European Business Organization Law Review (2018) 19:715–735

https://doi.org/10.1007/s40804-018-0123-5

ARTICLE

Blockchain Securities, Insolvency Law and the Sandbox

Approach

Renato Mangano1

Published online: 13 November 2018

© T.M.C. Asser Press 2018

Abstract
Blockchain is a new technology that is based on an algorithm which allows par-
ticipants of an IT network to process, store and share data across multiple points
without the need for any intermediary, at least in order to ensure the integrity of
the data dealt with. This technology is simplifying financial markets—many organi-
zations are launching initial coin offerings to facilitate the financing of new busi-
ness ventures; moreover, ‘securities’ that are issued in such a digital form can be
bought and sold in the secondary market without the intervention of the traditional
intermediaries. However, this use of blockchain could give rise to many problems
which, in this article, will be analysed from the prospective of insolvency law. This
paper will argue: first, that these problems originate from the fact that the issuance
of blockchain securities is creating a divide between the world where securities are
issued, offered and sold, and the world where law is enforceable; secondly, that these
problems cannot be managed easily because of the lack of an apt point of attack,
rather than because of the claim that the principle of technological neutrality should
be observed; thirdly, that—under certain conditions—the sandbox approach that is
being adopted by the UK financial conduct authority could contribute to directly
shaping the platforms in pursuit of regulatory goals.

Keywords  Blockchain · Initial coin offerings (ICOs) · Technology neutrality ·

Regulatory sandbox · Insolvency law

This paper reproduces and combines the contents of two lectures that were delivered in Australia,
at Queensland University of Technology (QUT), Brisbane, on 12 September 2017, and at Deakin
University, Melbourne, on 15 September 2017, respectively. The author is particularly grateful to
Prof Rosalind Mason, QUT, and Dr Christian Chamorro-Courtland, Deakin University, for their
generous invitations. Sometimes this paper refers to homepages and other Internet resources. When
this is the case, and unless otherwise provided, these resources are assumed to have been retrieved
on 20 December 2017 last.

* Renato Mangano
[email protected]
1
University of Palermo, Palermo, Italy

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1 New Setting, New Issues

Blockchain technology is enriching financial markets. This observation first refers

to the primary market. For example, recently many organizations have launched
the so-called initial coin offerings (ICOs).1 These are fundraising events based on
blockchain technology in which participants invest their money in ‘digital coins’
in order to finance a new business venture in return for either cash or cryptocur-
rency—henceforth, these ‘digital coins’ will be interchangeably called ‘tokens’, or
‘blockchain securities’ or, simply, ‘securities’.2 The statement that blockchain tech-
nology is enriching financial markets also refers to the secondary market, where
these tokens can be bought and sold without the intervention of any intermediary.
This feature is particularly advantageous for investors. This is because a person
who intends to invest his or her money in traditional securities must set in motion a
chain of intermediation which very often involves many intermediaries, such as bro-
kers, banks, a national central securities depositary (CSD), and—if the investment
concerns non-domestic securities—an international central securities depositary
(ICSD), such as ‘Clearstream’ or ‘Euroclear’. But this intermediation could prove
problematic: first, because the longer the chain of intermediaries is, the more diffi-
cult it is for an investor to identify the intermediary who is responsible for any short-
coming which has affected his or her investment; secondly, because the nature of the
investor’s entitlement varies according to whether the intermediary employs either
an omnibus account or an account expressly segregated for that investor; thirdly,
because this chain usually crosses the borders of a jurisdiction and this requires

1
  This paper refers to those blockchain platforms which are non-public, where an administrator grants
permissions to participate in the network. These platforms can be either fully private, or the result of
a consortium set up between private organizations that already exist. In both cases, the presence of an
administrator does not contradict the assumption that blockchain platforms do not need an intermedi-
ary that would ensure the integrity of the data processed—here, the correct functioning of the system,
including protection against the problem that the same amount of money could be erroneously or mali-
ciously spent many times, is ensured by the algorithm itself. Non-public platforms are different from
public platforms, to which anyone may have access. Usually, public platforms are employed for the issu-
ance of cryptocurrency. The expression ‘initial coin offering’ (ICO) mirrors the more familiar expression
‘initial public offering’ (IPO) and refers to a fundraising event which is effected through a distributed
ledger technology offering ‘tokens’ or ‘coins’ to participants in a business venture in return for either
cash (fiat currency) or cryptocurrency, such as Bitcoin or Ether. ICOs are typically announced through
online channels such as cryptocurrency forums and websites. Even though every ICO involves cryptocur-
rencies, the ICO in itself is different from the issuance of cryptocurrency: first, because the issuance of
cryptocurrency does not aim to finance a new business venture; secondly, because, at least in the case of
Bitcoin, the issuance of cryptocurrency is an activity aiming at giving people an incentive to participate
in the decentralized process of validation of the ‘blocks’ which is called ‘proof-of-work’. This explains
why those people who spontaneously validate these blocks are called ‘miners’ and why this activity is
called ‘mining’.
2
 This statement does not imply that these tokens must be necessarily considered as ‘securities’ in
accordance with the law which is applicable. This point must be ascertained jurisdiction by jurisdiction.
For example, on 25 July 2017 the United States Securities and Exchange Commission (SEC) stated that
the tokens issued by that Decentralized Autonomous Organization (DAO) created by the German corpo-
ration ‘Slock.it UG’ were ‘securities under the Securities Act of 1933 (“Securities Act”) and the Securi-
ties Exchange Act of 1934 (“Exchange Act”).’ In this respect, see SEC (2017).

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Blockchain Securities, Insolvency Law and the Sandbox Approach 717

the investor intending to protect his or her investment by means of a legal action to
ascertain which jurisdiction is competent and which law is applicable.3
However, this new setting could give rise to new issues whenever the person who
has underwritten or bought a token becomes insolvent and insolvency proceedings
are opened. If this is the case, the interest held by that entity who/which owns a
token might clash with the interests of his/her/its creditors. This paper will focus
on this clash, which, for the sake of simplicity, will be summarized in the follow-
ing three questions: ‘How can tokens be made available for the debtor’s creditors?’;
‘How can post-commencement avoidance rules be enforced?’; and ‘How can fraud-
ulent transaction avoidance rules be enforced?’ The analysis aims at demonstrat-
ing: first, that these problems originate from the fact that the issuance of blockchain
securities is creating a divide between the world where securities are issued, offered
and sold, and the world where law is enforceable; secondly, that these problems can-
not be managed easily because of the lack of any apt point of attack, rather than
because of the claim that the principle of technology neutrality should be observed;
thirdly, that—under certain conditions—the sandbox approach that is being adopted
by the UK Financial Conduct Authority (FCA) could contribute to directly shaping
the platforms in pursuit of regulatory goals.

