Preamble

Securitization of Biopharmaceutical Patent Pools Driven by Digital Currency: Institutional Reconstruction from a Law and Economics Perspective

Amid the dual trends of global digital financial legalization and intellectual property capitalization, the financialization of patents in the biopharmaceutical industry has become increasingly prominent. Traditional patent securitization models, constrained by uncertainties in underlying asset valuation, high income volatility, and obstacles to cross-border financing, struggle to effectively meet the financing needs of pharmaceutical innovation. Meanwhile, the rise of stablecoins and the central bank digital currency E-CNY, with their advantages in payment efficiency and traceability, provides new institutional vehicles for patent pool securitization. Anchored in the macro perspective of building a digital financial rule-of-law ecosystem, this paper examines the "patent pool securitization + stablecoin" model through a law and economics lens to explore the interactive mechanisms between IP financialization and digital currency regulation. By comparing institutional models across the United States (functional regulation), the European Union (MiCA unified legislation), Japan (industrial policy-oriented), and Hong Kong (dual-tier regulation), this study constructs a theoretical framework of "Institutionally Embedded Patent Financialization." It argues that a sovereign credit system backed by central bank digital currency, combined with smart contract-based co-governance mechanisms, can achieve legalized and controllable innovation financing.

Building on this analysis, the paper proposes a China-specific institutional pathway: establishing coordinated pilot programs for "digital currency + patent pool securitization" across domestic and offshore jurisdictions, improving patent valuation systems, and constructing a cross-sector functional regulatory framework with sandbox mechanisms to balance monetary sovereignty, market efficiency, and innovation incentives. The findings suggest that China has the potential to develop an institutionally distinctive paradigm in the integration of digital currency and intellectual property, offering a "Chinese approach" to global digital financial governance.

Keywords: Digital currency; Biopharmaceutical patent pool; Securitization; Law and economics; Digital financial rule-of-law ecosystem

Abstract

Against the backdrop of deepening integration between the knowledge economy and digital finance, the financialization of intellectual property has emerged as a critical pathway for promoting interaction between technological innovation and capital markets. In the biopharmaceutical sector, patents serve as core assets—both legal expressions of innovative achievements and important vehicles for capitalized financing. However, due to long R&D cycles, high risks, and enormous capital requirements, small and medium-sized pharmaceutical enterprises universally face financing difficulties. Traditional debt financing and venture capital models cannot meet sustained innovation needs, making the question of how to unlock the "technology-capital-industry" chain through IP financialization tools a shared concern for both academia and practice \cite{liu2022}. In recent years, the combination of patent securitization and patent pool mechanisms has been regarded as an important institutional innovation to resolve innovation financing dilemmas. On one hand, patent pools reduce technology transaction costs and mitigate the "tragedy of the anticommons" caused by "patent thickets" through centralized licensing and unified authorization \cite{heller1998}. On the other hand, patent securitization transforms future patent revenue rights into tradable financial assets through structural design, thereby enhancing the liquidity of intangible assets \cite{nikolic2009}. Nevertheless, this model remains constrained in practice by structural obstacles including uncertainty in post-patent revenue evaluation, insufficient legal stability of underlying assets, and low market acceptance \cite{zhang2018,chen2010,wang2018}. Traditional financial tools and existing IP financialization models struggle to effectively allocate investment risks for such assets, causing significant innovation potential to be stifled during mid-stage R&D phases (the "valley of death") \cite{zakrzewski2012} (see Figure 1 [FIGURE:1]).

Simultaneously, new crypto-financial instruments represented by stablecoins have developed rapidly worldwide. Stablecoins represent an institutional innovation by the market to address value transfer and payment efficiency challenges in the digital economy, essentially creating a new type of traceable digital debt instrument through technological means (blockchain) and legal arrangements (reserves, redemption rights) \cite{li2021,qi2021}. With their characteristics of anchoring asset value, improving payment efficiency, and facilitating cross-border settlement, stablecoins are viewed by some scholars and policymakers as potential financial tools to optimize cash flow structures in IP securitization and alleviate cross-border capital flow obstacles \cite{deng2021}. Recent research indicates that the rise of stablecoins is driving the reconstruction of traditional financial regulatory paradigms, with their functions in currency substitution, capital flows, and payment systems posing challenges to central bank monetary policy \cite{brunnermeier2019}. For instance, the U.S. Stablecoin Transparency Act and the EU's Markets in Crypto-Assets Regulation (MiCA) have respectively constructed differentiated regulatory frameworks—the former focusing on information disclosure and investor protection, while the latter introduces a classification system for "Asset-Referenced Tokens" (ARTs) and "E-Money Tokens" (EMTs) under a unified regulatory system \cite{europeancommission2023,uscongress2022}. Scholars Zetzsche and Buckley note that this "functional regulation" model demonstrates high portability in balancing innovation and financial stability \cite{zetzsche2021}.

China has adopted a prudent regulatory approach in the digital finance domain, imposing strict restrictions on virtual currencies and foreign stablecoins while actively promoting a legal digital currency system centered on the digital yuan (e-CNY). The People's Bank of China's white paper on e-CNY development states that the digital yuan will possess "legal tender status, controllable anonymity, and programmability," positioning it as a public payment infrastructure for the digital economy \cite{pbc2021}. Recent empirical research also demonstrates that e-CNY can enhance monetary policy transmission and cross-border payment efficiency \cite{meng2024}. Against this backdrop, exploring institutional innovation in "patent pool securitization + stablecoin (or e-CNY)" not only helps improve the liquidity and financing accessibility of pharmaceutical patent assets but also promotes the deep integration of China's digital currency system with its IP financial system.

At the theoretical level, existing research predominantly focuses on single domains: legal risks and institutional barriers in patent securitization \cite{chen2010}, legal attributes and risk regulation of stablecoins \cite{arner2020,sheehy2023}, or national legal construction of digital currencies. However, systematic research on the cross-cutting topic of "patent pool securitization + stablecoin" remains a blank area. This issue possesses significant interdisciplinary characteristics (financial law, IP law, monetary law) and practical urgency (coordination between pharmaceutical innovation financing and digital currency regulation), demonstrating substantial research and policy value.

This paper employs law and economics and comparative law methodologies to systematically analyze the feasibility, legal obstacles, and institutional innovation pathways for combining patent securitization with stablecoins, with a focus on comparing regulatory models in the United States, European Union, Japan, and Hong Kong to propose institutional design solutions tailored to China's national conditions. The research aims to address: Under the theoretical framework of law and law and economics, how can this new institutional arrangement correct capital market failures in the biopharmaceutical sector? What lessons can China draw from globally divergent digital asset regulatory pathways? Based on China's digital financial regulatory system and biopharmaceutical industry development realities, how should China design a localized pathway that can stimulate innovation vitality while maintaining national financial security? To systematically answer these questions, this paper adopts an argumentative structure of "macro problem introduction → theoretical/legal depth analysis → current situation/empirical dilemma analysis → international experience comparison → localized countermeasures combined with national conditions" \cite{wang2025}, aiming to provide an institutional solution with both theoretical depth and practical feasibility for the integration of China's biopharmaceutical industry development and digital financial rule-of-law ecosystem construction.

2. Theoretical Foundations of Patent Pool Securitization and Stablecoins

This chapter unfolds across five conceptual levels—concepts, mechanisms, risks, regulation, and theoretical framework. It begins by defining patent pools and patent securitization to reveal their practical constraints, then systematically examines the nature, types, and regulatory trends of stablecoins. Subsequently, supported by patent pool securitization theory, it proposes an institutional integration logic centered on transaction cost minimization, laying the analytical foundation for subsequent international comparisons and China-specific pathways.

2.1 Concepts, Mechanisms, and Practical Dilemmas of Patent Pools and Patent Securitization

Traditional civil law theory conceptualizes patent rights as integrated intangible "property rights," emphasizing their in rem nature and exclusivity \cite{larenz2003}. A patent pool is an institutional arrangement where multiple patent holders collectively manage patents related to the same technology field or standard through contractual agreements and license them uniformly. Its core function lies in reducing transaction costs by eliminating duplicate licensing and patent cross-blocking, thereby promoting technology diffusion and industrial innovation \cite{heller1998}. Classic research demonstrates that patent pools can significantly mitigate the "tragedy of the anticommons" in technology standardization processes and enhance innovation efficiency \cite{heller1998}. However, they simultaneously pose competition law risks, particularly the potential for de facto monopolies when rights are highly concentrated \cite{wang2011}.

