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82 U. Chi. L. Rev. Dialogue 53 (2015-2016)
A Conceptual Framework for the Regulation of Cryptocurrencies

handle is hein.journals/uchidial82 and id is 53 raw text is: A Conceptual Framework for the Regulation of Cryptocurrencies Omri Mariant INTRODUCTION This Essay proposes a conceptual framework for the regula- tion of transactions involving cryptocurrencies. Cryptocurrencies offer tremendous opportunities for innovation and development but are also uniquely suited to facilitate illicit behavior. The regulatory framework suggested herein is intended to support (or at least not impair) cryptocurrencies' innovative potential. At the same time, it aims to disrupt cryptocurrencies' criminal util- ity. To achieve these purposes, this Essay proposes a regulatory framework that imposes costs on the characteristics of crypto- currencies that make them especially useful for criminal behav- ior (in particular, anonymity) but does not impose costs on characteristics that are at the core of cryptocurrencies' genera- tive potential (in particular, the decentralization of value- transfer processes). Using a basic utility model of criminal be- havior as a benchmark,1 this Essay explains how regulatory instruments can be so designed. One such regulatory instrument is proposed as an example-an elective anonymity tax on cryp- tocurrency transactions in which at least one party is not anon- ymous. There has been increasing interest in the regulation of cryp- tocurrencies, with many inquiries focusing on the regulation of cryptocurrencies within discrete areas of law.2 This Essay t Assistant Professor of Law, University of Florida Levin College of Law. For help- ful comments and critique I thank Professors Michael Abramowicz, Andrew Hayashi, Danny Sokol, as well as Sarah Meiklejohn and participants at the ABA Tax Section's 2-14 Joint Fall CLE Meeting and the 9th Annual Junior Tax Scholars Workshop. 1 See note 30 and accompanying text. 2 See generally, for example, Stephen T. Middlebrook and Sarah Jane Hughes, Regulating Cryptocurrencies in the United States: Current Issues and Future Directions, 40 Wm Mitchell L Rev 813 (2014); Jerry Brito, Houman B. Shadab, and Andrea Castillo, Bitcoin Financial Regulation: Securities, Derivatives, Prediction Markets, and Gambling, 16 Colum Sci & Tech L Rev (forthcoming 2014), online at http://papers.ssrn.com/sol3/papers.cfmabstract-id-2423461 (visited Nov 26, 2014); Nicholas A. Plassaras, Regulating Digital Currencies: Bringing Bitcoin within the Reach

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