2 How Can Tokens Be Made Available for the Debtor’s Creditors?

If insolvency proceedings are opened against an insolvent debtor, the appointed

insolvency practitioner must determine the debtor’s assets which are available for
his/her/its creditors. Basically, this task is performed in accordance with the gen-
eral principles of property law and contract law which are applicable to solvent par-
ties—as a general rule, insolvency law respects pre-insolvency entitlements, unless
it is otherwise provided. This implies that insolvency assets can be considered as
consisting of all the assets belonging to a debtor at the time the insolvency proceed-
ings are opened. Moreover, in this respect national insolvency laws tend to employ
wide-mesh criteria aiming at the inclusion in the insolvency assets of both tangibles
and intangibles, claims and other interests belonging to the debtor.4
The application of this rule implies that the insolvency assets will include also
tokens which, before the opening of insolvency proceedings, were owned by the
debtor. These items will be included in the insolvency assets as intangibles, since
they consist of a digital code, with no physical dimension, which encrypts every
detail of the underlying financial operation, including powers, rights and obligations

3
  Gullifer (2010), pp 1-32.
4
  This paper aims at demonstrating that blockchain-based platforms may clash with the basic principles
of insolvency law. This explains why, intentionally, this paper refers neither to a specific jurisdiction nor
to a specific type of insolvency proceedings. As regards the principle that insolvency law should respect
pre-insolvency entitlements, unless it is otherwise provided, see: for the common law system, Goode
(2011), para. 6–01—this book refers to UK corporate insolvency law; for the Germanic legal system,
Bork (2017), paras. 227–230—this book refers to German insolvency law; and for the Roman legal sys-
tem, Pérochon (2014), paras. 1458–1459—this book refers to French insolvency law.

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R. Mangano

belonging or owed to their owner. However, if the insolvency assets include tokens,
the nature of these items affects the delineation of insolvency assets, both positively
and negatively.
The nature of these items affects the delineation of insolvency assets positively:
first, because blockchain-based transactions are usually performed instantly—this
implies that there will be no time gap between the date when the contract is con-
cluded and the date when the contract is able to produce its effects on third parties,
including the platform that issued the tokens in question; secondly and especially,
because every transaction is recorded in a distributed ledger ensuring the integrity
of the encrypted data and the certainty of the date of purchase. The fact that these
operations are performed through a ledger ensuring the certainty of the date makes
it easy to apply the principle of priority-in-time in order to solve potential conflicts
arising between the insolvency practitioner, as the debtor’s representative, and other
entities claiming a legal position which conflicts with that of the debtor. Here, the
reference is both to entities claiming that their entitlement prevails over that of the
seller, and to entities claiming that they had purchased the same security from the
same seller before the debtor purchased it. In both cases, it does not matter whether
these entities claim to be the full owners of the securities or only to have a security
right in rem encumbering them.
The nature of these items affects the delineation of insolvency assets negatively:
first, because the debtor who owns these items exercises his/her/its rights through a
digital key, which is secret; secondly, because the debtor might have underwritten
or bought those items by employing a pseudonym, i.e. a username which can differ
from his/her/its real name and which cannot be easily traced back to it. Both issues
are very serious. In fact, if the debtor has decided not to make the tokens available
for his/her/its creditors, the debtor will probably keep them hidden, and the insol-
vency practitioner will not even be aware that the insolvency assets include those
items. But what if the debtor is non-cooperative and the insolvency practitioner gets
to know that the debtor owns those tokens? Will the insolvency practitioner be able
to answer the question of ‘How those tokens can be made available for the debtor’s
creditors’?5
The question is difficult to answer, because the fact that these securities only
exist as a digital code put out from a computer network seems to have disrupted the
traditional ‘who-owns-what’ pattern of property law, which is at the very basis of
insolvency law. The first source of concerns regards the ‘what’ part of the pattern.
For example, in this respect a Japanese scholar maintains that in Japan, as well as
in most jurisdictions, the concept of property is statutorily restricted to tangibles
and that, for this reason, the concept could not be accommodated to blockchain

5
 Theoretically, another scenario might be possible where the debtor was cooperative and willing to
make the securities purchased through a blockchain-based platform available for his/her/its creditors.
Here, if the debtor has been totally divested of his/her/its assets, he might communicate to the insolvency
practitioner his/her/its secret key in order to allow him to sell the securities and distribute the proceeds
of the sale to pay his/her/its creditors; if the debtor remains in possession of the insolvency assets, he
himself, she herself or its directors might use the secret code to perform the same operations. But, it goes
without saying that a similar scenario is very unrealistic.

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securities, since these are intangibles. Moreover, the same author states that, even
though in those jurisdictions where the concept of property is statutorily extended
to intangibles, the accommodation of that enlarged concept of property to bloch-
chain securities could prove problematic since those jurisdictions do not establish
how and under what conditions a new intangible might be considered as an object
of ownership.6 Actually, the above-mentioned author did not deal expressly with
the issue under investigation. However, if one accepts his thesis, according to which
jurisdictions would follow a putative principle of numerus clausus of those items
which might be objects of ownership, one has to admit that in the case under inves-
tigation the insolvency practitioner could not include in the insolvency assets the
debtor’s blockchain securities because this operation would be legally impossible
and, therefore, that he would be legally unable to make those securities available for
the debtor’s creditors. However, this position seems to be too rigid: first, because
authors generally tend to deny the existence of a principle of numerus clausus of the
objects of ownership7; secondly, because property law has demonstrated that it is
able to accommodate to new objects regardless of whether they have or do not have
a physical dimension, on the one condition that these objects are specifically deter-
mined in an environment where they are scarce or rival8—this condition is certainly
met by blockchain securities.
The second source of concerns regards the ‘who-owns’ part of the pattern, i.e.
the relation between the entity who owns the blockchain securities and these securi-
ties themselves. This is because one could object that anyone who owns blockchain
securities has no relation, either physical or non-physical, with these securities,
which—it was said—only exist as a digital code put out from a computer network.
However, this objection does not appear decisive either, at least from a theoretical
point of view. For instance, the writers of the ‘MultiChain White Paper’ state that
the ‘who-owns’ part of the proprietary pattern could be easily accommodated to the
new setting by considering as the owner the entity having the key that protects those
securities9—this entity alone has control over those securities that the key protects
since this key allows him, and no one else, both to enjoy, administer and sell those
securities, and to prevent other people from doing the same.
As already said, this proposal is attractive from a theoretical point of view, since
it conceptually accommodates the ownership relation to the new setting by means of
an easy operation of re-characterization of the relation between the entity who owns