At the financial level, patent pool securitization refers to the transformation of future expected earnings from individual patents within a pool into securitized products, achieving financing through structural risk diversification. This model emerged in the United States in the 1990s, marked by David Bowie's music copyright securitization and later introduced to the pharmaceutical patent field by Royalty Pharma \cite{lim2016}. The patent pool securitization process typically includes: (1) identification and portfolio assembly of underlying assets; (2) cash flow forecasting and structural tranching; (3) establishment of a Special Purpose Vehicle (SPV); and (4) issuance of Asset-Backed Securities (ABS) and profit distribution \cite{nikolic2009}.

Nevertheless, existing patent pool securitization faces three major practical dilemmas. First, uncertainty in patent pool valuation: patent revenues depend on future market performance and technological validity, resulting in high volatility of underlying asset prices and difficulty in accurately quantifying credit risk \cite{thoma2024}. Second, incomplete legal framework for patent pools: in bankruptcy, pledge, and transfer processes, the property attributes of patent rights have not been fully integrated with securities law systems, leading to legal enforcement risks \cite{chen2010}. After forming a patent pool, there are no relevant legal provisions for individual patent withdrawal, separate trading, collective pledging, and transfer. Third, information asymmetry and insufficient investor protection: due to opaque revenue information for each patent in the pool, securitized product pricing and rating lack uniform standards \cite{catalini2019}.

Based on these challenges, scholars advocate introducing blockchain and digital finance technologies to enhance patent asset liquidity and transparency through "patent tokenization": distributed ledger technology can achieve property rights confirmation, revenue traceability, and automatic smart contract settlement in IP financing, thereby significantly reducing transaction costs \cite{brunnermeier2019}.

2.2 The Nature, Risks, and Regulatory Framework of Stablecoins

As embedded payment and clearing infrastructure, stablecoins align perfectly with the institutional needs of patent pool securitization in cross-border transactions, traceability, and automatic performance. Therefore, a systematic clarification of their legal-economic attributes, types, and regulatory trajectory is necessary.

2.2.1 Legal and Economic Attributes of Stablecoins

Stablecoins aim to overcome the excessive price volatility of cryptocurrencies like Bitcoin, performing quasi-monetary functions in payment, settlement, and value storage. Academia generally defines them as "crypto tokens that maintain stable value by pegging to certain assets," with stability derived from external asset anchoring or algorithmic mechanisms \cite{investopedia2023}. From a law and economics perspective, stablecoins possess dual attributes as both payment media and financial products \cite{bis2021,pbc2021}: their monetary function relies on credit anchoring mechanisms \cite{brunnermeier2019}, while their security nature stems from the connection to investment and profit expectations \cite{krause2024,sec2019}. According to Brunnermeier and Niepelt's "digital money function redistribution model," stablecoins may compete with central bank money in value storage and payment medium functions \cite{brunnermeier2019}, embodying multiple attributes including "investment product," "currency," and "asset."

Consequently, the U.S. Securities and Exchange Commission (SEC) stated in its financial risk assessment report: "If stablecoin issuance involves investment contract characteristics, it should be incorporated into the securities regulatory framework" \cite{sec2019}. This definition reflects the "hybrid" nature of stablecoins—they may be either payment instruments or regulated investment products \cite{ecb2020,fsb2020,adrian2019}.

2.2.2 Main Types and Operational Mechanisms of Stablecoins

Current mainstream stablecoins can be categorized into three types based on their collateral mechanisms:

1. Fiat-collateralized: These stablecoins are backed by fiat currency or highly liquid assets held by issuing institutions to guarantee a 1:1 redemption ratio. Representative projects include Tether (USDT) and USD Coin (USDC) \cite{fireblocks2023}. This model's advantage lies in strong stability and clear redemption mechanisms, but risks include insufficient information transparency and inadequate reserve auditing by issuing institutions, which have become regulatory priorities \cite{wikipedia2023}.

2. Crypto-collateralized: These stablecoins use crypto assets (e.g., Ethereum) as collateral and are issued through smart contract mechanisms. For example, the DAI stablecoin is generated by the MakerDAO system, where users lock ETH or other crypto assets into Vaults (collateral pools) and issue DAI at certain collateralization ratios (typically exceeding 150%) \cite{gemini2023}. Their decentralized characteristics enhance regulatory resistance, but due to high volatility of collateral assets, they face issues such as "difficulty in maintaining over-collateralization" and "liquidity spiral risks" \cite{brookings2023}.

3. Algorithmic: Algorithmic stablecoins do not rely on collateral but maintain price pegs through automatic supply adjustment algorithms. The typical representative is TerraUSD (UST), whose mechanism design involves burning Luna tokens to reduce supply when UST exceeds $1, and issuing additional UST to restore the peg when it falls below $1 \cite{coingecko2023}. However, UST's collapse in 2022 demonstrated that algorithmic stablecoins face "confidence-dependent" risks: when market confidence is lost, both price and algorithmic cycles may collapse simultaneously \cite{snb2023,xie2023}. Scholars argue that the UST incident reveals that "algorithmic stability" is essentially an illusion of collateral, requiring redefinition of its legal and financial attributes \cite{bertsch2023}.

Table 1 [TABLE:1]. Comparison of Mechanism Characteristics and Regulatory Differences Among Three Types of Stablecoins

Type Collateral Mechanism & Value Logic Operational Logic & Representative Projects Primary Risk Types Typical Regulatory Models (Countries/Regions) Fiat-collateralized Issuing institutions hold fiat currency or equivalent assets (e.g., USD, government bonds) as reserves to support issuance at 1:1 ratio. Centralized institutions manage reserves and guarantee redemption, such as USDT (Tether) and USDC (Circle). Reserve opacity, inadequate auditing, potential credit risk. Subject to traditional financial regulators: U.S. SEC and FinCEN require transparent disclosure; EU MiCA imposes liquidity and capital constraints. Crypto-collateralized Over-collateralized with crypto assets (ETH, BTC), issued through smart contracts. Decentralized governance; collateralization ratio ≥150%; typical example is DAI (MakerDAO). High volatility of collateral assets may trigger "liquidation spirals"; smart contract vulnerability risks. Primarily subject to decentralized protocol self-regulation; U.S. and EU exploring functional regulation; China has not yet permitted such mechanisms. Algorithmic Does not rely on collateral assets; maintains peg through automatic supply adjustment algorithms. Represented by UST (Terra); "burn-mint" mechanism regulates market supply and demand. Confidence-dependent risk; algorithm failure may cause price collapse (e.g., 2022 UST incident). Most countries do not recognize its monetary function; FSB and BIS classify as high-risk assets. China completely prohibits.

Source: Investopedia (2023); Fireblocks (2023); Brookings (2023); CoinGecko (2023); SNB (2023); European Commission (MiCA, 2023); PBC Digital Currency Research Working Group (2021), compiled by the author.

2.2.3 Primary Risk Types of Stablecoins

While stablecoins' core advantages lie in payment efficiency and cross-border circulation, making them widely used in international clearing and digital asset transactions, their institutional risks are equally significant. First, depegging risk: If reserve assets are insufficient or liquidity management is inadequate, stablecoins may lose their peg, triggering systemic risks. Instant liquidity crises occurred during the October 2022 USDT depeg event and the 2018 UST instantaneous decoupling incident, subsequently prompting regulatory upgrades \cite{coinmetrics2022}. Second, regulatory arbitrage and compliance risk: Some issuing institutions evade financial regulation through "gray zones," potentially creating channels for money laundering and capital flight \cite{fsb2023}. Third, monetary policy interference: When stablecoins are widely adopted in cross-border payments, they may undermine national monetary policy independence and capital control effectiveness \cite{somoza2020}. Fourth, technical vulnerabilities: Algorithmic stablecoins or smart contract flaws may lead to systemic failures.

