VOLUME 15 • ISSUE 2 • PRINT
ENDING THE CRYPTO TAX HAVEN
Noam Noked1Associate Professor, Faculty of Law, The Chinese University of Hong Kong (noam. noked@cuhk.edu.hk). I thank Zachary Marcone, Omri Marian, Bob Michel, Paul Millen, Vincent Ooi, and Sarah Sonnenfeld for their helpful comments. This Article benefited from insightful feedback received at the Annual Conference of the Tax Research Network, the GREIT Lisbon Summer Course, the International Roundtable on Taxation and Tax Policy, and the UC Irvine Symposium on Taxation, and seminars of the International Fiscal Association Hong Kong Branch and the Hebrew University Faculty of Law. The work described in this article was fully supported by a grant from the Research Grants Council of the Hong Kong Special Administrative Region, China (Project No. CUHK 14609022).
There is growing global concern regarding the use of crypto for tax evasion and financial crimes. To address this problem, over sixty jurisdictions have recently committed to implement the Crypto-Asset Reporting Framework (CARF). CARF transposes the Common Reporting Standard (CRS)—designed for the traditional financial industry—onto the crypto industry. Under CARF, certain crypto intermediaries are treated like traditional financial institutions: they must identify and report crypto owners who are tax residents of other jurisdictions.
VOLUME 14 • ISSUE 2 • PRINT
BANK RUNS DURING CRYPTO WINTER
Gary B. Gorton & Jeffery Y. Zhang
“Crypto Winter” refers to a systemic event that occurred in the cryptocurrency ecosystem—what we call “crypto space”—in 2022. Crypto space was wracked by plummeting crypto prices, the troubles of a large crypto hedge fund, and runs on many crypto lending platforms. Several large crypto firms went bankrupt. Collectively, everyday people lost billions of dollars. And crypto investors are still feeling the aftershocks.
VOLUME 12 • ISSUE 2 • PRINT
MONITORING FACEBOOK
Hillary A. Sale
From Facemash to Facebook to Meta, Mark Zuckerberg’s path and com- pany have been fraught with conflicts, controversy, and even illegality.1 Did he steal the idea from the Winklevoss brothers? Has he invaded people’s privacy? Does he care about privacy? Does he mean what he says?2 Does he respect the law? Does he respect his shareholders? Does he respect his stakeholders? The answer to all of the above appears to be, no.
VOLUME 10 • ISSUE 2 • PRINT
ARTIFICIAL FINANCIAL INTELLIGENCE
William Magnuson
Recent advances in the field of artificial intelligence have revived long- standing debates about the interaction between humans and technology. These debates have tended to center around the ability of computers to exceed the capacities and understandings of human decisionmakers, and the resulting effects on the future of labor, inequality, and society more generally. These questions have found particular resonance in finance, where computers already play a dominant role. High-frequency traders, quantitative (or “quant”) hedge funds, and robo-advisors all represent, to a greater or lesser degree, real-world instantiations of the impact that artificial intelligence is having on the field. This Article, however, takes a somewhat contrarian position. It argues that the primary danger of artificial intelligence in finance is not so much that it will surpass human intelligence, but rather that it will exacerbate human error. It will do so in three ways. First, because current artificial intelligence techniques rely heavily on identifying patterns in historical data, use of these techniques will tend to lead to results that perpetuate the status quo (a status quo that exhibits all the features and failings of the external market). Second, because some of the most “accurate” artificial intelligence strategies are the least transparent or explain- able ones, decision makers may well give more weight to the results of these algorithms than they are due. Finally, because much of the financial industry depends not just on predicting what will happen in the world, but also on predicting what other people will predict will happen in the world, it is likely that small errors in applying artificial intelligence (either in data, programming, or execution) will have outsized effects on markets. This is not to say that artificial intelligence has no place in the financial industry, or even that it is bad for the industry. It clearly is here to stay, and, what is more, has much to offer in terms of efficiency, speed, and cost. But as governments and regulators begin to take stock of the technology, it is worthwhile to consider artificial intelligence’s real- world limitations.