6
  Takahashi (2017), p 15.
7
  Van Erp (2017).
8
  For example, consider the accommodation of property law to airport take-off and landing slots—these
objects have no physical dimension, but they are specifically determined in an environment where they
are scarce or rival. Actually, property law has demonstrated that it is able to accommodate also to those
intangibles which are determined in an environment where they are neither scarce nor in competition—
even though this accommodation is producing some crucial changes to the traditional contents of the
right. These changes have been brilliantly highlighted by Perzanowski and Schultz (2016). This is the
case of intellectual property in a digital environment, which is outside the scope of this paper.
9
 Available at https​://www.multi​chain​.com/downl​oad/Multi​Chain​-White​-Paper​.pdf, p 5. This ‘White
Paper’ describes a project which is sponsored online.

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the blockchain securities and these securities themselves—interestingly the Digest

of legal opinions enacted by the Emperor Justinian I in the sixth century AD con-
templates many examples of these forms of conceptual manipulation by means of
which, for example, a transfer of items stored in premises (traditio mercium) was
re-characterized as a transfer of the keys allowing the purchaser to have access to
those premises (traditio clavium).10 However, from a practical point of view, it is
doubtful that this strategy could really allow the insolvency practitioner to include
the debtor’s blockchain securities in the debtor’s assets and to make them available
for the debtor’s creditors. This is because this ‘key’ does not consist in a mere PIN
(Personal Identification Number) similar to that which is used to withdraw money
from a cash machine (ATM), but it is usually an item of software allowing the entity
that purchased the blockchain securities to generate a random code giving access to
the platform.11
This implies that, if the debtor owns blockchain securities, the insolvency practi-
tioner intending to include this portfolio in the insolvency assets to make it available
for the debtor’s creditors needs to engage in an additional activity which could be
performed either by the debtor himself, or by those who administer the platform.
However, while at the beginning of this analysis the former possibility was ruled
out when it was assumed that the debtor would be unwilling to cooperate with the
insolvency practitioner, the latter seems to be much more improbable in the present-
day environment where platforms have neither a duty of, nor incentives for, coop-
eration with the insolvency practitioner who has been appointed to the insolvency
proceedings.

3 How Can Post‑Commencement Enforcement Rules Be Enforced?

Usually, the opening of insolvency proceedings divests the debtor of his/her/its

assets—these will be administered by the insolvency practitioner appointed. How-
ever, if the debtor nevertheless transfers an asset, most jurisdictions make this trans-
action void or ineffective with regard to his/her/its creditors by operation of law.
This implies that the insolvency practitioner will be entitled to require the transferee
to return that asset, or its value, to the insolvency assets.12
Theoretically, these rules should also apply to cases in which the debtor has
transferred assets via blockchain. Again, here the insolvency practitioner might not
be aware of these transactions. However, if he is aware of them, he will certainly
encounter some difficulty in enforcing post-commencement avoidance rules: first,
because blockchain transactions are technically irreversible; secondly, because the
transferee might have purchased the items by using a pseudonym. The first issue
requires an additional explanation. The technology which is behind Bitcoin and the

10
  Digest (Digesta seu Pandectae), 41.1.9.6.
11
  Takahashi (2017), p 16. As regards the fact that the ‘key’ very often consists in an activity which
could even involve many bodies, see Fairfield (2014), pp 62 et seq.
12
  Goode (2011), para. 13–127; Bork (2017), paras. 129–130; Pérochon (2014), paras. 1153–1155.

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most popular blockchain platforms ensures the integrity of data and immunity from
the double-spending risk (i.e., from the risk that the same person may transfer the
same item twice) by using an algorithm which makes each transaction unique and
irreversible—the transferor himself will not be able to change or remove a trans-
action.13 This implies that, if the debtor has transferred assets via blockchain, the
insolvency practitioner will not be able to recover the transferred items in kind.
Concerning most items, this inconvenience proves to be not particularly serious,
because the insolvency practitioner could apply the same rule which is applicable
when the transferred items have perished or are no longer present in the transferee’s
assets. This means that he can only claim against the transferee for a restoration in
money. However, sometimes a restoration in money could be unsatisfactory. This
happens especially if a transaction concerns tokens. Like a house or a car, these
items have a specific value, but, like traditional securities, these confer a bundle of
rights including the right to vote and the right to be paid pro quota profits. Moreo-
ver, like traditional securities, tokens may appreciate in value. Consider the follow-
ing example. After the opening of the insolvency proceedings against a debtor A,
the same debtor A transfers to entity B a token issued by platform C. This trans-
fer certainly meets the prerequisites laid down by the post-commencement avoid-
ance rules, and it is void or ineffective with regard to the debtor’s creditors, with the
result that the insolvency practitioner will claim from B a restoration in money com-
pensating for the value of that token at the time when A transferred it to B. However,
while this remedy restores the integrity of the insolvency assets at the time of the
transfer, it does not allow the insolvency practitioner to exercise both the participa-
tory rights of the transferred security or to be paid pro quota profits—these rights
will still be exercised by the transferee B. Moreover, since the transferred token still
exists and may appreciate in value, any appreciation of this token will be beneficial
to the transferee B rather than to the insolvency practitioner and, therefore, to the
debtor’s creditors.
The situation might prove to be even worse. This certainly happens if the trans-
feree has purchased those items by employing a pseudonym which cannot be easily
traced back to his/her/its true name. If this is the case, the insolvency practitioner
will not even be able to claim a restoration in money.