2.2.4 Stablecoin Regulation and International Trends

The United States and European Union represent two typical models in stablecoin regulation, while China has adopted a strict prohibition approach. The U.S. employs a "function-oriented regulation" logic, categorizing stablecoins based on their actual functions under the jurisdiction of the SEC (securities attributes), CFTC (commodities attributes), and FinCEN (anti-money laundering) \cite{sec2019,fincen2019}. Currently, the U.S. Congress is reviewing the Stablecoin Transparency Act, aiming to establish unified regulatory frameworks through clear issuance licensing and reserve disclosure requirements \cite{uscongress2022}. The EU, through the Markets in Crypto-Assets Regulation (MiCA), establishes a unified framework that clearly defines ARTs and EMTs along with their obligations \cite{europeancommission2023}. Research indicates that this tiered regulatory model possesses strong scalability and legal transplantability, providing an institutional template for combining digital financial instruments with IP securitization \cite{zetzsche2021}. China currently maintains a prohibitive stance toward foreign stablecoins, banning their domestic transactions or use as legal tender substitutes, while making the digital yuan (e-CNY) the sole legitimate form of legal digital currency through centralized issuance and management by the central bank \cite{pbc2021}. This model reflects China's legislative philosophy for digital currency policy: monetary sovereignty and financial security \cite{pbc2021}—that is, by excluding foreign stablecoin risks while creating institutional space for "digital yuan + financial innovation" \cite{bis2022}.

This paper argues that stablecoins represent a "credit-anchored" financial innovation whose legal status lies between currency and securities. Different underlying collateral mechanisms lead to varying stability and risk characteristics: fiat-collateralized types emphasize compliance and custody, crypto-collateralized types highlight decentralization and algorithmic governance, while algorithmic stablecoins represent an extreme experiment in market confidence and mechanism design. From a regulatory perspective, future trends are evolving toward functional identification, cross-departmental coordination, and international harmonization. For China, the key lies in constructing a new institutional balance between monetary sovereignty and technological innovation to establish a secure foundation for IP financialization and digital yuan applications.

2.3 Concepts of Patent Financialization and Patent Pool Securitization in the Biopharmaceutical Field

Unlike copyright or single IP securitization, patent financialization in the biopharmaceutical field must take "patent pool securitization" as its institutional prerequisite. Conceptually, patent financialization refers to the process of embedding patents as capital assets into the financial system, aiming to endow intellectual property with financing and investment functions through market mechanisms, thereby integrating innovation activities into capital logic and enabling two-way flows between technological achievements and financial resources \cite{neururer2023}. Patent securitization serves as the institutional vehicle for this financialization—transforming illiquid assets into tradable securities to enhance financing efficiency \cite{greenbaum2016}. The relationship is clear: financialization represents the concept and objective, while securitization constitutes the mechanism and tool. However, the unique legal and industrial characteristics of biopharmaceutical patents determine that financialization cannot rely on direct securitization of individual patents.

First, biopharmaceutical patents exhibit significant revenue delay and high value uncertainty. Patents for drugs, treatment methods, and medical devices possess only potential technical value in early R&D stages; their economic value only materializes after rigorous clinical trials, regulatory approval, and market authorization. This lengthy and high-risk approval chain makes patent validity highly susceptible to invalidation declarations, technological iteration, and infringement disputes \cite{xie2025}. Second, the rights structure of biopharmaceutical patents is highly fragmented with synergistic revenue path dependencies. A single drug often involves multiple patents covering compounds, formulations, dosage forms, and production processes, with diverse ownership entities and complex revenue structures, making it difficult for a single patent to generate continuous, stable, and quantifiable cash flows. In contrast, music copyrights or single IP patents possess more independent and immediate revenue streams, enabling capitalization through single-asset securitization \cite{xie2025,marcowitz2015}.

In this context, the patent pool mechanism becomes the institutional hub for transforming biopharmaceutical patent financialization into securitization. Patent pools reduce ownership fragmentation risks, stabilize revenue expectations, and achieve rights clarification and revenue stratification structuration through contractual arrangements, thereby satisfying the legal requirements for underlying assets in securitization to be "defensible, predictable, and divisible." Meanwhile, the institutional introduction of stablecoins and sovereign digital currencies (CBDC) enables cross-border settlement and credit enhancement within smart contract environments. As Ahmed and Aldasoro (2025) reveal, stablecoins are gradually evolving into "quasi-safe assets," whose reserve transparency and traceability can provide credit support for liquidity management in patent pool securitization \cite{ahmed2025}. In other words, the "financialization feasibility" of biopharmaceutical patents depends on the co-governance integration of patent pools rather than the technological innovativeness of individual patents. Only when patent portfolios enter pooled and structurally governed systems can financialization be implemented through securitization pathways, achieving property rights reconstruction and capital transformation in the law and economics sense.

2.4 Summary

In summary, according to Coase's transaction cost theory, in an ideal world with zero transaction costs, market actors can always negotiate optimal resource allocation \cite{coase1960}. However, the practical dilemmas of patent pool securitization precisely stem from high transaction costs in the real world, where single rules cannot achieve Pareto improvement. This paper argues that combining patent pool securitization with stablecoins/e-CNY and smart contracts can simultaneously reduce costs and enhance efficiency across three dimensions: search and negotiation, verification, and enforcement. The former reduces negotiation and pricing costs through centralized licensing and structural tranching, while the latter mitigates adverse selection and moral hazard through on-chain rights confirmation, traceability, and automatic performance. The core objective is to reduce transaction costs for innovation financing through institutional design while supporting sustained financing and revenue distribution for biopharmaceutical innovation through regulable, accountable, and auditable digital financial rule-of-law arrangements, thereby achieving embedded reconstruction and incentive alignment in the law and economics and institutional economics sense.

3. International and Extraterritorial Experience Comparison: Models of the United States, European Union, Japan, and Hong Kong

Different jurisdictions' regulatory choices are not random technical decisions but rather reflections of deep-seated economic philosophies, legal traditions, and institutional path dependencies. This chapter analyzes the regulatory models of the United States, European Union, Japan, and Hong Kong in depth, revealing their underlying economic logic to provide reference for China's institutional design.

3.1 United States: Pluralistic Regulatory Framework and Functional Review Logic

3.1.1 Regulatory Structure and Institutional Characteristics

The United States is a dual pioneer in global patent securitization and stablecoin regulation. On one hand, the U.S. patent asset securitization market is relatively mature, built upon capital market risk stratification and information disclosure systems. A typical case is Royalty Pharma's pharmaceutical patent revenue securitization project, which effectively achieved capital marketization of intangible assets by packaging drug patent future licensing revenues into asset-backed securities (ABS) \cite{lim2016}. Research indicates that this securitization pathway based on "patent revenue rights" relies on efficient IP evaluation systems and legal enforcement mechanisms \cite{nikolic2009}. On the other hand, U.S. stablecoin regulation adopts a "function-based regulation" model, where different regulators oversee stablecoins based on their substantive market functions: (1) if stablecoins exhibit "investment contract" characteristics, they fall under the Securities Act of 1933 and Securities Exchange Act of 1934, regulated by the SEC; (2) if they involve derivatives trading or commodity attributes, they come under the CFTC's jurisdiction; and (3) if they involve payment and anti-money laundering issues, the Financial Crimes Enforcement Network (FinCEN) enforces the Bank Secrecy Act (BSA) and AML/KYC requirements \cite{sec2019,fincen2019}.

In 2023, the U.S. Congress proposed the Clarity for Payment Stablecoins Act, attempting to establish a unified regulatory framework through clear issuance licensing and reserve disclosure requirements \cite{uscongress2023}. SEC Chair Gary Gensler explicitly stated in Senate Banking Committee testimony: "If stablecoin expected returns derive from the efforts of others, they should be identified as securities and registered accordingly" \cite{gensler2021}. This position reinforces the "substance over form" regulatory philosophy, reflecting the common law tradition of substantive judgment.

However, the U.S. model also faces fragmentation challenges. With regulatory authority dispersed among the SEC, CFTC, and FinCEN, stablecoin projects must simultaneously comply with multiple legal frameworks, resulting in high regulatory coordination costs \cite{fincen2019}. Scholar Zaring notes that while this "regulatory overlap" provides institutional flexibility in the short term, it may weaken innovation incentives in the long run \cite{zaring2021}.

