**3. Standardization and Regulations**

A report elaborated by The Law Library of Congress, Global Legal Research Center, Sta ff of Global Legal Research Directorate (2018) examines the legal, political, and fiscal landscape regarding the regulated status (or not) of cryptocurrencies in over 100 countries and notes that the terminology of addressing (and implicitly of perceiving cryptocurrencies) differs from one jurisdiction to another (Figure 1). In Taiwan, China, and Canada, cryptocurrencies are seen and described as a virtual commodity; in Mexico and Honduras as a virtual asset; in Thailand and Argentina as digital currency; in Lebanon and Colombia as electronic currency; in Italy as cyber currency; in Switzerland as token payment; in Germany as a crypto-token, etc. The approach is different and reflects the acceptance decisions (or not) as a means of paymen<sup>t</sup> or taxation method. For example, Switzerland taxes cryptocurrencies as foreign currency, while in Israel, they are assets. If some jurisdictions impose direct or indirect restrictions (e.g., by financial restriction) on investments in cryptocurrencies, others prohibit citizens from engaging in activities at the local level, but not abroad.

**Figure 1.** Legal status of cryptocurrencies. Source: Staff of Global Legal Research Directorate (2018).

The European Central Bank and the national central banks may also open accounts for participating credit institutions or public entities according to national regulations for insurance companies or other parties involved in the transaction or transfer process (Zellweger-Gutknecht 2018). One of the challenges generated by the desire to regulate cryptocurrencies brings to the forefront the need to combat money laundering, which is focused on combating terrorism financing while monitoring illegal markets (e.g., drug trafficking, trafficking in human beings, etc.). Another challenge refers to rules concerning securities and consumer and investor protection guidelines. Regulatory boundaries need to take into account concrete realities, in which the delimitation of responsibilities of various authorities from the jurisdiction point of view related to cryptocurrencies is rather unclear. Central banks adopt a prudential policy, capitalizing on digital technologies in the direction of saving resources. Distributed Ledger Technology components apply inter alia to the Central Bank Digital Currency (CBDC) and therefore must be modeled on authorized protocols. The design should include options for reserve convertibility to support day-to-day liquidity, minimizing settlement risks (Bank for International Settlements 2018). In addition, the introduction of the CBDC as a guarantee, deposit facilitation for commercial banks, or the interest payable for individuals' holdings emphasizes fixing margins that are difficult to control. Taxation of profits earned by individuals or intermediary companies implies the existence of "monetary" legislation, tax provisions, and clear enforcement rules. The likelihood of correlation is rather low in terms of end-user anonymity, and it is virtually impossible to comply with the minimum Know Your Customer/Client (KYC) provisions, which are also necessary for risk assessment. Nevertheless, we are witnessing bold moves regarding the assimilation of Financial Technology and FinTech-blockchain into platforms dedicated to banking operations. The open architecture is designed

to be flexible and tailored to the needs of customers, with the digitized models in operation validating the avant-garde character (Erste Group 2018).

A new tendency, which was perhaps born out of the desire to eliminate one of the most disturbing factors, is to freeze values. It theoretically addresses players who do not have a high-risk appetite and who want to trade at default quotes. Anonymity is maintained, but parity is fixed in comparison with a widely-recognized financial standard. Specifically, the cryptocurrency is supported by an equivalent amount in one of the traditional currencies (e.g., dollar, euro, or Japanese yen) and may be deposited in an account. The native tokens trading under the USD symbol in 2014 were about twenty-five million units, with more than 2.5 billion units in circulation by the end of 2018. At the time of issue, a Tether was quoted at the value of one US dollar, and a Roncoin, built on the Ethereum blockchain platform, was rated at the cost of one Romanian RON. Tether allows for dollar-like operations without a bank connection and can be converted into another cryptocurrency, with leverage in manipulating quotes. 'Scheduled' Tether issuing and the acquisition of cryptocurrencies almost always have a strong e ffect on stabilizing or raising prices, with massive reconversion leading to a controlled decline. Symmetrical or asymmetric correlations were carefully investigated, and the results were delivered in graphical form and tables (Gri ffin and Shams 2018) as clearly as possible.