4 How Can Fraudulent Transaction Avoidance Rules Be Enforced?

Almost all jurisdictions lay down a set of rules aiming at reversing the effects of
transactions that a debtor has performed within a specific time before the opening
of insolvency proceedings, if these payments and transactions result in a diminution
in the debtor’s assets. Certainly, this regulation varies from jurisdiction to jurisdic-
tion. Nevertheless, almost all jurisdictions lay down that, if the legal requirements

13
  Peters and Panayi (2015), p 28.

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R. Mangano

are met, the relevant transactions are void or ineffective with regard to the debtor’s
creditors.14
As a general rule, these prescriptions are applicable also to transactions per-
formed via blockchain. However, this does not rule out the possibility that the insol-
vency practitioner intending to apply these rules to blockchain transactions may
encounter the same difficulties that were dealt with in the previous section. In par-
ticular, here the insolvency practitioner will encounter some difficulties in enforc-
ing the fraudulent transaction avoidance rules because blockchain transactions are
technically irreversible. Certainly, also in this case, the insolvency practitioner could
manage the problem by claiming from the transferee a compensation in money that
would restore the economic integrity of the insolvency assets at the time of the
transfer. Nevertheless, again in this case, the aforementioned caveats apply. Further,
the insolvency practitioner might be unaware of the real identity of the transferee
because he/she or it may have purchased the token by using a pseudonym.
In all probability, scholars dealing with the application of insolvency law to debt-
ors who have transferred securities through a blockchain-based platform before
the opening of insolvency proceedings might tend to undervalue, or even deny, the
existence of this problem. They might object that, if a debtor has transferred securi-
ties through intermediaries, the insolvency practitioner will not be able to challenge
those transactions either—this time, because of a specific choice of policy which
expressly refers to intermediated securities.15 However, the fact that insolvency
practitioners are already accustomed to the idea that they cannot reverse the debtor’s
transactions concerning intermediated securities can only impair the perception of
the problem psychologically. In this respect one may remark: first, that—as a gen-
eral rule—fraudulent transaction avoidance prescriptions are applicable to every
fraudulent transaction that occurred before the opening of the insolvency proceed-
ings and, therefore, also to those transactions that were performed via blockchain;
secondly, that those prescriptions laying down this immunity contain an exception
to the general rule which is grounded on the fact that transactions concerning tra-
ditional securities are performed through intermediaries that mediate an immense
number of transactions performed by an immense number of debtors. To give an
absurd example: if insolvency practitioners were able to challenge these transac-
tions, there would be a high degree of probability that the same intermediary would
be a target for an immense number of actions, and that this situation might produce
not only his/her/its failure but also the failure of the entire system, since interme-
diaries are financially interdependent on each other. However, this immunity is not
applicable to transactions performed via blockchain, even by analogy, because these
transactions are performed without the intervention of any intermediary. Therefore,

14
  Goode (2011), para. 13–136; Bork (2017), paras. 244–245; Pérochon (2014), paras. 1460–1462.
15
  For instance, at European level see: both Art. 7 of Directive 98/26/EC of the European Parliament
and of the Council of 19 May 1998 on settlement finality in payment and securities settlement systems
[1998] OJ L166/45, and Art. 8 of Directive 2002/47/EC of the European Parliament and of the Council
of 6 June 2002 on financial collateral arrangements [2002] OJ L168/43. These directives are available at:
http://eur-lex.europ​a.eu/legal​-conte​nt/EN/TXT/HTML/?uri=CELEX​:31998​L0026​&from=EN and http://
eur-lex.europ​a.eu/legal​-conte​nt/EN/TXT/HTML/?uri=CELEX​:32002​L0047​&from=en, respectively.

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fraudulent transaction avoidance rules are also applicable to transactions involving

tokens which were performed before the opening of the insolvency proceedings, and
the insolvency practitioners might encounter the aforementioned problems.

5 New Setting, New Regulatory Dilemmas: The So‑Called Principle

of Technology Neutrality and Its Proper Sphere

The analysis carried out has demonstrated that insolvency laws are not yet ready to
manage the insolvency of an entity that has purchased blockchain securities; that
blockchain platforms could allow insolvent debtors to fraudulently evade their credi-
tors; and, consequently, there is an urge to solve this problem. However, it is highly
debatable how this task can be managed.
The first problem consists in the fact that, as regards IT, most scholars and prac-
titioners are regulation-adverse. In particular, those who are unwilling to regulate
blockchain support their position on the grounds of the so-called principle of ‘tech-
nology neutrality’—this claims that no particular technology should be required or
assumed both in order to prevent regulation from hindering the development of a
superior technology, and in order to prevent regulation from becoming rapidly obso-
lete.16 This claim is popular. For example, among the scholars who have dealt with
non-blockchain based IT, there is a worldwide consensus that regulators have to pre-
vent them from evaluating technology and making rules that address the following
questions: Is this technology good? Is this technology bad? Is this technology better
than that technology? If this concept is applied to the blockchain environment, this
would imply that a regulator ought to refrain from authorizing a specific platform, or
banning a specific platform or from considering a specific platform better or worse
than another one merely on the grounds that these platforms adopt blockchain tech-
nology or does not adopt it.
Moreover, within the same circle, there is a wide consensus that the principle
of ‘technology neutrality’ also affects the ‘mechanics’ of law, i.e. that level of law
which distributes among individuals rights, duties and other subjective positions
steering behaviour. If this concept is applied to the blockchain environment, this
would imply that a regulator ought to refrain from introducing prescriptions seek-
ing to answer the following questions: How can the insolvency practitioner deline-
ate the debtor’s blockchain portfolio? How can the insolvency practitioner enforce
post-commencement avoidance rules concerning blockchain securities? How can
the insolvency practitioner enforce fraudulent transaction avoidance rules concern-
ing blockchain securities? To sum up, the acceptance of the above-described posi-
tion would imply that a regulator ought to refrain either from introducing a new con-
cept of property which would be suitable for the management of the insolvency of

16
 As regards the so-called principle of technology neutrality, see Reed (2007a), pp 1 et seq.; Reed
(2007b), pp 1 et seq.; and again Reed (2010), pp 1 et seq. As regards the origin of the so-called principle
of technology neutrality, see again Reed (2007b), fn. 8.