At the IP securitization level, U.S. market success depends on high market transparency and judicial predictability. U.S. courts confirmed the assignability of future royalty streams from copyrights in the "Music Royalty Trust" series of cases \cite{arista2021}, providing a judicial foundation for subsequent patent securitization \cite{patentroyalty2016}. The U.S. Uniform Commercial Code (2023 Revision) Section 9-408 further establishes independent transfer rules for IP revenue rights \cite{ucc2023}.

3.1.2 Law and Economics Analysis: Transaction Costs and Legal Elasticity

The institutional design of the U.S. regulatory model implies a law and economics logic. The SEC's functional characterization of stablecoins essentially achieves market correction by reducing information asymmetry and externality costs—in other words, a form of "regulation as transaction cost correction" that aligns with the modified version of Coase's theorem in the real world \cite{coase1960}. Due to high information asymmetry and trust risks in stablecoin transactions, regulatory intervention is necessary to establish market signals.

Moreover, the U.S. legal system possesses certain elasticity: when facing rapid cryptocurrency development, the SEC can adjust the Howey test's application scope through "interpretation" to accommodate new stablecoin forms. For instance, after 2021, the SEC included yield-bearing stablecoins within securities regulation, demonstrating the financial law system's adaptability. This aligns with scholar Pistor's (2021) concept of "law's elasticity," which she identifies as a key mechanism in financial rule-of-law, with U.S. financial regulation maintaining institutional adaptability through "interpretive enforcement" \cite{pistor2021}.

However, legal elasticity also introduces institutional uncertainty and systemic risks. First, regulatory fragmentation: overlapping responsibilities among the SEC, CFTC, and FinCEN require some stablecoin projects to comply with multiple regulations simultaneously, sharply increasing compliance costs. Second, compliance uncertainty: without a unified Digital Assets Act from Congress, regulatory standards vary across states—for example, New York and Wyoming have different stablecoin regulatory standards, forcing enterprises to bear dual compliance costs and weakening innovation incentives \cite{uscongress2022}. Cases involving Tether (USDT) and Circle (USDC) demonstrate the need to face multiple audits and dual regulation. Finally, due to legal elasticity and functional characteristics, uncertainty and instability arise: if issuers' reserve structures are opaque or audits inadequate, they may be unable to meet redemption demands under pressure, causing user trust collapse. A 2024 study noted that during the SVB collapse, USDC's high transparency enabled rapid redemption during liquidity shocks, while USDT's low-frequency disclosure somewhat mitigated this shock \cite{hernandez2024}.

3.1.3 Institutional Risks and Cases

U.S. institutional risks concentrate in three areas: First, regulatory ambiguity: lack of coordination among multiple agencies creates overlaps and gaps. Second, reserve risk: Tether (USDT) was investigated by the New York Attorney General for incomplete reserve disclosure and fined $18.5 million in 2021. Third, systemic risk transmission: if stablecoins become widely embedded in payment systems, depegging events can trigger chain runs through financial intermediaries. Fourth, declining innovation incentives: uncertainty from excessive enforcement drives DeFi protocol developers to relocate offshore \cite{gensler2021}.

In summary, the U.S. model reflects a trade-off between flexibility and uncertainty. It grants maximum freedom for market innovation but at the cost of high "legal discovery" transaction costs and "regulatory ambiguity" and "compliance uncertainty," which themselves deter risk-averse capital entry. The U.S. system's strength lies in flexibility and innovation, but it suffers from regulatory fragmentation and legal uncertainty.

3.2 European Union: MiCA Unified Regulation and IP Financial Policy Coordination

3.2.1 Regulatory Structure and Institutional Characteristics

The EU adopts a "top-down" unified legislative model in digital financial governance, with its core document being the Markets in Crypto-Assets Regulation (MiCA), which officially took effect in 2023 \cite{europeancommission2023}. MiCA establishes a function-based regulatory framework that classifies crypto assets into Asset-Referenced Tokens (ARTs), E-Money Tokens (EMTs), and other ordinary crypto assets. MiCA requires both ART and EMT issuers to obtain authorization within the EU (registered with the European Banking Authority) and comply with reserve requirements (2%), information disclosure obligations, and governance standards. For "significant tokens," daily transaction limits and liquidity emergency plans are also required. The legislative objective is to "ensure financial stability and consumer protection while promoting financial innovation."

As scholars Zetzsche and Buckley (2023) point out, MiCA's institutional features lie in "tiered supervision," "cross-jurisdictional coordination mechanisms," and the "principle of proportionality" \cite{zetzsche2021}. It forms a regulatory layering and coordination system through the European Banking Authority (EBA) and European Securities and Markets Authority (ESMA), thereby balancing consistency and flexibility at the institutional level.

Regarding IP and financial integration, the EU's Intellectual Property Action Plan (2020) first incorporated "IP securitization" into the EU Capital Markets Union (CMU) strategy, proposing to promote IP asset financing through High-Quality Securitization (HQS) standards. Some EU member states (e.g., Germany, Netherlands) are exploring blockchain registration and transfer mechanisms based on IP revenue rights, creating institutional space for future "patent securitization + crypto settlement" models. Therefore, the EU model's characteristics can be summarized in three points: First, unified legislation and regulatory coordination ensure institutional certainty. Second, emphasis on information disclosure and investor protection reduces market risks. Third, the regulatory system accommodates financial innovation while reserving technologically neutral space. Its institutional shortcomings include slower innovation response speed and significant implementation differences among member states.

3.2.2 Law and Economics Analysis: Coordination Efficiency and Ex Ante Regulation

The economic logic of EU regulation reflects the "coordination efficiency model" and "ex ante regulation" thinking. Its institutional objective is to reduce cross-border compliance transaction costs through unified rules (Williamson, 1985) and prevent regulatory arbitrage \cite{williamson1985}. MiCA's "single license + passporting" mechanism allows stablecoin issuers to circulate freely among EU member states, significantly enhancing market efficiency. However, from a law and economics perspective, this "institutional coordination priority" design sacrifices flexibility. As scholars note, MiCA's ex ante regulation may lead to "excessive institutional rigidity," inhibiting startup entry \cite{zetzsche2021}.

3.2.3 Institutional Risks and Cases

The EU system's main risks include: First, innovation constraints: MiCA's high thresholds cause small and medium innovative enterprises to exit the market. Second, sovereignty conflicts: private stablecoins may weaken the euro's position in cross-border payments. Third, enforcement differential risk: uneven resources and regulatory capabilities among member states may create regulatory "lowlands." A 2022 ECB report noted that before MiCA implementation, approximately 70% of stablecoin transactions were completed through non-EU platforms, indicating that regulatory "uniformity" had not yet translated into "market integration" \cite{ecb2022}. The EU model holds advantages in financial security, but its economic cost is decreased innovation vitality and market concentration tendencies.

3.3 Japan: Prudent Innovation Under Licensing System

3.3.1 Institutional Structure and Regulatory Logic

Japan adopts a dual-track parallel model of "industrial policy + legal system" in digital currency and patent financialization. In 2022, Japan passed the Revised Fund Settlement Act, first establishing the legal status of stablecoin issuance, stipulating that stablecoins must be issued by banks or trust companies and fully backed by fiat reserves. In 2023, Japan's Financial Services Agency (FSA) released the Payment Services Act Revision Implementation Rules, further clarifying that stablecoin issuance requires registration and prohibiting unauthorized cross-border stablecoin circulation \cite{fsa2023}.

On this foundation, the Japanese government promotes application experiments of blockchain in finance, IP, and medical data through the "Fintech Regulatory Sandbox" and "Digital Agency" mechanisms \cite{yatsunami2020}. Scholars note that the core of Japan's regulatory framework lies in "compliance with experimentation"—allowing limited institutional innovation while ensuring financial security \cite{goo2020}. Additionally, Japan's Ministry of Economy, Trade and Industry (METI) supports the establishment of cross-enterprise "pharmaceutical patent pool and securitization experimental projects," attempting to enhance drug licensing fee settlement efficiency through stablecoin payments and smart contract mechanisms \cite{meti2022}. This government-driven industrial coordination mechanism gives Japan unique institutional advantages in combining patent financialization with digital currency. Overall, Japan's model features: (1) government leadership and industrial coordination; (2) clear regulatory systems but limited innovation space; and (3) balancing risk and technological development under an "experimental regulation" framework.

