When entering into a tontine, the value of the tontine for the participant highly depends on its composition (e.g. the age of the participants, the amount invested by each of them already invested in the tontine). However, participants subscribe to the scheme without any knowledge of either the composition of the tontine, or, in some cases, its exact payout scheme. Herein, we quantify the value of this information using certainty equivalents in the expected utility setting and a measure for model risk that allows us to obtain bounds on the tontine value subject to uncertainty in certain characteristics. We then propose a smart contract that offers full disclosure of information in a tontine. We discuss the practical implementation of such a tontine and present some new risks that could arise.
Darren Aiello, Tetyana Balyuk, Marco Di Maggio, Mark J. Johnson · 6 authors
This paper uses transaction-level data across millions of accounts to identify cryptocurrency investors and evaluate how fluctuations in individual crypto wealth affect household consumption, equity investment, and local real estate markets.We estimate an MPC out of unrealized crypto gains that is more than double the MPC out of unrealized equity gains but smaller than the MPC from exogenous cash flow shocks.This MPC is mostly driven by increases in cash/check spending and mortgages.Moreover, households sell crypto to increase both discretionary as well as housing spending.As a result, crypto wealth causes house price appreciation-counties with higher crypto wealth see higher growth in home values following high crypto returns.Our results indicate that cryptocurrencies have substantial spillover effects on the real economy through consumption and investment into other asset classes.
Michael Weber, Stephen Sheflin, Olivier Coibion, Yuriy Gorodnichenko
Using repeated large-scale surveys of U.S. households, we study the cryptocurrency investment decisions and motives of households relative to other financial assets.Cryptocurrency holders tend to be young, white, male and more libertarian relative to non-crypto holders.They expect much higher rates of returns for crypto and perceive it as relatively safer than do other households.They also view it as a better hedge against inflation.For those holding cryptocurrencies, changes in Bitcoin prices translate into their purchases of durable goods.Finally, exogenously-provided information about historical returns of cryptocurrencies leads individuals to increase their desired crypto holdings and makes them more likely to actually purchase cryptocurrency subsequently.We compare these views and behaviors to those of households toward other financial assets and argue that cryptocurrency is unique in many of these respects.
This article contributes to the limited empirical literature on the impact of decentralization on psychological wellbeing by investigating the hypothesis which signifies that shifts toward more fiscal decentralization in health services would be accompanied by improvements in health outcomes. Formulating a conventional public finance model applied to health care, this hypothesis is tested on a panel data of the Pakistan's provinces during the period 1990 to 2015. The empirical underpinning of the article suggested that the economic reforms of 2001 in Pakistan's healthcare sector, through fiscal decentralization, have imposed a substantial and positive influence on the effectiveness of the public policy in improving the healthcare outcomes over the examined period.
Blockchain technology, perhaps the most revolutionary invention of the 21st century, was popularized by introducing the world's first cryptocurrency 'Bitcoin.' However, despite many purported advantages offered by cryptocurrencies, they eluded mass adoption due to their extreme volatility. This flaw led to the ideation of an alternate cryptocurrency, 'stablecoin' which have seen their popularity surge almost 10x within a year. Further, the world has also witnessed the evolution of new business structures in decentralized autonomous organizations ('DAOs') where ownership and management intermingle with the help of smart contracts driven blockchain technology.
The profoundness of these new-age concepts could see them become the inherent elements of the global economy soon. This development would also necessitate devising new tax policies to cater to the crypto and blockchain-driven world. So far, not much has been discussed or debated around the income-tax implications for these concepts. With this background, the authors have deep-dived into the concept of stablecoins, their mechanics and explored the possible income tax implications throughout the lifecycle of different stablecoins. The authors have also discussed the concept of DAO along with a real-world case study, examine conceivable income tax offshoots that could arise due to DAO's unique nature, and sign-off with a suggestion on the probable solution.
Christopher S. Henry, Kim P. Huynh, Gradon Nicholls, Mitchell Nicholson
The Bank of Canada continues to use the Bitcoin Omnibus Survey (BTCOS) to monitor trends in Canadians’ awareness, ownership and use of Bitcoin. The most recent iteration was conducted in late 2018, following an 85 percent decline in the price of Bitcoin throughout the year.