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debtors with a blockchain portfolio, or from regulating the insolvency of debtors

with a blockchain portfolio.
However, the principle of technology neutrality does not seem to be set in stone.
First, because it is debatable whether the so-called principle of technology neutrality
is really a principle of law rather than a rule of thumb or even a mere aspiration of
a legal system that should be balanced with other aspirations which appear equally
valuable.17 Secondly, because even those who declare that they believe in the claim
for technology neutrality more or less explicitly maintain that this claim could be
laid ‘ceteris paribus’, i.e. in a context where the other values of the system are
equally protected (e.g., in the context of e-commerce), and vice versa that this claim
would be defeasible where there is a risk that some other values of the system could
be jeopardised. For example, this is the position held by the UK Financial Conduct
Authority (FCA). In a recent Discussion Paper, on the one hand, the FCA declared
‘[w]e generally take a “technology neutral” approach to regulating financial services
and are interested in considering whether there is anything distinctive about Distrib-
uted ledger technology (DLT) which would require us to take a different approach’18
and on the other hand, it stated ‘DLT’s potential, combined with processing speed
(the likes of which has not yet been seen), might suggest that aspects of existing
rules may need to be reviewed in the light of this new technological context’.19
These observations further explain why other writers are more prone to regulate
blockchain technology. For example, while the Japanese author who was quoted
above had suggested that a law-maker should introduce a new concept of property
which would fit into the blockchain setting20, the authors of a recent paper main-
tain—even though with a slight hint of provocation—that those who employ block-
chain algorithms cannot claim to govern them entirely and, therefore, that a wise
regulator should consider whether blockchain algorithms should have a legal per-
sonality.21 However, neither position is persuasive in its content since neither has
demonstrated what the real point is, why one should deviate from the principle of
technology neutrality and, especially, how those regulatory interventions that they
have put forward could solve the problems that blockchain is giving rise to.

17
  Certainly, we are aware that the concept of ‘principle’ is one of the most highly controversial concepts
in jurisprudence—to have just one sample of this diversity in positions, see: Alexy (1986), pp 71 et seq.;
Dworkin (1977), pp 23–39; and MacCormick (1978), pp 152–156. However, here the point is not to open
a theoretical debate on the ontology of the claim for technology neutrality, but—and more concretely—to
ascertain how general this claim is and whether this claim should necessarily prevail over other claims.
18
  FCA (2017a), para. 1.4.
19
  FCA (2017a), para. 1.17.
20
  Takahashi (2017), especially from p 14.
21
  Barnett et al. (2017).

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Blockchain Securities, Insolvency Law and the Sandbox Approach 725

6 What Is the Real Point? Blockchain Is Creating a Divide

between the World Where Securities Are Issued, Offered and Sold
and the World Where Law Is Enforceable; Implications for Making
an Appropriate Choice of Policy

Traditionally, IT is just a medium sharing information which makes it easier for peo-
ple to do what they could equally do without IT intervention. For example, this hap-
pens when people pay for a service through a digital platform such as PayPal; this
happens when people buy a book through an e-commerce platform, such as Ama-
zon. In both cases, they do what they could equally well do by paying in cash or
by credit card, or by buying the same book in a traditional bookshop. Something
similar happens in the field of company law when people purchase shares which
were issued in an uncertificated form, i.e. without the issuance of a paper certificate
evidencing the name of the shareholder—very often, this form is compulsory for
shares which are listed on a stock exchange. If this is the case, the person who has
purchased an uncertificated share through a digital paperless process must request
that company to have his or her name entered in the shareholder register in order to
be recognized by that company as its shareholder. Moreover, in some jurisdictions,
such as in the UK, if this person wants to have a paper certificate, physically evi-
dencing his or her status as a shareholder, he or she may still apply to the company
in order to obtain it.22
Nevertheless, for a long time now scholars have noted that IT tends to impact on
the real world in a different way. For example, in 1964 Marshall McLuhan wrote that
‘the medium is the message’,23 in the sense that IT could impact on the real world
regardless of the contents of the message, while in 1999 Lawrence Lessig more inci-
sively wrote that people who use IT can create a ‘space’ which is only regulated by
a code and which is conventionally called ‘cyberspace’. With a slightly prophetic
hint, Lessig additionally wrote that ‘[c]yberspace would be a society of a very differ-
ent sort. There would be definition and direction, but built from the bottom-up. The
society of this space would be a fully self-ordering entity, cleansed from governors
and free from political hacks’.24 He concluded that in cyberspace ‘[p]roblems can be
programmed or “coded” into the story, and they can be “coded” away’,25 and, all in
all, that in cyberspace ‘code is law’.

22
  As regards the UK, see reg. 32 of ‘The Uncertificated Securities Regulations 2001’ (SI 2001/3755).
This instrument is available at: http://www.legis​latio​n.gov.uk/uksi/2001/3755/conte​nts/made.
23
  McLuhan (1964), where the first chapter is titled ‘The Medium is the Message’—here the author put
forward the thesis that the media, not the content that they carry, should be the focus of study. In 1967,
together with the graphic designer Quentin Fiore, McLuhan further developed this concept in a book
which was titled ‘The Medium is the Massage: An Inventory of Effects’. Of course, the fact that in the
second book the authors used the expression ‘massage’, rather than ‘message’, stimulated a vivid debate
which, however, is outside the scope of this paper.
24
  Lessig (2006), p 3. The passage which is quoted in brackets already existed in the first edition of Les-
sig’s book (Lessig 1999b). Here, the author had already put forward his main idea that computer codes
regulate human behavior in much the same way that law does.
25
  Lessig (2006), p 15. This passage too already existed in the 1999 edition.

123
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R. Mangano

Both McLuhan and Lessig have expressed a concept which is important for
the theme under investigation—both authors highlighted the fact that IT tends
to create a divide between the virtual world and the real world. However, at
the time when these scholars wrote their pieces of research blockchain did not
exist and those observations could appear to be the prophetic statements of
two visionaries rather than a description of something objective which really
was happening. This explains why in the book quoted above Lessig wrote ‘[o]f
course, no sharp line divides cyberspace from the Internet. […] Those who see
the Internet simply as a kind of Yellow-Pages-on steroids won’t recognize what
citizens of cyberspace speak of.’ However, this situation changed in 2008, when
blockchain technology was introduced—the introduction of blockchain made
the divide between the virtual world and the real world sharper and more clear-
cut. This is because blockchain has introduced a system for the transmission of
data which is not vested in any single member of the transmission, but which
is encoded in every step of the process of transmission and which ensures the
absolute integrity of the transmitted data. Here, each code encrypting a security
is a world in itself or, to use an expression of Lessig’s book, each ‘code is law’,
in the sense that each code encrypting a security detaches a ‘space’ within the
entire cyberspace and this ‘item’ exists and is fully recognized at large with-
out the intervention of human behaviour and, consequently, without the need for
law.
This feature of blockchain technology explains why blockchain platforms can
issue securities which exist as digital codes only and why people can purchase or
trade them without the intervention of any intermediaries ensuring the integrity
of the transferred data. But this feature also explains why an insolvency practi-
tioner cannot enforce a digital portfolio held by a non-digital debtor, whether
individual and corporate—there is a divide between the world where securities
are issued, offered and sold and the world where law is enforceable. And this
feature also explains why a regulator cannot easily manage the problems under
investigation by means of the traditional regulatory toolbox—here, the prime
problem of a regulator is not ‘to observe’ or ‘not to observe’ the so-called prin-
ciple of technology neutrality, but to find an apt point of attack.