3.3.2 Law and Economics Analysis: Risk Ring-Fencing and Policy Incentives

Japan's regulatory mechanism embodies the risk ring-fencing model. Through licensing and trust mechanisms, it separates stablecoin operational risks from the banking system, thereby preventing systemic spillovers. This aligns with Williamson's theory that "when transaction asset specificity is high, centralized governance can reduce uncertainty" \cite{williamson1996}. Furthermore, METI's "IP Finance" strategy incorporates blockchain and stablecoin settlement mechanisms into technology industrial policy, achieving "regulation-innovation" synergy \cite{meti2022}. This "policy-driven model" strengthens institutional coordination.

3.3.3 Institutional Risks and Cases

Japan's system faces four main risks: First, access rigidity: small and medium technology enterprises cannot enter the market due to capital thresholds. Second, technical dependency risk: if blockchain systems fail, redemption cannot be executed. Third, regulatory ambiguity: algorithmic stablecoins lack clear legal status. Fourth, innovation outflow risk: some enterprises relocate to Singapore and South Korea seeking more lenient environments. As Japan's FSA report noted, in 2023 a trust company experienced a blockchain node failure that prevented some customers from redeeming within 48 hours. Although no losses were ultimately incurred, the incident exposed technical dependency vulnerabilities. Japan's model makes a choice between coordination and competition. Close coordination between government and industry promotes financial stability and strategic synergy but may lead to regulatory capture and weakened market vitality.

3.4 Hong Kong: Progressive Sandbox Regulation as a "Super Connector"

3.4.1 Institutional Design and Regulatory Objectives

The Hong Kong Monetary Authority (HKMA) released the Discussion Paper on Crypto-assets and Stablecoins in 2023, proposing a "risk-tiering + function-oriented" regulatory system: only fiat-pegged stablecoins are permitted (algorithmic stablecoins prohibited); reserves must be 100% backed by highly liquid assets; a mandatory licensing system for Virtual Asset Service Providers (VASP) is implemented; and risk information disclosure and cross-border regulatory coordination mechanisms are enforced \cite{hkma2023}.

3.4.2 Law and Economics Analysis: Regulatory Arbitrage and Institutional Equilibrium

The Hong Kong model can be viewed as an application case of "second-best regulation equilibrium" \cite{lipsey1956}. Between complete freedom and strict prohibition, HKMA maximizes regulatory efficiency through differentiated licensing systems. From a transaction cost perspective, this function-oriented regulation achieves institutional equilibrium between openness and security \cite{posner2014}. Its institutional design also features "institutional interoperability": it aligns with both EU MiCA and the mainland digital yuan (e-CNY) system, forming technical compatibility and providing legal interfaces for cross-border payment pilots \cite{hkma2023}.

3.4.3 Institutional Risks and Cases

The 2022 Terra-UST crash directly impacted Hong Kong's regulatory approach. HKMA research indicates that UST's "death spiral" caused algorithmic stablecoin market capitalization to plummet 99%, creating chain reactions that affected USDT and USDC market liquidity \cite{hkma2022,nber2022}. Hong Kong's institutional risks can be summarized as: First, cross-border compliance risk: foreign projects may use Hong Kong registration to evade other countries' regulations. Second, technical vulnerability risk: smart contract errors may cause payment system failures. Third, financial stability risk: if HKD-pegged stablecoins decouple from monetary policy, they may affect the linked exchange rate system.

3.5 Summary: Differences Among Models and Institutional Implications for China

Comparatively, the U.S. model emphasizes market-driven functional regulation, offering institutional flexibility but fragmentation; the EU model focuses on legislative unification and systematic coordination, ensuring legal certainty but lacking innovation elasticity; Japan's model reflects government leadership and policy pilots, promoting application experiments under risk-controllable conditions; and Hong Kong's model represents eclecticism with a bias toward equilibrium and serving as China's external window.

For China, the implications are primarily: drawing on the function-oriented regulatory logic of the U.S. and Hong Kong to establish stablecoin review standards centered on usage and risk; absorbing the EU's unified legislative experience to form a tiered classification system in digital yuan and crypto asset regulation; and learning from Japan and Hong Kong's regulatory sandbox mechanisms to ensure flexibility and security in innovation pilots combining patent financialization with digital currency.

Table 2 [TABLE:2]. Comparison of Regulatory Structures, Law and Economics Logic, Core Objectives, and Typical Risks Across the United States, European Union, Japan, Hong Kong, and Mainland China

Jurisdiction Regulatory Structure Law and Economics Logic Core Objectives Typical Risks United States Multi-agency parallel (SEC, CFTC, FinCEN) Legal elasticity, transaction cost minimization Maintain market flexibility, encourage innovation Fragmentation, reserve risk (USDT audit issues, SVB liquidity shock) European Union Unified legislation (MiCA) Coordination efficiency, ex ante regulation Monetary sovereignty and financial stability Innovation constraints, ECB 2022 report on market integration Japan Licensing system + sandbox Risk ring-fencing, policy incentives Prevent risk, promote innovation Technical dependency, FSA annual report Hong Kong Function-oriented + risk-tiering + sandbox Second-best equilibrium, institutional interoperability Innovation openness and risk control Cross-border compliance, Terra-UST crash Mainland China Central bank-led, prudent prohibition of private stablecoins, focus on e-CNY Monetary sovereignty and financial security Prohibit private stablecoins, focus on digital yuan e-CNY Regulatory gaps, algorithmic risks

The ultimate goal should be to construct a "digital financial rule-of-law ecosystem" that conforms to China's legal context, promotes IP capitalization and international innovation cooperation while maintaining monetary sovereignty and financial security, and builds a "compliance + innovation" digital financial governance system.

4. Theoretical Reconstruction of China-Characteristic Patent Pool Securitization—Reflections Based on Policy Realities and Law and Economics

In the global fintech reconstruction, the evolution of digital currency systems is profoundly influencing IP financialization pathways. The emergence of stablecoins has broken traditional monetary boundaries, while sovereign digital currencies (CBDC) have redefined the legal boundaries of "legitimate payment instruments" through state credit.

In this context, patent pool securitization, as an advanced form of IP financialization, no longer operates as mere "patent revenue capitalization" but as an institutional coordination process embedded within the digital currency system. On one hand, China's pharmaceutical industry faces obvious financing constraints and innovation imbalances, with small and medium-sized biopharmaceutical R&D enterprises characterized by "many patents, little capital." On the other hand, the rise of digital currencies and stablecoins provides new payment and circulation mechanisms for patent revenue rights securitization, but under China's regulatory framework, this mechanism exhibits three institutional tensions: first, the tension between monetary sovereignty and monetary liberalization; second, the balance between property rights incentives and market efficiency; and third, the law and economics tension between innovation-driven growth and regulatory rigidity.

Therefore, this paper proposes that China-characteristic patent pool securitization should be theoretically reconstructed through a systematic law and economics analytical framework that both safeguards sovereign monetary order and promotes pharmaceutical industry innovation financing through property rights clarification and market incentive mechanisms.

4.1 Policy Feasibility Analysis: Tension Between Financial Innovation and Legal Constraints

China has undertaken preliminary reforms in IP financialization, such as patent pledge financing and IP securitization pilots, but these remain at the policy experimentation and partial exploration stage \cite{wang2018}. Although patent pool securitization offers new financing pathways for small and medium-sized pharmaceutical enterprises, significant institutional constraints persist in regulatory frameworks, asset valuation, and market mechanisms \cite{wang2018}.

First, at the financial regulation level, China currently adopts a "prohibitive regulation" approach toward virtual currencies \cite{deng2022}, explicitly excluding stablecoins and other crypto assets from the legal payment system. While this policy is justified in maintaining financial security, it also creates an "institutional vacuum for digital financial innovation"—a time lag between technological innovation and regulatory response prevents some controllable innovations from entering the pilot system (see Table 3 [TABLE:3]).

Second, at the securitization operation level, the legal attributes of patent pool assets have not been fully integrated into securities law logic. Although Article 2 of China's Securities Law (2020 Revision) permits "securitized products issued based on asset earnings," it does not clarify the securitization standards for intangible assets, particularly intellectual property. This results in a lack of uniform rules for asset rights confirmation, revenue forecasting, and risk rating in patent pool securitization.

