Financial Intermediation in Cryptocurrency Markets: Regulation, Gaps and Bridges

This chapter presents an analysis of financial intermediation in cryptocurrency markets with a focus on cryptocurrency exchanges and electronic wallet providers. These two main intermediaries are considered in detail by highlighting the activity, risk profiles and regulation of each service category. This is followed by a brief introduction to other less-regulated intermediation activities operating in this market, namely, cryptocurrency lending platforms, cryptocurrency remittance services and the use of hybrid business models. The chapter concludes by presenting regulatory issues in need of further consideration in the future governance of the cryptocurrency markets. These include the filling in of regulatory gaps and fissures in the areas of peer-to-peer platforms and the resolution of defunct exchanges, and the creation of bridges and linkages between current regulation and alternative sources of law including payment services regulation, custody and authorisation law and the fuller consideration of the regulatory implications of existing industry self-regulation.