123
Blockchain Securities, Insolvency Law and the Sandbox Approach 727

7 The Position of the UK Financial Conduct Authority (FCA)

and the Establishment of a Regulatory Sandbox: The Declared
Goals of this Strategy

The UK Financial Conduct Authority (FCA) appears to have grasped the essence of
the problem since it is considering blockchain securities from a perspective of prob-
lem solving rather than from the usual one of commanding and controlling.26 For
example, in a recent Discussion Paper the FCA states:
[h]istorically, the FCA’s philosophy has been one of ‘technology neutrality’
i.e. not to regulate specific technology types, only the activities they facili-
tate and the firms carrying out these activities. This approach is designed to
accommodate innovation but avoid arbitrage and unfair competition. However,
there may be specific areas where DLT [distributed ledger technology, i.e.
blockchain] does not fit with our requirements but still achieves our desired
outcomes. We may, therefore, need to consider whether our rules prevent or
restrict sensible development that would benefit consumers and hence whether
changes may be needed.27
In the same document, the FCA further writes:
[a]t this stage we do not see a clear need to consider changes to our regulatory
framework for DLT solutions to be implemented. Instead we want to explore
emerging business models, and how their potential risks and opportunities
operate in the context of our regulatory framework. In particular, we invite dis-
cussion on two sets of issues: What new risks and opportunities does DLT pre-
sent to our statutory objectives of market integrity, consumer protection and
competition? Can DLT support more effective competition, financial system
integrity and deliver better consumer outcomes? How can regulated firms mit-
igate any risks?28
For such a purpose, the FCA launched the project ‘Innovate’. This aims at sup-
porting greater competition and innovation in financial services by removing ‘bar-
riers to entry where desirable and possible through clarifying regulatory expecta-
tions, examining our own rules and processes and providing a test environment for
the most innovative ideas’.29 This project is particularly ambitious since it embraces

26
  In this respect, the FCA is behaving in a manner different from that adopted by the SEC. In fact, the
SEC, after having issued the so-called ‘DAO Report’ (see SEC (2017)), has started to adopt a series of
initiatives of enforcement against ICOs. The full list of these actions is available at: https​://secse​arch.
sec.gov/searc​h?utf8=%3F&affil​iate=secse​arch&query​=ico. This difference in approach between the SEC
and the FCA is not accidental, and it appears to correspond to a more general difference in regulatory
culture between the USA and the UK. As regards this, see Vogel (1986), who maintains throughout the
book the idea that the US approach is more deterrence oriented, while the UK approach is more compli-
ance oriented.
27
  FCA (2017a), para. 1.18.
28
  FCA (2017a), para. 1.19.
29
  FCA (2017a), para. 1.7.

123
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R. Mangano

various initiatives which, in turn, aim at offering direct support to businesses that
are looking to introduce innovative products or services to the market; exploring
how regulatory requirements and technology can align through regulatory technol-
ogy; providing regulatory feedback to firms developing automated models to deliver
lower-cost advice to consumers; and establishing a regulatory sandbox.30
Certainly, the establishment of a regulatory sandbox is the most advanced part
of the project. This initiative is declared to consist in the setting up of a highly-con-
trolled and transparent environment where blockchain securities can be issued and
experimented in order to allow the FCA and the firms participating in the project
mutual learning about the impact of current regulation on new financial products
and, more generally, in order to reduce the phase of ‘time to market’ in financial
innovation.31 In this respect, the FCA officially pinpoints that the regulatory sand-
box is
a rich source of case studies to inform our understanding of this technology.
Firms have found the Regulatory Sandbox to be a useful mechanism to explore
areas where our requirements do not anticipate their type of solution. We have
found some areas of regulatory uncertainty in how our custody and payments
rules apply to DLT and these case studies form a key part of the regulatory
analysis which we have performed to date. These tests are still ongoing and as
a result we have not yet drawn any firm conclusions. Even so, the work done
so far has raised various questions which we would like to explore further.32

8 Further Reflexions on the FCA Regulatory Sandbox

The idea of setting up a regulatory sandbox is really ground-breaking, and for this
reason it is capturing the attention of both overseas regulators and scholars.33 This
experiment is innovative in many respects, which could be summarized as follows.
First, the idea of setting up a regulatory sandbox is innovative because the FCA
has replaced the more traditional ‘commanding and controlling’ approach with
a form of problem-solving behaviour which aims at exploring the new setting and
investigating the essential nature of the challenge that the new setting is posing for

30
  FCA (2017a), para. 1.78.
31
  Available at https​://www.fca.org.uk/firms​/regul​atory​-sandb​ox.
32
  FCA (2017a), para. 2.5.
33
  For example, the regulatory sandbox is capturing the attention of the ‘Innovation Hub’ of the Aus-
tralian Securities & Investments Commission (ASIC) (http://asic.gov.au/for-busin​ess/your-busin​ess/innov​
ation​-hub/regul​atory​-sandb​ox/) and, more recently, of the European Commission (COM (2018) 109/2,
Communication from the Commission to the European Parliament, the Council, the European Central
Bank, the European Economic and Social Committee and the Committee of the Regions—FinTech
Action Plan: For a More Competitive and Innovative European Financial Sector. This is available at:
https​://ec.europ​a.eu/info/sites​/info/files​/18030​8-actio​n-plan-finte​ch_en.pdf). This resource was retrieved
on 29 March 2018. By contrast, some scholars are suggesting the idea that regulators should set up a
regulatory sandbox for ‘Robo Advice’. As regards this, see Ringe-Ruof, ‘A Regulatory Sandbox for Robo
Advice’, paper presented at the University of Oxford on 29 November 2017. By express choice of the
authors, this paper is not available.