Third, at the currency and payment level, China's foreign exchange management system has not yet permitted cross-border capital settlement through stablecoins or crypto assets. According to the State Administration of Foreign Exchange's 2022 report, cross-border payments still primarily rely on SWIFT and the Cross-Border Interbank Payment System (CIPS) \cite{safe2022}. Therefore, if patent pool securitization products need to attract international investors, new regulatory interfaces must be constructed within the central bank digital currency (e-CNY) cross-border payment system.

Table 3 [TABLE:3]. China's Major Virtual Currency Regulatory Policies

Year Policy/Regulation Issuing Authorities Core Regulatory Content 2013 Notice on Preventing Bitcoin Risks PBC, MIIT, CBRC, CSRC, CIRC Bitcoin characterized as a "specific virtual commodity" without legal tender status; financial and payment institutions prohibited from conducting bitcoin-related business. 2017 Announcement on Preventing Token Offering Financing Risks PBC, Cyberspace Administration, MIIT, SAIC, CBRC, CSRC, CIRC Token offerings (ICOs) identified as unapproved illegal public financing; all ICO activities ordered to cease immediately; trading platforms prohibited from exchanging fiat currency with tokens/"virtual currencies." 2021 Notice on Further Preventing and Disposing of Virtual Currency Trading and Speculation Risks PBC, Cyberspace Administration, Supreme People's Court, Supreme People's Procuratorate, MIIT, MPS, SAMR, CBIRC, CSRC, SAFE Virtual currencies declared not to have legal tender status; related business activities deemed illegal financial activities; overseas virtual currency exchanges providing services to Chinese residents via the internet similarly illegal; participation in virtual currency investment and trading carries legal risks. 2021 Notice on Rectifying Virtual Currency "Mining" Activities NDRC and 10 other departments Virtual currency "mining" listed as an eliminated industry; strict prohibition on new mining projects; accelerated orderly exit of existing projects. 2025 Regulatory Guidance (Media Report) Relevant regulators Requirements for large internet platforms, banks, securities firms, and state-owned enterprises in Hong Kong to shrink crypto asset businesses, including restricting cryptocurrency investment, applying for Hong Kong stablecoin licenses, and assisting domestic enterprises in moving assets offshore.

Overall, China currently possesses an innovation foundation at the policy level, but institutional design remains constrained by the macro-regulatory logic of "prioritizing monetary sovereignty and financial security." To promote the combination of patent pool securitization and stablecoins, controllable innovation pathways must be explored within compliance frameworks.

4.2 Theoretical Dialogue: Reinterpretation Under Three Core Theoretical Frameworks

Within the law and economics system, institutional design aims to minimize transaction costs and achieve efficient resource allocation through legal rules \cite{posner2014}. Based on this, the theoretical reconstruction of "China-characteristic patent pool securitization" can be developed across three dimensions: monetary sovereignty, property rights incentives, and market efficiency.

4.2.1 First Dimension: Chinese Reconstruction of Monetary Sovereignty Theory

Monetary sovereignty, in law and economics, manifests as the state's exclusive control over payment instruments and clearing systems. Pistor (2021) argues that the monetary legal order is a "coding of power," whose core function is to maintain trust and enforceability \cite{pistor2021}. In the digital economy context, stablecoins, as hybrids of "private law credit" and "state credit," challenge traditional monetary sovereignty boundaries. Therefore, China can achieve "digital extension of legal payment" institutionally by using sovereign digital currency (e-CNY) to replace foreign stablecoins' settlement functions, thereby preventing financial risk diffusion from capital liberalization. This aligns with the "sovereignty-constrained efficiency model" in law and economics: the state ensures efficiency improvements within controllable risk ranges through institutional constraints \cite{williamson1996}.

4.2.2 Second Dimension: Chinese Reconstruction of Property Rights Incentive Theory

From a law and economics perspective, the key to patent pool securitization lies not in "formal innovation" but in property rights incentives within legal structures \cite{demsetz1967} and achieving efficiency maximization and fairness balance \cite{calabresi2020}. China's IP system has long focused on "protecting innovation incentives," but support for financialization and securitization means—such as rights' liquidity, pricing, and enforceability—remains insufficient \cite{wang2018}. As empirical research finds: "In China, financial innovation can effectively alleviate information asymmetry and negative spillover effects in IP protection, promoting technological development in regulated enterprises. IP pledge financing helps regulated enterprises fund innovation activities by replacing high fault-tolerance institutional investors, effectively incentivizing innovation" \cite{song2023}. This demonstrates that a coordination mechanism of "dual reconstruction of technological trust and legal trust" can ensure patent pool securitization practices and form a new IP innovation incentive framework: legal trust ensures rights stability and enforceability, while technological trust guarantees transaction transparency and automatic performance.

In the biopharmaceutical field, where patent value realization involves high uncertainty, balance between incentives and coordination must rely on technological and legal trust: First, centralized patent rights and unified licensing mechanisms reduce negotiation costs. Second, revenue rights securitization brings forward future innovation earnings, enhancing corporate cash flow. Third, smart contract-based automatic distribution ensures allocation transparency and reduces opportunistic behavior.

In law and economics terms, this represents a three-dimensional composite structure of "property rights incentives + contract governance": designing an enforceable contractual architecture and using technology to operate and safeguard it, thereby supplementing the incompleteness of property rights systems in the innovation incentive process. This paper argues that the core of biopharmaceutical patent pool securitization lies in optimizing property rights structures and using computer technology to guarantee contracts, achieving innovation revenue redistribution.

4.2.3 Third Dimension: Chinese Reconstruction of Market Incentives (Market Efficiency)

Coase and Posner's law and efficiency theory posits that the function of legal systems is not static balance but dynamic adjustment, enabling optimal allocation of innovation and risk within institutional elasticity \cite{posner2014}. The core of global stablecoin regulation lies in preventing currency substitution and financial risk spillovers \cite{somoza2020}. In the context of digital currency and IP integration, market incentive mechanisms can be achieved through: First, using foreign stablecoins bound to e-CNY as settlement media to reduce cross-border transaction costs—stablecoins entering the central bank digital currency (e-CNY) system achieve controllable digital payment innovation through state credit backing and distributed ledger control. Second, achieving instant redemption and compliance regulation through smart contracts. Third, establishing a "limited elasticity" regulatory model that permits controllable innovation while preventing systemic risks.

This institutional elasticity reflects the unique advantages of China's rule-of-law system: through administrative guidance and pilot mechanisms, it maintains both policy flexibility and legal constraint stability.

4.2.4 Three-Dimensional Structure of China-Characteristic Patent Pool Securitization

Observed from a law and economics perspective, this three-dimensional model (see Figure 2 [FIGURE:2]) reveals the "endogenous logic" of China-characteristic institutional innovation: achieving optimal coordination among monetary governance, IP incentives, and market efficiency within limited sovereign boundaries through legal system design. In institutional evolution, this coordination is not spontaneous equilibrium but an "embedded equilibrium"—the state achieves dual objectives of innovation-driven growth and risk control through coupling digital currency infrastructure, IP legal systems, and financial regulatory frameworks.

Therefore, patent pool securitization is not merely a financial innovation but an institutional experiment under the sovereign monetary rule-of-law system, embodying "structural adaptation" and "functional elasticity" in the law and economics sense.

4.3 Evolutionary Path of China-Characteristic Biopharmaceutical Patent Pool Securitization

Under the law and economics analytical framework, China-characteristic "patent pool securitization" is not isolated financial innovation but an institutional evolution phenomenon reflecting interactive adjustments among monetary sovereignty, property rights incentives, and market mechanisms. To reveal this evolutionary logic, this paper constructs the illustrated "institutional evolution" path, using law and economics institutional efficiency theory and legal elasticity theory as analytical foundations to explore the model's dynamic operational mechanisms (see Figure 3 [FIGURE:3]).

4.3.1 Input Layer: Three-Element Structure of Sovereign Currency, Property Rights Incentives, and Market Efficiency

The initial layer of institutional evolution is the input layer, comprising three institutional elements: First, monetary sovereignty. The state establishes the priority of legal tender in financial settlement and payment systems through the issuance and circulation of central bank digital currency (e-CNY), binding foreign stablecoin issuance, thereby ensuring that patent securitization activities do not depart from the monetary sovereignty framework. The institutional function of monetary sovereignty lies not only in payment stability but also in establishing "compliance boundaries" for capital flows to prevent "sovereignty spillover risks" in digital financialization \cite{pistor2021}.

