Blockchain and Cryptocurrency: International Legal and Regulatory Challenges by Dean Armstrong KC

Chapter 1
Introduction
1.1 Welcome to the Second Edition of Blockchain and Cryptocurrency: 
International Legal and Regulatory Challenges. When we wrote the original book 
that will now be known as the First Edition, we were not at all certain there would 
be a sequel; we could imagine a strong future for blockchain and distributed 
ledger technology but cryptocurrency was facing bans in a number of countries 
and its future success was not guaranteed. Yet as we look at cryptocurrency or, 
as some may prefer cryptoassets, at the beginning of 2022 one might argue that 
its rise has been equal to or even more stratospheric than blockchain. Indeed, my 
co-authors noted that had we been writing the First Edition today there would 
be healthy debate as to whether the book title order should be Cryptocurrency 
and Blockchain rather than the other way round. The title however remains 
faithful to the original as does our underlying philosophy that the book should 
be as accessible and understandable as possible. Whilst many more readers 
will be more familiar with blockchain and cryptocurrency this time around we 
have tried to accommodate those who would benefit from an explanation of the 
fundamentals. We again adopt the observation of Albert Einstein that ‘if you 
can’t explain it to a six year old, you don’t understand it yourself’ and have 
strived to elucidate blockchain, cryptocurrency and the new thinking that these 
topics represent whilst always keeping in mind that it should be explained in a 
way that anyone, including a six year old, would understand. In our view, far too 
many books and articles discuss emerging technology in a way that baffles rather 
than enlightens and we hope that this Second Edition achieves the right balance 
between innovation of thought and clarity of explanation. This edition is, by 
necessity, longer than the original. It now runs to twelve chapters, with essential, 
additional content that includes an analysis of the various forms of fungible and 
non-fungible cryptoassets, remedy and tracing strategies and a complete chapter 
devoted to the Metaverse. In addition to this we have updated and expanded the 
entirety of the book to ensure it has kept pace with change.
1.2 We are entering what has been referred to as the Fourth Industrial 
Revolution or the Second Machine Age. The Third Industrial Revolution and 
First Machine Age arguably began in the 1950s with the advent of digitalisation 
and technological progress that was so significant and complementary as to 
radically shape the world from what had gone before. That technological progress 
continued apace into the Fourth Industrial Revolution to the point where the level 
of digitisation and computing heralded global frontier-less interconnectivity and 
breakthroughs in emerging technologies such as artificial intelligence, robotics, 
quantum computing, the Internet of Things and decentralised consensus via 
distributed ledger technology. There are valid arguments that this new Second 
Machine Age is witnessing an era of technology that can both assist and 
undermine humanity, with artificial intelligence capable of replacing areas of

human cognitive endeavour and cybercriminals utilising technology as a tool 
for harm. It is certainly the case that cryptocurrency and blockchain have seen a 
remarkable level of adoption and many individuals and businesses have woven 
these technologies into the fabric of their operations.
1.3 The speed of that adoption has not always been matched by regulation 
which has struggled to keep pace with technology and consequently there may 
be a gap or uncertainty as to what the legal position is. Indeed, on 9 December 
2021, the International Monetary Fund (IMF) posted a blog post which accepted 
that cryptoassets are fundamentally changing the international monetary and 
financial system. Cryptoassets, the IMF declared, were generating financial risks 
that underscore the ‘need for comprehensive international standards that more 
fully address risks to the financial system from crypto assets, their associated 
ecosystem, and their related transactions, while allowing for an enabling 
environment for useful crypto asset products and applications’. The IMF view 
is that a global regulatory framework is required; that framework must include 
licensing for cryptoasset service providers, bespoke requirements for the main 
use cases of cryptoassets and stablecoins and clear requirements on regulated 
financial institutions with exposure to and engagement with crypto. One aim of 
this book is to help clarify, where possible, some of those issues in order that the 
reader better understands what the current state of regulation is. We often hear it 
said in the UK for example that blockchain and cryptocurrency are not regulated; 
it will hopefully become apparent from this Second Edition that much depends 
on how they are applied and that in many contexts it will be plain that the use 
case, of blockchain or cryptoassets, is not regulation free.
1.4 This introduction provides a synopsis of the book’s content and 
is intended to be a useful guide in introducing the reader to the core topics 
with some context where it might assist. The scope of this work is limited to 
blockchain (which is a type of distributed ledger technology), cryptocurrency 
(to include cryptoassets such as non-fungible tokens (‘NFTs’)), the Internet 
of Things, natural resources and ancillary concepts such as decentralised 
autonomous organisations that required inclusion for the reader to have a 
comprehensive appreciation of blockchain, cryptocurrency and the international 
regulation and challenges that apply. As with the First Edition it was simply 
not possible in a book of this length to forecast and examine every regulation 
or future challenge though three years on we were able to cast the net wider 
to catch new developments and challenges. It has also become apparent that 
blockchain and cryptocurrency will continue to develop at pace and the zenith 
for their optimal potential might not be realised for a few years yet. The 
global adoption of smart cities with a myriad range of inter-connected health 
and industrial devices will likely be at the forefront of this growth though a 
multitude of other sectors will be involved too.

Blockchain and Cryptocurrency: International Legal and Regulatory Challenges by Dean Armstrong KC