European Consumer Law and Blockchain Based Financial Services : A Functional Approach against the Rhetoric of Regulatory Uncertainty

The article questions the EU's regulatory response to blockchain based financial services by examining the existing consumer law within the context of the operation of cryptocurrency exchange platforms and Initial Coin Offerings (ICO).It is commonly believed that a rushed regulatory response to a disruptive technology might stifle innovation whereas implementing tailor-made regulation requires adequately understanding the technology and the legal challenges it presents. A decade after the financial market started experimenting with blockchain, the prevailing view of EU regulators is that blockchain based transactions do not fit into the current regulatory regime. This was illustrated by the European Banking Authority's warning to the consumers issued in 2013 of the absence of specific legal regime designed to protect the consumers dealing with exchange platforms. A similar position was adopted by the European Securities and Market Authority in its 2017 investor alert indicating that ICO operating in unregulated spaces pose several risks about which the consumers should be informed. Meanwhile, Member States have diverse approaches to regulating Exchange Platforms and ICOs.Building on the law and technology literature and on the jurisprudence of the European Court of Justice, the article argues that the extent of regulatory uncertainty is overstated by EU regulators and calls for the adoption of a functional approach to legal interpretation. Thus, it posits that although blockchain and cryptocurrencies are new technologies, the legal transactions they enable are not unfamiliar to the legal system. The article provides an insight into how the existing legal rules can be applied to blockchain based financial services, without the need for a sweeping legal reform