Second, property rights incentives. The patent pool system clarifies and securitizes patent revenue rights through centralized licensing and revenue-sharing mechanisms, thereby reducing transaction costs. According to Demsetz's property rights theory, the clarity of property rights definition positively correlates with transaction efficiency, and improved property rights systems help form predictable investment incentives and innovation return mechanisms \cite{demsetz1967}.

Third, market efficiency. Market mechanisms in patent pool securitization are strengthened through smart contracts and cross-border payment systems. Using foreign stablecoins + digital yuan as payment media, combined with blockchain accounting mechanisms, not only reduces transaction costs but also enhances transparency and security in cross-border flows \cite{hkma2023}. This enables patent pool securitization to transcend local capital markets and gain international circulation potential.

4.3.2 Coordination Layer: Legal Elasticity and Institutional Integration

The second layer of institutional evolution is the coordination layer—the legal reconciliation and institutional adaptation among monetary sovereignty, property rights systems, and market mechanisms. Its core lies in achieving institutional integration and legal elasticity.

Legal elasticity (Pistor, 2021) means legal rules possess sufficient adaptability to accommodate technological and market changes while maintaining institutional stability \cite{pistor2019}. China's current financial regulatory system enables digital financial innovation within safe boundaries through a "functional regulation + regulatory sandbox" dual mechanism \cite{pistor2021}. This aligns with Posner's "efficiency-oriented legal adjustment theory"—legal systems must balance efficiency and predictability to prevent institutional rigidity from stifling innovation \cite{posner2014}.

Under this framework, China's regulatory coordination mechanism should be divided into three categories: First, regulatory adaptation: resolving legal attribute definition and transaction compliance issues for patent securitization products through integration of financial law and IP law. Second, technology governance: achieving traceability in cross-border payments and regulation through digital yuan infrastructure. Third, incentive compatibility: ensuring synchronized revenue distribution and risk prevention through smart contract automatic execution. This layer's institutional characteristic is "embedded coordination"—markets and law achieve two-way interaction through state regulatory mechanisms.

4.3.3 Output Layer: Optimal Coordination of Efficiency and Sovereign Security Under the Chinese Model

The output layer represents the final outcome of institutional evolution—the formation of the "China-characteristic patent pool securitization model." This model's features manifest in three aspects: First, innovation financing efficiency. Under the sovereign currency system, securitization products based on patent earnings can achieve faster liquidity and capital recovery, alleviating financing difficulties for small and medium-sized enterprises. Second, legal stability and sovereign security. Through e-CNY's compliant payment mechanisms, the state can control cross-border capital flows and prevent financial sovereignty "spillover effects." This embodies "sovereignty-constrained equilibrium" in institutional economics—states maintain macro-institutional stability through regulatory power. Third, cross-border financial integration. Drawing on MiCA experience, China can promote international alignment of digital financial rules and enhance international competitiveness by issuing offshore stablecoins pegged to the digital yuan (e-CNY) while maintaining regulatory sovereignty \cite{zetzsche2020}.

From a law and economics perspective, this model's core is not simply pursuing innovation efficiency but achieving "optimal coordination of efficiency and sovereign security" through institutional evolution. This reflects China's new legal logic in global digital economy governance—achieving a balance between innovation incentives and market integration under sovereign constraints through institutional adaptation and legal elasticity.

4.4 Constructing a Biopharmaceutical Patent Pool Securitization Model Under Sovereign Digital Currency + Stablecoin

4.4.1 Model Logic: Patent Pool → Securitization Product → Offshore (Sandbox) Stablecoin + Onshore Digital Yuan Payment/Settlement → Revenue Distribution

The fundamental logic of patent pool securitization lies in concentrating revenue expectations from multiple patent holders to form predictable cash flows, then conducting risk stratification and securitized issuance through structural financial instruments. However, traditional patent securitization faces limitations including insufficient liquidity, cross-border payment obstacles, and high transaction costs. Introducing stablecoins as settlement and distribution mechanisms can thus construct a closed-loop structure of "patent pool—securitization product—stablecoin settlement—revenue distribution," which also aligns with technological innovation system theory: "patent pool—securitization product—stablecoin settlement—revenue distribution—R&D reinvestment (patent formation)—new patent pool."

The first stage is patent pool formation. Pharmaceutical enterprises, research institutions, and investors collectively manage relevant drug patents through contracts or trusts, reducing transaction friction from "patent thickets" and achieving revenue unification \cite{nikolic2009}. This stage's core lies in IP rights confirmation and standardization of licensing revenues. Research shows that in industries with high R&D costs and failure rates, patent pools can significantly reduce licensing negotiation costs and transaction friction \cite{heller1998}.

The second stage is securitization product design. A Special Purpose Vehicle (SPV) packages the patent pool's future licensing revenues into underlying asset pools, which after credit rating and risk stratification are issued as securitization products (ABS/IP-Backed Securities). This process must comply with the Securities Law, Trust Law, and related disclosure obligations \cite{chen2010}.

The third stage is stablecoin payment and settlement. Using a dual-currency structure of foreign stablecoins pegged to domestic central bank digital currency (e-CNY) as transaction and redemption media can achieve high-efficiency, low-cost cross-border settlement \cite{odintsov2022}. Simultaneously, smart contracts can automatically trigger revenue distribution, enhancing transparency and enforceability \cite{deng2021}.

The fourth stage is revenue distribution and refinancing. Cash flows generated from securitization products can be automatically distributed to investors' wallets through smart contracts, with some stablecoins reinvested into new patent pool projects to form a circular financing mechanism. This model achieves the integration of "innovation assets—financial instruments—payment mechanisms," enhancing the sustainability of IP financialization (see Figure 4 [FIGURE:4]).

4.4.2 Model Innovation: Cross-Border Applications Supported by Smart Contracts + Stablecoin and Digital Yuan

In this model, the embedding of smart contracts + foreign stablecoins and domestic digital yuan (e-CNY) constitutes the core of institutional innovation. Smart contracts automatically execute revenue distribution, redemption, collateral release, and other operations when predetermined conditions are met \cite{yulianto2023}. This not only enhances financial transaction automation and transparency but also provides real-time data support for judicial supervision and compliance auditing \cite{mustafa2024}.

The People's Bank of China explicitly stated in the China Digital Yuan R&D Progress White Paper (2021) that e-CNY possesses legal tender status and controllable anonymity, enabling payment transparency and compliance regulation in cross-border scenarios \cite{pbc2021}. Integrating e-CNY into patent securitization settlement systems can reduce the potential risky asset attributes of foreign stablecoins while safeguarding legal tender status and AML compliance.

Therefore, at the currency settlement level, China can explore a two-tier system with parallel central bank sovereign digital currency (CBDC) and foreign compliant stablecoins: First, the onshore layer: dominated by e-CNY for domestic patent pool revenue settlement and distribution to ensure regulatory control. Second, the offshore layer: issuing foreign compliant stablecoins (similar to USDC, EURe) to participate in cross-border financing and settlement for attracting international capital. This system's key lies in issuance classification, functional division, and regulatory mutual recognition, balancing sovereign security and cross-border liquidity through "tiered regulation by monetary function."

Thus, embedding smart contracts and digital yuan + stablecoins in patent securitization not only helps improve capital flow efficiency but also legally achieves a traceable, accountable, and auditable financial ecosystem.

4.4.3 Comparison with Traditional Models: Advantages and Disadvantages in Liquidity, Transparency, and Risk Management

Compared with traditional patent securitization, the "stablecoin + digital yuan + patent pool" model offers advantages across three dimensions: First, enhanced liquidity: on-chain settlement with stablecoins and digital yuan facilitates cross-border capital flows, reducing foreign exchange and clearing costs—particularly significant for cross-border financing of small and medium-sized pharmaceutical enterprises \cite{dong2022}. Second, improved transparency: blockchain ledgers and smart contracts record the entire transaction process, making patent revenue distribution transparent and traceable, reducing information asymmetry \cite{catalini2019}. Third, optimized risk management: automated risk control through algorithmic rules and smart contract mechanisms, combined with the legal attributes of central bank digital currency, enhances transaction security.