The four essays contained herein this study focus on recently emerged questions in the field of Financial Technology (FinTech). This new finance domain has a growing importance in the finance discipline, policy, and practice. The FinTech is the common theme, while the thesis is organised to investigate the open questions separately in the essays. The first essay assesses the required human capital in FinTech. Recent technological developments have enabled a wide array of new applications in financial markets, e.g. big data, cloud computing, artificial intelligence, blockchain, cryptocurrencies, peer-to-peer lending, crowdfunding, and robo-advising, inter alia. While traditionally comprising of computer programs and other technology used to support or enable banking and financial services, the new FinTech is often seen as enabling transformation of the financial industry. A more moderate and critical view suggests that for the full transformative potential of FinTech to be enabled, there is a need for an updated educational curriculum that balances knowledge and understanding of finance and technology. A curriculum that provides a skill portfolio in these two core components and complements them with applied knowledge. This essay also makes an inquiry into the educational curriculum in finance and technology, aiming to inform this modern educational agenda, and into the skills shortages, as identified by firms and experts with examining some of the first educational programmes in FinTech. The second essay investigates the relationship between financial literacy and attitudes to cryptocurrencies, using microdata from 15 countries. The financial literacy proxy exerts a large negative effect on the probability of currently owning cryptocurrencies. The financially literate are also more likely to be aware of cryptocurrencies, and less to own them due to their price volatility. In addition, data from a second survey of retail investors in three Asian countries is used to externally validify the financial literacy proxy and findings. I show that the relationship between financial literacy and attitudes to cryptocurrencies is moderated by a different perception of the financial risk involved in cryptocurrencies versus traditional investments by the more financially literate. The findings shed light on the demand for cryptocurrencies among the general population and suggest has been largely driven by unsophisticated investors. The third and fourth essays are closer in their empirical investigation of asset price timeseries data. In the third essay, I assess the bitcoin futures introduction into the retail investor driven marketplace. Bitcoin futures were introduced in December 2017 as an effort to provide institutional and retail investors with additional trading tools for bitcoin. This study analyses the bitcoin Futures mid-quote data from CBOE, and Bitcoin market index applying VAR and VECM process methodologies, Hasbrouck’s information share and the Gonzalo-Granger component share measurement to examine price discovery in bitcoin markets. The results drawn on the intra-day prices show that the futures are leading the price discovery at different frequencies even with comparably low futures trading volumes. The empirical results support the extant literature of futures-spot market price discovery and the role of informed traders in the futures market. Finally, the fourth essay attempts to evidence the network externalities on digital assets using exchange-listed Initial Coin Offerings (ICOs) data. Utilising an online database comprising of self-reported ICO characteristics, measures of post-ICO performance, along with information on business social networks, higher fundraising figures are found to contribute positively to the ICO long-term success. This positive impact is multiplied by six times when fundraising is conducted to an existing, proprietary blockchain. This large impact is explained by the network effect. The modified information ratio measure is introduced to approximate the comparative quality signalling of ICO organisations using price timeseries and benchmarking these to already functioning blockchain technology, e.g. ethereum in the long-term. The ICO sample’s mean trading period on an exchange is 1.5 years and is used for long-period asset analysis. Additionally, the cointegration to the market technology benchmark is found to have a large, significant negative effect on long-term ICO organisational success as this indicates lower ICO intrinsic value. The final concluding chapter summarises the thesis contribution, implications and a selection of future research avenues relating to FinTech research sub-field.
Cryptocurrency has been increasingly popular with investors. Using the 2018 National Financial Capability Study Investor survey, we examined the association between investment literacy and cryptocurrency investment—about 13% of investors invested in cryptocurrency directly or indirectly. Results from regression analyses show that objective investment literacy was negatively while sub- jective literacy was positively associated with holding cryptocurrency. Overconfident investors were more likely to invest in cryptocurrency, and results were robust across three overconfidence meas- ures. This study has implications for investment advice, financial education, and research.