In the same context, the idea of creating a decentralized cryptocurrency using blockchain technology, whose parity is in line with the global gold quote, has begun to emerge. More precisely, through the token process, AurusGOLD (AWG) was born. Each currency represents the equivalent of one gram of 99.99% pure gold at the London Bullion Market Association's accepted quotation. The cryptocurrency is claimed by promoters, some of whom have gained experience in specialized software firms in a country located at the intersection of Central, Eastern, and Southeast Europe, that it is designed to support market pullout at any time, supported 100% by physical gold, and that the storage and securing of the precious metal is in line with the international regulations in force including those on the paymen<sup>t</sup> of taxes. The debate aims at the direct convertibility of gold–cryptocurrency, under the conditions of a regulatory vacuum in this area and predictability placed under the sign of doubt (BitScreener 2018). Regardless of the asset attempted for anchor, manipulation is present in several forms, with one or more powerful players having the ability to force the platforms. Making seemingly valid operations without real holdings through scheduled robots and exploiting hourly intervals has revealed new market vulnerabilities, which are responsive to false messages and fraudulent transactions. Even though the material treated rigorously, with extensive robustness checks, addresses the Bitcoin ecosystem, the evaluation can easily be extrapolated to the crypto phenomenon generally, or to any other cryptocurrency in particular (Gandal et al. 2018).

In the report submitted for analysis in July 2018 to the G20 (Group of Twenty, International Forum set up in 1999), it was noted that the Financial Stability Board (FSB) has developed, together with the Committee on Payments and Market Infrastructures (CPMI), an identifying metrics frame to monitor transmission channel implications, exposure, growth rate, convertibility, volatility, transparency, accessibility, jurisdiction, and other elements that can influence the financial stability of cryptographic markets. CPMI pays special attention to paymen<sup>t</sup> innovations and provides assistance and advice in studying topics related to decentralized assets or support assets. The International Organization of Securities Commissions has developed a support platform for enrolled members to look into possible cross-border issues, investor protection, regulatory matters, etc. The question is whether the line of conduct designed for secondary markets is also pursued in this case, especially if we take into account critical issues related to custody, settlement, cybersecurity, and system integrity. As we have already said, the legal status of cryptocurrencies is quite unclear, and the weather variations in the quotes lead to changing the calculation coe fficients. The terminology is somewhat fluid and indicates a focus on property regulation, with crypto-tokens being often equated with securities, instruments used to raise funds by representing a security or tangible asset, tangible things that can be held, or controlled (e.g., buildings, commodities, patents, etc.). New indicators refer to capital: the minimum required balance of reserves, custody, pledges, receivables, accounting records, private or property rights, transfer rights, assignment, future contracts, solvency, bankruptcy, etc. Are we finally discussing the regulation of goods, money, assets, financial instruments (e.g., promissory notes, checks, securities, etc.) or the regulation of commercial services?

The convertibility on demand of a cryptocurrency as a legal means of payment, the admissibility of cryptocurrencies and related products such as derivatives traded on stock exchanges (Auer and Claessens 2018) is one of the reasons why the Basel Committee on Banking Supervision quantifies direct and indirect exposure, monitors the evolution of FinTech's crypto-assets, and seeks to clarify prudential procedures from banks and supervisors. Respecting all the compliance rules is one of the stated goals, and the implementation of RegTech (Regulatory Technology) solutions aims to increase transparency and consistency, with the correct interpretation of ambiguous regulations, to impose the right level of quality.

Similarly, the Euro Cyber Resilience Board was created, a forum for cooperation between central banks, supervision institutions, and critical financial infrastructure providers, responsible fiscal policies and economic reforms being under discussion. Governance studies occupy an important place in the list of relevant concerns and are added to those dedicated to improving the financial transaction mechanics. Due to their high volatility, the crypto-assets should have an assigned risk weight around the minimum 1000% threshold, the weighting coe fficients varying according to the nature of the crypto-asset. The financial market supervisory authorities will express the consensus within the Basel Committee by developing an international standard.

One thing is clear: international collaboration is essential in the successful imposition and enforcement of rules for combating tax evasion, money laundering, and terrorist financing. An initiative on a unified global regulatory framework must be supported by all o fficial organizations involved such as the G20, the Egmont Group, the FATF or the UN O ffice on Drugs and Crime (Robby and Snyers 2018).