However, the model also has shortcomings: First, stablecoin "depegging" or algorithmic failure risks may still cause systemic liquidity crises \cite{zhao2021}. Second, smart contracts face technical vulnerabilities and attack risks, requiring strict code auditing and formal verification \cite{tsankov2018}, coupled with a "smart contract lifecycle management framework" \cite{chu2023} and coordinated judicial governance and technical standards to advance risk control in blockchain finance \cite{koda2024}. Third, legally, cross-border payments involve complex issues including foreign exchange controls, monetary sovereignty, and judicial jurisdiction conflicts, requiring clear regulatory boundaries \cite{koda2024}.

Therefore, patent pool securitization should prioritize using central bank digital currency (e-CNY) bound to compliant stablecoins within regulatory sandboxes (such as Hong Kong) to ensure capital safety and policy controllability.

4.5 Summary: China-Characteristic Biopharmaceutical Patent Securitization Model

Viewed through the lens of law and economics, the China-characteristic biopharmaceutical patent securitization model demonstrates an "institutionally embedded innovation" logic: achieving coordinated equilibrium between innovation incentives and rule-of-law order through institutional elasticity under national sovereign constraints. This model can be summarized as a "three-element balance model" (see Table 4 [TABLE:4]). In law and economics terms, this institutional innovation not only responds to the practical needs of IP financialization but also reflects the structural self-evolution of China's rule-of-law system in the digital era. It does not pursue isomorphism through institutional transplantation but emphasizes institutional adaptation under sovereign logic—this is the core value of China-characteristic digital financial rule-of-law innovation.

Table 4 [TABLE:4]. Three-Element Balance Model

Element Institutional Design Law and Economics Logic Core Objective Monetary Sovereignty Onshore e-CNY + offshore sandbox stablecoins Sovereign control + compliance efficiency Payment security and risk prevention Property Rights Incentives Patent revenue rights securitization Rights clarification + revenue incentives Innovation motivation and investment returns Market Efficiency Smart contracts + sandbox regulation Technology governance + functional supervision Transaction efficiency and investor protection

5. Conclusion and Outlook

5.1 Research Review and Core Findings

This paper examines biopharmaceutical patent pool securitization as an entry point, exploring the interactive relationship between patent pool securitization and digital currency institutional innovation from a law and economics perspective. Based on comparative analysis of institutional experiences in the United States, European Union, Japan, and Hong Kong, combined with China's regulatory environment and policy logic, the paper proposes a law and economics reconstruction framework for China-characteristic biopharmaceutical patent securitization.

The study finds that China's current institutional environment presents "three structural tensions": first, the tension between sovereign logic and market logic—strong sovereign orientation in financial regulation ensures systemic stability but somewhat inhibits innovation efficiency and cross-border capital flows; second, the fragmentation tension in the legal system—intellectual property law, securities law, and financial regulation law have not yet achieved coordination at institutional boundaries, leading to ambiguous legal attributes of innovative assets; third, the functional misalignment between policy and market—policy emphasizes risk prevention and compliance review, while market mechanisms have not yet formed adequate incentive structures.

Against this backdrop, this paper constructs a "monetary sovereignty—property rights incentives—market efficiency" three-dimensional synergy model through law and economics analysis, proposing "institutional adaptive innovation under sovereign constraints" as the core theoretical proposition for China-characteristic pathways. This model reveals that the uniqueness of China's institutional innovation does not stem from complete marketization or legal isomorphism but from achieving dynamic balance between innovation and security through legal elasticity and institutional coordination within a strong sovereign system.

5.2 Theoretical Significance: From Institutional Transplantation to Institutional Genesis

At the theoretical level, this paper expands and integrates existing research on IP financialization and digital currency regulation, with three main innovations:

First, it breaks through the limitations of the "institutional transplantation" perspective. Previous academic research on patent securitization mostly borrowed from the U.S. Royalty Pharma model or EU High-Quality Securitization (HQS) system without fully considering China's unique regulatory logic and monetary system. This paper emphasizes "institutional genesis" rather than simple imitation—achieving China-characteristic financial innovation frameworks through adaptive reconstruction of existing institutions \cite{pistor2019}.

Second, it constructs a three-dimensional analytical framework. Using monetary sovereignty, property rights incentives, and market efficiency as three pivot points, this paper reveals the "embedded coordination mechanism" in China's financial rule-of-law system. This framework inherits Posner's "efficiency-oriented rule-of-law" theory and Demsetz's property rights evolution logic, demonstrating that the core function of legal systems is reducing transaction costs and maintaining institutional predictability \cite{posner2014}. Through analysis of the integration mechanism between digital yuan (e-CNY) and patent pool securitization, this paper further validates the practical applicability of the law and economics proposition of "sovereignty-embedded markets."

Third, it proposes a Chinese model of "coexistence of institutional elasticity and functional regulation." At the regulatory theory level, this paper advocates replacing "entity classification regulation" with "functional regulation," granting institutional flexibility through regulatory sandboxes and tiered authorization mechanisms to address the rapid iteration of digital finance \cite{zetzsche2020}.

Therefore, China's biopharmaceutical patent securitization system should not be viewed as "delayed imitation" of Western legal structures but understood as an institutional innovation form endogenously generated within the sovereign financial order.

5.3 Institutional Significance: From Financial Security to Innovation Governance

Institutionally, this research demonstrates that China-characteristic biopharmaceutical patent securitization is not merely financial innovation or IP policy reform but rather a comprehensive institutional engineering project whose goal is achieving macro-equilibrium among "security—efficiency—innovation." First, at the financial security level, the sovereign currency framework centered on digital yuan, combined with a dual-currency structure of foreign stablecoins, ensures controllability and compliance in cross-border settlement, preventing foreign stablecoins from directly impacting the national monetary system \cite{pistor2021}. Second, at the innovation incentive level, patent pool securitization mechanisms achieve IP capitalization and risk sharing, providing new financing channels for small and medium-sized pharmaceutical enterprises \cite{wang2011}. Third, at the institutional coordination level, the combination of smart contracts and regulatory sandboxes achieves integration of "technological governance and rule-of-law governance," forming a dynamically adjustable institutional ecology \cite{pistor2021}.

The significance of this institutional model lies in its being the first to integrate four major systems—sovereign currency, foreign stablecoins, intellectual property, and financial regulation—within a single institutional framework, achieving an institutional leap "from departmental coordination to systematic integration." This not only provides a model for domestic rule-of-law modernization but also offers Chinese solutions to global digital financial governance.

5.4 Outlook: From Institutional Coordination to Chinese Solutions for Global Governance

Looking forward, China-characteristic biopharmaceutical patent securitization systems need to further achieve balance between institutional openness and risk controllability. This paper suggests three directions for institutional optimization and theoretical deepening:

First, promote cross-border institutional mutual recognition. China can align with EU MiCA and Hong Kong VASP systems under the Belt and Road Initiative and Guangdong-Hong Kong-Macao Greater Bay Area framework to form international digital financial rule mutual recognition mechanisms, laying legal foundations for international circulation of biopharmaceutical patent pool securitization \cite{somoza2020}.

Second, construct a multi-level IP financial market. China should promote a multi-layer capital system covering IP pledge financing, securitization products, and risk reinsurance, drawing on U.S. IP market experience to establish a national-level IP trading center \cite{nikolic2009}.

Third, perfect the digital financial rule-of-law system. China needs to promptly enact foundational legislation such as a Digital Finance Law to clarify the legal status of digital assets and finance, establishing a rule-of-law framework with both elasticity and constraint.

From a broader perspective, in constructing the "digital yuan + regulatory sandbox stablecoins + patent securitization" institutional system, China is exploring a new global financial governance logic: using sovereign currency as the institutional anchor, foreign sandbox stablecoins as the leverage, IP financialization as market momentum, and legal adaptability as governance tools, ultimately achieving symbiosis and co-prosperity among rule-of-law order, technological innovation, and international coordination.

As U.S. legal scholar Katharina Pistor states in The Code of Capital: "The power of law lies in its ability to construct capital, while the wisdom of law lies in its capacity to maintain order amidst change" \cite{pistor2019}. This proposition is precisely the theoretical pivot for China's institutional innovation to move toward the center of global digital economy governance.