Cardano was launched in October 2017 and by May 2021 has been operational for 44 months. Comparison with its closest rival, Ethereum, reveals that their prices are highly correlated but the change in daily closing prices do not always move in unison. Cardano is also more volatile than Ethereum and In terms of growth Cardano is lagging behind. Cardano’s only saving grace is its transaction fees, which are considerably lower than Ethereum. However, care must be taken in understanding the structure of any data source. In this case three data sources are used and results vary depending on the precision of the price data, particularly Cardano which for a number of years did not trade above one dollar.
Atte Oksanen, Eerik Mantere, Ilkka Vuorinen, Iina Savolainen
OBJECTIVES: Online platforms enable real-time trading activities that are similar to those of gambling. This study aimed to investigate the associations of traditional investing, real-time stock trading, and cryptocurrency trading with excessive behavior and mental health problems. STUDY DESIGN: This was a cross-sectional population-based survey. METHODS: The participants were Finnish people aged 18-75 years (N = 1530, 50.33% male). Survey asked about monthly regular investing, real-time stock-trading platform use, and cryptocurrency trading. The study had measures for excessive behavior: gambling (Problem Gambling Severity Index), gaming (Internet Gaming Disorder Test), internet use (Compulsive Internet Use Scale), and alcohol use (Alcohol Use Disorders Identification Test). Psychological distress (Mental Health Inventory), perceived stress (Perceived Stress Scale), COVID-19 anxiety, and perceived loneliness were also measured. Background factors included sociodemographic variables, instant loan taking, and involvement in social media identity bubbles (Identity Bubble Reinforcement Scale). Multivariate analyses were conducted with regression analysis. RESULTS: Within the sample, 22.29% were categorized into monthly regular investors only, 3.01% were investors using real-time stock-trading platforms, and 3.59% were cryptomarket traders. Real-time stock-trading platform use and cryptocurrency trading were associated with younger age and male gender. Cryptomarket traders were more likely to have an immigrant background and have taken instant loans. Both real-time stock-trading platform use and cryptomarket trading were associated with higher excessive behavior. Cryptomarket traders especially reported higher excessive gambling, gaming, and internet use than others. Cryptomarket traders reported also higher psychological distress, perceived stress, and loneliness. CONCLUSIONS: Regular investing is not a risk factor for excessive behavior. However, rapid online trading platforms and applications were significantly more commonly used by participants reporting excessive behavior and mental health problems. The strong association between cryptomarket trading and excessive behavior in particular underlines the need to acknowledge the potential risks related to real-time trading platforms.
Kim P. Huynh, Christopher S. Henry, Gradon Nicholls, Mitchell Nicholson
The Bank of Canada commissioned the Bitcoin Omnibus Survey in 2016 to monitor trends in the adoption and use of Bitcoin and other cryptoassets. This report presents findings from the latest iteration of the survey, which was conducted in 2018. We find that between 2016 and 2018 the share of Canadians who were aware of Bitcoin increased from 62 percent to 89 percent and those that owned Bitcoin increased from 3 percent to 5 percent. However, the share of past owners also increased, suggesting an influx of Bitcoin owners who subsequently divested after the steep rise of prices in 2017. The main reason for owning Bitcoin remains speculation, though this share decreased slightly since 2017. On the other hand, the share of Canadians who reported using Bitcoin for transactions a few times a month or more increased. Finally, we discuss how Bitcoin adopters differ from overall Canadians with respect to their financial literacy and cash holdings.
The emergence of digital financial technology, such as blockchain, cryptocurrencies, and decentralized finance (DeFi) has created new opportunities in the field of financial inclusion, although gender differences are still very strong. The research paper examines the acceptance and effects of Web3 financial tools on the economic empowerment of women, the access and use as well as the financial literacy levels of women in the developed and emerging economies. The research design is a mixed-method study that will involve quantitative data based on blockchain transaction data, the use of digital wallets, and financial inclusion indicators, and qualitative data collection based on structured interviews and focus groups with female users and fintech providers. The results show that there are also a great difference in the adoption: women in technologically developed areas are better equipped with access, financial literacy, and institutional support, and women in resource-deprived regions have challenges with limited internet connectivity, lack of digital literacy, and socio-cultural constraints. In spite of such difficulties, Web3 technologies can contribute to making women more financially independent through facilitating inexpensive and safe transactions, decentralized savings, and having access to alternative credit structures. In addition to this, the user interaction also indicates subtle preferences: digitally literate users prefer convenience, transparency, and privacy, whereas the less digitally equipped ones focus on trust, education, and community support. Strategic interventions presented in the paper, such as female-sensitive policy models, specific financial literacy interventions, and onboarding strategies driven by communities, are also suggested to facilitate fair involvement in the Web3 ecosystem. Through the identification of both prospects and obstacles to digital finance that is inclusive of gender, this paper illustrates that Web3 can be used as an empowering opportunity in the economy and financial sustainability. The findings can be added to the increasing body of research on digital finance and presented as evidence-based policies to help policymakers, fintech developers, and advocacy organizations to enhance the gender gap in digital financial technology adoption.
