Blockchain Havens and the Need for Their Internationally-Coordinated Regulation

Abstract

This paper describes the rise of a new form of regulatory havens. Jurisdictions that have traditionally been characterized as “tax havens” are gradually becoming hubs for blockchain-based ventures. These jurisdictions attract blockchain entrepreneurs by offering refuge from regulatory and tax burdens imposed by developed economies. These new “Blockchain Havens” create a regulatory “race to the bottom” that is traditionally associated with the world of international tax evasion and avoidance. Over the past several years, developed economies have put to use—mostly through coordinated efforts—several regulatory frameworks aimed to address some of the negative effects of tax havens. These regulatory instruments are aimed against the haven jurisdictions themselves, or the private institutions operating in such jurisdictions. However, this paper argues that the unique nature of blockchain-based technology—most importantly, decentralization and temper resistance—makes such traditional anti tax haven policies ineffective in the blockchain context. This paper argues that coordinated international regulatory policies must be quickly developed to address certain important aspects of blockchain technology. Such coordination is necessary to prevent an uncontrolled regulatory race to the bottom, while at the same time preserving the benefits of blockchain-based applications.