VOLUME 10 • COLUMNS
THE DEMOCRATIC DIGITAL DOLLAR: A DIGITAL SAVINGS & PAYMENTS PLATFORM FOR FULLY INCLUSIVE STATE, LOCAL, AND NATIONAL MONEY & BANKING SYSTEMS
Robert Hockett2† Edward Cornell Professor of Law and Finance, Cornell Law School; Visiting Professor of Finance, Georgetown McDonough School of Business; Senior Counsel, Westwood Capital, LLC; Co-Founding Director, Digital Fiat Currency Institute; Board Member, Public Banking Institute. The author has drafted legislation that would institute a version of the plan here discussed in the State of New York. This legislation has now been proposed by Assemblyman Ron Kim in the New York State Assembly and Senator Julia Salazar in the New York State Senate. See Empire State Inclusive Value Ledger Establishment & Administration Act, H.R. 8686, 2019 Assemb. Reg. Sess. 2019-2020. (N.Y. 2019), https://assembly.state.ny.us/leg/?default_fld=&bn=A08686&term=2019&Summary=Y&Actions=Y&Text= Y&Committee%26nbspVotes=Y&Floor%26nbspVotes=Y.
Many national and subnational units of government see a need for more inclusive money, payment, and retail banking systems for the capture, storage, and transfer of spendable value among their constituents. Existing and still proliferating payments platforms, most provided by for-profit private sector entities, exclude too many people, and extract too much value in the form of needless transaction charges and other rents, to be up to the task of efficiently affording this essential commercial and financial utility to the full public on sensible terms. This Article sketches a smart-device-accessible platform— the ‘Digital Dollar Platform Plan’—which, thanks to new payment technologies, can easily be put in to place and administered by any unit or level of government with a view to supplying this critical commercial and financial infrastructure to all of its constituents.
VOLUME 10 • COLUMNS
HUMAN LEADERSHIP IN A HIGHLY REGULATED AND TECH-RELIANT CORPORATE ENVIRONMENT
Timo Matthias Spitzer, LL.M. (Wellington)3Board Member and Adjunct Professor at the Institute for Law and Finance, Goethe University Frankfurt. The author would like to thank his team, in particular Cedric Liesens, Kajetan Sitko and Lukasz Lorent, as well as Julia Bayón Pedraza for being a role model and true leader. Kudos to the Association of Corporate Counsel, the International Bar Association and The Legal 500 for providing a forum for the global legal in-house community.
We are living in times of drastic change and global legal, economic, and political turmoil, hoping for the best but expecting the worst. A focus on the shareholder may drive managers toward profit maximization, often with limited incentives to include environmental, governance, and social factors into corporate decisions. Crises show the need for human leadership with integrity to realign companies with stakeholders besides the shareholder, including the wider society.
VOLUME 8 • COLUMNS
BULLISH ON BLOCKCHAIN: EXAMINING DELAWARE’S APPROACH TO DISTRIBUTED LEDGER TECHNOLOGY IN CORPORATE GOVERNANCE LAW AND BEYOND
Wonnie Song
The buzz around blockchain is getting ever louder. Mergers & Acquisitions (M&A) activity in the blockchain technology sector rose 33.3% between Q2 2016 and Q2 2017. Increased legislative response is perhaps the clearest signal yet that blockchain technology may be more than a passing fad. As of September 2017, several jurisdictions in the United States have amended their state laws to explicitly legitimize the use of blockchain technology in both commerce and corporate governance. With a focus on Delaware’s embrace of blockchain technology, this Article examines the potential role of distributed ledgers in corporate governance and capital market transactions. The Article then considers the solutions such technology offers, as well as some barriers its advocates might face in pursuing its wide-scale adoption.
VOLUME 7 • COLUMNS
BITCOIN AND VIRTUAL CURRENCIES: WELCOME TO YOUR REGULATOR
Matthew Kluchenek
Among all the U.S. regulators interested in regulating Bitcoin and virtual currencies, the Commodity Futures Trading Commission (CFTC) is determined to be at the forefront. Since the announcement by CFTC Chairman Timothy Massad in late 2014 that Bitcoin derivatives should fall within the scope of the CFTC’s jurisdiction, the CFTC has been aggressive in addressing not only wrongful conduct involving Bitcoin derivatives, but also wrongful conduct involving certain spot Bitcoin transactions. The CFTC’s actions are a clarion call for market participants to understand the broad breadth of the CFTC’s jurisdiction, and to take notice of the requirements that may apply both to derivatives and to certain physical transactions involving Bitcoin and other virtual currencies.