Regulating the Technology (Placement)

Abstract

AbstractThis chapter examines the placement phase of MLFT. This chapter starts in Sect. 5.2 by examining the definition of virtual wallets under the EU Anti-Money Laundering Directive. Section 5.2 examines the definition of entity under this Directive. It concludes that whilst the term entity is broadly formulated it creates risk by excluding the non-custodian wallets. Section 5.3 therefore discusses whether non-custodian wallets should be supervised or remain anonymous. This section concludes that non-custodian wallets should supervise itself. Section 5.4 then continues by discussing how these non-custodian wallets can supervise themselves through smart assets and AI. Section 5.5 then continues by analysing the legal requirements for such a supervisory approach. This approach includes creating a digital legal personality for the digital wallet. The digital legal personality could be used to create an insurance system for such wallets in case of damages. In such a case the insurer would have the power to represent the wallet in legal proceedings. Section 5.6 then continues by discussing how such a system could aid in the prevention of digital scams and how transactions to third-countries should be incorporated. Section 5.7 continues by discussing incorporating smart contracts into the regulatory system. Particular attention is paid to regulating the criminal smart contracts (csc). Section 5.8 provides a conclusion and recommendations.