to configure a Socio-Legal theory of money. To support this
assertion, we rely on the analysis of the ius cudendae monetae/lex monetae and its
influence beyond the prerogatives related to the creation of sovereign currencies. We think
that most of the analyses related to lex monetae tend to ignore the existence of payment
systems and different expressions of “inside money,” which are tolerated and sanctioned by
the State in exercise of its prerogatives. Accordingly, we will conclude that money in general terms is a social conception, but, just as in the case of lex mercatoria, new monetary
instruments cannot be labelled as money in law if they –and their infrastructures- are not
recognised as such and/or tolerated by law.
Throughout the financial history of the world, the referred recognition has evidenced
the need for the development of what we currently understand as central banking and its
constitutional prerogatives related to the stability of the payment systems and the monopoly
over money creation to uniform the economic interactions that derive from our social
contracts. However, after the Global Financial Crisis (GFC), Distributed Ledger
Technologies (DLT) innovators around the world have been working in the development of
new decentralised/disintermediated payment instruments to brake this sovereign financial
“panopticon.” Paradoxically, just as it has been verified with other Internet developments,
we are witnessing, again, a gradual process of intermediation, which is characterised by its
own set of market imperfections.
In order to situate this novel analysis within the existing academic production (which
tends to be heavily focused on the characteristics that define Bitcoin), this thesis divides the
“cryptoassets’” market in three main generations to highlight the existence of a wide offer of
cryptographic instruments, and the relevance of infrastructural elements like Intellectual
Property Rights (IPRs), governance arrangements and intermediaries in the development
of lex monetae. Based on this division, it is argued that we are following an historical trend
by which a new generation of Financial Technology (FinTech) intermediaries is evolving to
provide, not a “Global Coin”, but the infrastructure required for the optimal diffusion and
consolidation of new payment instruments. As result of this trend, we conclude that the
current constitutional prerogatives and regulations in force applicable to instruments like
promissory notes, electronic money and payment systems could be useful to develop a
fourth generation of “cryptoassets” and put in place an optimal regulatory effort beyond the
crypto lex mercatoria inspired by the ideas found in the work of Satoshi Nakamoto.
Consequently, we can argue that the set of proposals this thesis offers, could help us to
keep supporting the evolution of money and the institutions relating to it in the “Fourth
Industrial Revolution”.