123
Blockchain Securities, Insolvency Law and the Sandbox Approach 729

regulators. This explains why, unlike the United States Securities and Exchange
Commission (SEC), the FCA is avoiding the enforcement of the current financial
regulation against ICOs. Further, this approach explains why the FCA is investigat-
ing whether the pursuit of its remit, i.e. the protection of both consumers and finan-
cial markets and the promotion of innovation and competition, should be balanced
with other needs which could be equally crucial for the UK market. Here, significant
reference is made to the need to avoid international arbitrage—if the FCA prohibits
an ICO, this action does not rule out the possibility that the same operation will
be equally performed in another jurisdiction which is laxer and that this ICO will
equally attract UK investors, since cyberspace has no boundaries.34
Secondly, the idea of setting up a regulatory sandbox is innovative because it is
laying the basis for a form of cooperation between the FCA and the stakeholders
of the blockchain financial industry which is proving to be beneficial for both the
parties. This point is very clearly highlighted in the ‘Regulatory sandbox lessons
learned report’, where the FCA draws up a bottom line of the first year of the sand-
box experiment.35 Here, the FCA states, on the one hand, that ‘[t]he sandbox has
allowed us to work with innovators to build appropriate consumer protection safe-
guards into new products and services’36 and, on the other hand, that the sandbox
is ‘[e]nabling products to be tested and introduced to the market’37; that the experi-
ment ‘has reduced the time and cost of getting innovative ideas to market’38 and,
finally, that this device ‘has helped [firms] to facilitate access to finance’—’[a]t least
40% of firms which completed testing in the first cohort received investment during
or following their sandbox tests.’39 As a result, so the report states, even firms which
are based outside of the UK in countries including Canada, Singapore and the US
have applied for participation in the experiment.40
Thirdly, the idea of setting up a regulatory sandbox is innovative because this
experiment is open and transparent. This experiment is open to both authorised
firms, and unauthorised firms that require authorisation. This experiment is transpar-
ent because the FCA makes public the requirements requested for application, what
firms have applied, for what type of business they have applied, which applications
have been rejected and why, and what feedbacks the experiment has produced.

34
  Lessig (2006), p 10. As regards the idea that sometimes strict enforcement could be counterproduc-
tive, see Deakin (2015), p 27.
35
  FCA (2017b).
36
  FCA (2017b), paras. 2.17–2.18.
37
  FCA (2017b), paras. 2.13–2.16.
38
  FCA (2017b), paras. 2.8–2.9.
39
  FCA (2017b), paras. 2.10–2.12.
40
  FCA (2017b), para. 3.4.

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R. Mangano

9 The FCA Regulatory Sandbox 1 Year After: The Creeping Rise

of a Framework for Regulatory Design

As already said, in October 2017, the FCA issued a report titled ‘Regulatory sand-
box lessons learned report’. This document is particularly interesting. First, it draws
a bottom line of one year of activity of the sandbox; secondly, it shows that the sand-
box is proving to be not just a temporary experiment for mutual learning; thirdly
and most importantly, it is paving the way for the development of a stable frame-
work for regulatory design where the FCA directly shapes both technology and busi-
ness models in a way which is compliant with the FCA regulatory goals. This point
is inter alia highlighted in a passage of the aforementioned report, where the FCA
states:
[w]orking closely with the FCA has given firms the opportunity to develop
their business models with consumers in mind and mitigate risks by imple-
menting appropriate safeguards to prevent harm occurring. We put in place
a set of standard safeguards for all sandbox tests, and develop bespoke addi-
tional safeguards where these are relevant. For example, we require all firms
in the sandbox to develop an exit plan to ensure the test can be closed down at
any point whilst minimising the potential detriment to participating consum-
ers. We discuss examples of bespoke safeguards in the ‘Impact on the market’
section later in this report.41
Technically, this idea appears to combine some elements of cooperative regu-
lation with some elements of regulatory design in order to create an environment
where the FCA swaps with the sandbox firms influence in shaping the algorithms
in a way which is more investor-friendly for the authorization or accreditation of
digital products in the UK financial market. This idea appears to implement some
elements of cooperative regulation because, here, the FCA deals with the firms that
have applied for the sandbox in order to cooperate with them in regulating.42 This
idea appears also to implement some elements of regulatory design because, here,
the FCA avoids commanding and enforcing a specific rule, even though together
with the cooperation of the regulatees; rather it aims at suggesting that the sandbox

41
  FCA (2017b), para. 2.17.
42
 Here, the term ‘cooperative regulation’ is employed in a very broad sense, since it refers to both
‘cooperative regulation in commanding’ and ‘cooperative regulation in enforcing’. In particular, ‘coop-
erative regulation in commanding’ refers to a group of strategies where a regulator shares with its regu-
latees some regulatory functions by the combination of commanding regulation with self-regulation. For
example, at European level something similar happens in the arrangement which was introduced by Art.
46a of Directive 2006/46/EC [2006] OJ L224/1 as regards the adoption of codes of corporate govern-
ance. By contrast, ‘cooperative regulation in enforcing’ refers to a group of strategies where a regulator
shares with its regulatees some regulatory functions in law enforcement, such as the collecting of infor-
mation about non-compliant behaviours and the application of sanctions. This strategy is very popular
in taxation law where regulators incentivize citizens to voluntarily declare their evasion by promising
waiving and/or rescheduling as regards those claims that citizens have failed to pay. For both groups of
strategies, see Ayres and Braithwaite (1992), pp 101 et seq.

123
 Table 1  The sandbox as a framework for regulatory design
Stakeholders Goals Incentives Structure and process

FCA Both to protect the financial market and consumers, and to Avoiding international arbitrage Making visible both the prerequisites for applica-
promote innovation and competition and attracting foreign ventures tion, and the identities of the firms that have
to the UK market applied for the sandbox
Making visible the final outcome of the process
FIRMS To be authorized and/or accredited in the UK financial market Increasing investments by offer- Paralleling negotiations
Blockchain Securities, Insolvency Law and the Sandbox Approach

ing products and services that Suggesting adjustments

have been tested by the FCA Suggesting exit plans
Suggesting bespoke safeguards

123
731
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R. Mangano

firms should modify the algorithms of their products and services in pursuit of the
regulatory goals.43
Basically, this activity consists in a form of bargaining arranged between the FCA
and the firms that are admitted to the sandbox. Even though the FCA has not formal-
ized the context for this bargaining, this activity appears to follow an ideal frame-
work where the FCA and the firms admitted to the sandbox pursue their respective
goals under the pressure of their respective incentives. These incentives are: for the
FCA, the concern that the firms offering digital securities might decide to quit the
UK market for a more permissive market; and, for the firms admitted to the sand-
box, their interest in obtaining an authorization in one of the largest financial mar-
kets around the world or, if this authorization is considered as unnecessary for them,
their interest in being formally accredited in the UK financial market. Further, the
FCA has set the rules of the ‘game’, for example by establishing that the sandbox
operates on a cohort basis and that the admitted firms might be requested to adjust
their products; finally, the FCA makes the results of this activity public.
Table 1 tries to reproduce this framework for regulatory design in a more analyti-
cal way.

