BLOCKCHAIN TECHNOLOGY AND ITS LEGAL IMPLICATIONS FOR FINANCIAL REGULATIONS

Abstract

Blockchain technology, originally developed to support cryptocurrencies like Bitcoin, has rapidly evolved into a foundational tool with transformative potential for global financial systems. Its decentralized, immutable, and transparent ledger presents both opportunities and challenges for financial regulation, compliance, and enforcement. This study examines the legal implications of blockchain adoption, focusing on regulatory frameworks, compliance mechanisms, and risk management practices (1).

The research highlights how blockchain can enhance financial transparency, reduce fraud, and streamline anti-money laundering (AML) and know-your-customer (KYC) procedures (2). Simultaneously, it explores the inherent risks, including pseudonymity, cross-border jurisdictional ambiguities, and vulnerabilities to illicit financial activities (3). Regulatory responses vary widely across jurisdictions, with some countries adopting permissive approaches to innovation, while others impose stringent restrictions to mitigate systemic and reputational risks (4).

Furthermore, the study evaluates the interplay between domestic laws and international standards, emphasizing the need for harmonized approaches to address transnational financial crimes and maintain market integrity (5). By analyzing emerging case law, policy guidelines, and industry practices, this paper provides insights into effective legal frameworks for blockchain integration in the financial sector, balancing innovation with regulatory oversight and legal accountability (6).