Protection of Portfolios and Financial Consumers from Cryptoasset Frauds

The Emerald Handbook of Crypoassets: Investment Opportunities and Challenges / H. Kent Baker, Ehsan Nikbakht, Sean Stein Smith, and Hugo Benedetti, Editors / Book Chapter (Forthcoming: 2022)

10 Pages Posted: 18 Nov 2021 Last revised: 1 Dec 2021

See all articles by Ibrahim E. Sancak

Ibrahim E. Sancak

ZWIRN-Research Center/Ostfalia University of Applied Sciences

Date Written: October 23, 2021

Abstract

This chapter introduces the fundamentals of portfolio and financial consumer protection from frauds in the cryptoasset space. Cryptoassets pose new risks in two categories to portfolios and financial consumers: idiosyncratic risks stemming from their unique features, and systematic risks arising from the transition from centralized to decentralized finance. Market experience indicates that these risks threaten every portfolio and financial consumer holding cryptoassets. In the consumer protection framework, cryptoasset risks and threats are relatively higher than traditional assets and markets. Since cryptoassets fall outside the regulatory domain in many jurisdictions, their decentralized nature, technological attributes, and the momentum of financial technology cause asymmetric technology, disarming system-based portfolio and consumer protection mechanisms against frauds and abuses. Idiosyncratic and systematic risks of cryptoassets highlight the importance of developing more vigilant self-protection mechanisms to protect against fraud.

Keywords: Asymmetric Technology, Consumer Protection, Cryptoasset, Cryptocurrency, Decentralized Finance, DeFi, FinTech, Fraud, SupTech

JEL Classification: D10, G10, H11, K20, O14, O30

Suggested Citation

Sancak, Ibrahim E., Protection of Portfolios and Financial Consumers from Cryptoasset Frauds (October 23, 2021). The Emerald Handbook of Crypoassets: Investment Opportunities and Challenges / H. Kent Baker, Ehsan Nikbakht, Sean Stein Smith, and Hugo Benedetti, Editors / Book Chapter (Forthcoming: 2022), Available at SSRN: https://ssrn.com/abstract=3948419 or http://dx.doi.org/10.2139/ssrn.3948419

Ibrahim E. Sancak (Contact Author)

ZWIRN-Research Center/Ostfalia University of Applied Sciences ( email )

Germany

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