In this note I show that quadratic funding achieves decentralized social efficiency in the extent there are enough (donor) matching funds to cover the quadratic funding objective. If individual backers internalize that matching funds will not be sufficient to reach the quadratic level, allocation will be biased towards the capitalist allocation, the more so, the less matching funds are available. This result emerges even when individual contributors are not required to finance the deficit (i.e., the difference between total contributions and available matching funds). I also show properties of the level of required matching fund, in order to better understand under which conditions social efficiency will most likely be compromised.
The purpose of this study is to reveal whether cryptocurrency and non-cryptocurrency investors are different in terms of financial threats. In order to measure financial threat, 5-Item Financial Threat Scale (FTS) is used. It is found that the Turkish version of a 5-Item Financial Threat Scale (FTS) is highly reliable, unidimensional and a valid instrument for measuring the financial threat. According to the analysis, non-cryptocurrency investors have a more significant financial threat than cryptocurrency investors. Moreover, it is investigated that the working sector difference is not a distinguishing factor for financial threat. It is found that financial threat is associated with age, level of education, and monthly income. On the other hand, it is obtained that gender and marital status are not affecting factors for financial threat.
This paper aims to propose some behavioural biases of trading in Bitcoin. It is review literature in the areas of behavioural finance that address issues related to Bitcoin to underpin the conceptual model. A conceptual model for understanding the behavioural bias that affects investing in cryptocurrency is proposed. The biases are herding, optimism, overconfidence, confirmation bias, loss aversion, and gamblers’ fallacy. This paper ought to fill the research gap on cryptocurrency from the behavioral perspective. This paper implies that prices and Bitcoin transactions are more determined by psychological factors.
The 2017 were remarkable times for Bitcoin and other cryptocurrencies.In January 2017, the market price for one unit of Bitcoin (1 BTC)' was approximately $1,000; by December 2017, it had climbed to almost $20,000.2Despite the collapse of this speculative bubble, Bitcoin remains an important development in economics, finance, technology, and law.Also in 2017, Bitcoin produced an offshoot cryptocurrency, Bitcoin Cash.Bitcoin Cash arose because members of the Bitcoin community disagreed on how Bitcoin should change in response to its growing popularity and allow for a greater number of transactions. 3 Bitcoin and other cryptocurrencies are governed by "communities" and "consensus.' Community members who wanted deeper, more structural, changes effectively departed the Bitcoin community and created a new one, Bitcoin Cash.The dissidents did not create Bitcoin Cash from scratch.Instead, they cloned Bitcoin as it existed on August 1, 2017 and grafted their desired changes onto the cloned system.sSince Bitcoin is not backed by any external assets or business enterprise, 6 the dissidents could create Bitcoin Cash seemingly out of thin air, writing some computer code and garnering support of users.There was no severance, spin off, or other division of the Bitcoin system in a formal or legal sense.Since its creation, Bitcoin Cash has become a successful cryptocurrency, currently ranking sixth in terms of market ' See infra Part III.B.
Georgios A. Panos, Tatja Kärkkäinen, Adèle Atkinson
We examine the relationship between financial literacy and attitudes to cryptocurrencies, using microdata from 15 countries. Our financial literacy proxy exerts a large negative effect on the probability of currently owning cryptocurrencies. The financially literate are also more likely to be aware of cryptocurrencies, and more likely to report that they do not intend to own them. We confirm the external validity of our financial literacy proxy and findings using data from a second novel survey of retail investors in 3 Asian countries. More financially literate retail investors are more likely not to have held any cryptocurrencies. We show that the relationship between financial literacy and attitudes to cryptocurrencies is moderated by a different perception of the financial risk involved in cryptocurrencies versus alternative instruments by the more financially literate. Our findings shed light on the demand for cryptocurrencies among the general population and suggest that it is largely driven by unsophisticated users.
