Self-Regulatory Mechanisms in Cryptoasset Markets : The Need for Gatekeepers

Doctrinal and economic arguments militate in favor of the application of securities law in situations where issuers of cryptoassets – innovative financial instruments based on the distributed ledger technology - are seeking to finance the development of these assets. This article emphasizes that to be effective, the law must be supported by self-regulatory capital market mechanisms such as a mature network of gatekeepers and reputational intermediaries. The efficiency of gatekeepers depends on multiple factors such as their capacity to service the needs of a market, independence, ability to vet offerings, expertise, and reputational capital. Unfortunately, the assorted gatekeepers in crypto-markets currently do not exhibit these qualities. At the same time, there are fundament positive developments: new gatekeepers, such as the community of developers and smart contract auditors, are rising together with the evolving intermediaries similar to traditional investment banks and exchanges. These processes signal that with time the crypto-market should be expected to improve self-monitoring mechanisms, even if it currently faces a long road to self-regulation