10 Some Final Observations From the Perspective of Insolvency Law

Issues and How These Issues May Be Resolved

The sandbox experience is modifying the traditional activity of the FCA. For exam-
ple, the FCA had already declared that ‘[w]orking closely with the FCA has given
firms the opportunity to develop their business models with consumers in mind
and mitigate risks by implementing appropriate safeguards to prevent harm occur-
ring. We put in place a set of standard safeguards for all sandbox tests, and develop
bespoke additional safeguards where these are relevant.’44
In itself, this evolution would be nothing out the ordinary since it merely follows
Ehrlich’s statement according to which ‘the centre of gravity of legal development
[…] lies not in legislation, nor in juristic science, nor in judicial decision, but in soci-
ety itself’.45 In this respect, those scholars who have investigated financial regulation
from a historical perspective have demonstrated that on numerous occasions regula-
tors and financial authorities have made considerable changes of strategy in order to
cope with new developments in society and, consequently, with new market failures
and the increasingly higher transaction costs that were produced by these develop-
ments. The various hypotheses on the origin of the recent financial crises and the
consequent regulatory responses put forward by regulators and financial authorities
are cases in point. Here, on the one hand, regulators realized that certain changes

43
  This regulatory strategy includes various models, among which the most popular is that of ‘nudge’. In
this respect, see Thaler and Sunstein (2008). By contrast, for an application of regulatory design to IT,
see Lessig (1999a), pp 501 et seq.; and Murray and Scott (2002), pp 491 et seq.
44
  FCA (2017b), para. 2.17.
45
  Ehrlich (1913), Vorrede (Foreword).

123
Blockchain Securities, Insolvency Law and the Sandbox Approach 733

in society had increased the risks of financial operations, and, on the other hand,
consequently they introduced new measures in order to cope with these new risks—
unfortunately, very often they were too late. Case by case, these measures consisted
in an expansion of the duties of disclosure imposed on the entities issuing financial
products, in the introduction of additional duties of behaviour imposed on financial
intermediaries, and so on.46 However, the evolution that the sandbox approach is
triggering appears to go even beyond the trajectories that have been described until
now in the literature on financial regulation. This is because, it has been said, for the
first time blockchain technology is creating a divide between the world where secu-
rities are issued, offered and sold, and the world where law is enforceable; or, to put
it differently, this is because for the first time blockchain is increasing the transaction
costs of financial operations in a setting that cannot be either understood or ‘cured’
only within the boundaries of traditional financial regulation.
This further development does not imply that the FCA has to change its remit—
this will remain restricted to the protection of both consumers and financial mar-
kets and the promotion of competition47—but this implies that, if it is to stick to its
remit, the FCA must enlarge its perspective with regard to both investigation and
intervention. Again, the FCA appears to have grasped the specificity of the situa-
tion, and this awareness explains why the UK financial authority is now engaged
in non-standard activities that consist in suggesting to firms that they should adopt
bespoke measures, such as the adoption of ‘extra capital requirements’48 or ‘appro-
priate safeguards […] built into innovative products and services during and after
testing’.49 However, this change of approach appears set to go even further, because,
if the FCA intends to protect consumers and markets concerning blockchain securi-
ties, the UK financial authority will have to verify also how and to what extent the
platforms issuing tokens are subject to legal enforcement in civil and commercial
matters, even in the case of insolvency. Consequently, if the outcome of its inves-
tigation proves to be unsatisfactory, the FCA might use the sandbox approach to
require the platform to produce additional safeguards as a condicio sine qua non for
accreditation or authorization in the UK financial market. For example, the FCA
might require firms to implement their software with ‘hard forks’ which, under
certain conditions, split the chain of the blocks into two different paths and allows
transactions to be reversed.50

46
  For a sample of this type of analysis see Deakin (2015), pp 14 et seq. Of course, this statement does
not necessarily imply that every intervention that had been adopted proved to be successful, because
sometimes the opposite was the case. See Ferran et al. (2012).
47
  FCA (2017a), para. 1.6.
48
  FCA (2017b), para. 2.6.
49
  FCA (2017b), para. 2.4.
50
  Technically, a ‘hard fork’ is a strategy which allows a platform to modify the path of the block and,
therefore, to change the program in execution. In this respect, the FCA reports ‘[t]he DAO was a group
of individuals who agreed to interact on the basis of code that was executed on the Ethereum protocol.
The code enabled investors to participate in a self-directed venture capital fund, without the need for an
investment manager. Security flaws in the code enabled a malicious third party to siphon funds from the
DAO, resulting in substantial losses to investors. To resolve the issue, the Ethereum foundation’s core
developers resolved to create a “hard fork”, effectively reversing the transactions to restore investors to
their original position.’ FCA (2017a), para. 4.5.

123
734
R. Mangano

This paper has sought to depict the logic and the future of the sandbox approach.
Undoubtedly, the framework that the FCA has created can make these achievements
legally possible—the FCA ought to swap with firms authorization or accreditation
in the UK market in exchange for cooperation in law enforcement. Undoubtedly, IT
can make this achievement technically possible—platforms ought to build into their
products safeguards that would make it possible to bypass normal execution and
even authentication in the computer system under certain conditions which, in turn,
could be the subject of bargaining. Arguably, this approach will be able to bridge
the divide between cyberspace and the world where law is enforceable, so that it
will be possible to apply to courts in order to successfully enforce the law which is
provided against both the platform and the participants in the platform. This whether
the claimant is: an investor, who has been robbed of his/her money, and is making
a claim for the restitution of the stolen fund; an investor, who has bought a security
in the secondary market without having received the item, and is claiming the secu-
rity; or an insolvency practitioner, appointed to the proceedings opened against a
debtor with a blockchain portfolio, who intends to make that portfolio available for
the debtor’s creditors and who wants to enforce both post-commencement avoidance
rules and fraudulent transaction avoidance rules concerning blockchain transactions.
Of course, the success of this strategy will mainly depend, on the one hand, on
the capacity of the FCA to establish an environment of smooth cooperation with
firms, and, on the other hand, on the willingness of firms to accept the requirements
of the financial authority. Thus, the market will have the final say!.51

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  In fact, this statement does not automatically imply that in the near future the FCA will swap authori-
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