Long Finance's Distributed Futures research programme is pleased to announce the publication of the report, “Smart Ledgers & Collective Defined Contribution Pensions”
Veterans of the UK pensions scene often describe a former world in which pensions were organised on a best efforts basis. They tend to lament its passing and view the current situation, in which pensions promises are either hard and immutable, as is the case with UK defined benefit (DB) schemes, or non-existent, as is the case with defined contribution (DC) schemes, unfavourably. However, in recent years, there has been an aspiration to allow greater flexibility and innovation in pension provision, than is allowed by these two extremes.
The report focuses on collective defined contribution (CDC) pensions, a new integrated system of accumulation and decumulation, which brings with it some new technological challenges. There is a need for an integrated administration and management system. Some aspects of a CDC scheme are rooted in practices arising in the DB world and some in DC, but there are also some which are entirely new, such as risk-sharing among members.
The use of smart ledger technology is a natural solution to many of the challenges a CDC structure poses for pensions governance and administration. First, smart ledgers, ensure the accuracy and immutability of previous records including the assumptions and decisions of trustees. Consequently, there is transparency as to the decision process, which is not something that currently exists in pensions. Second, the multi-period accruals of assets, contributions, and the entitlements of scheme members, as well as the payment of pensions are all linked in chains over time. This technology therefore affords transparency for members; they may view both the capital value and the pension income equivalent of this in near real-time, as well as its historic evolution.
As Michael Parsons, Chairman of Cardano Foundation, wrote in his Foreword “There couldn’t be a more pertinent publication for Distributed Futures than one on pensions. Why? Because pensions require long-term, complex administration against a set of rules with good governance. Think immutable ledgers, smart code, and well-thought-out long-term governance, i.e. smart ledgers.“
The invention of Bitcoin in 2008/2009 gave consumers and businesses the possibility to transfer money nationally and internationally on a truly peer-to-peer basis (i.e. without a trusted central party such as a bank). Few people realised the full potential of the technology in the early days, but today blockchains are often referred to as the “internet of trust”. This term relates to the universal potential of blockchain technology, which goes beyond payment systems and enables people that do not trust each other to directly exchange (digitally representable) goods and services with each other. Today’s variety of blockchain technologies, including many crypto currencies, is impressive. Start-ups and IT incumbents are constantly reducing the speed, cost and effort it requires to transfer crypto currencies globally, while also increasing transaction capacity and offering services that go beyond payments. This discussion paper characterises the 10 biggest crypto currencies in terms of market capitalisation and explains the functioning principles of their underlying technologies. These variants of the technology are also essential for non-financial applications. A focus of this paper is the potential of blockchain technologies to improve (international) payments and land registries. Bitcoin-enabled payments were the first application of blockchain technology, and frictionless (international) payments are an essential part of financial inclusion. In contrast, improving land registries is a more innovative use of the technology, but the connection to financial inclusion is not straightforward. However, land registries may indeed play an important role in fostering access to credit for financially underserved people. Almost any technology comes with new risks, and blockchains are no exception to this rule. Although blockchains can provide a very high level of safety and immutability, it depends on the concrete design of the implementation whether this potential is realised. In addition, some blockchain technologies are very energy-intensive, which is an environmental risk. Finally, the high levels of volatility of most crypto currencies represent an economic risk for their users. National and international regulators are challenged by the rapid evolvement of the technology and should aim to mitigate its risks without compromising its potential.
The accounting profession has long occupied a role and fiduciary responsibility aligned with fraud prevention and safeguarding consumer data and finances. As cryptocurrencies become more prominent and widespread, including utilization by both individual consumers and organizations, the risk of unethical actors entering the market continues to rise. This research approaches the situation from two angles. First, a review of cryptocurrency and blockchain technology, including an overview of the initial coin offering (ICO) process is conducted, including regulatory updates in the space. Second, and important for both academic and practitioner end users of this research, a checklist, guide, and items to consider to assist in preventing fraud connected to cryptocurrencies will be provided.