A recente expansão global do uso de moedas virtuais passou a ser objeto de debate nos três últimos Fóruns das Nações Unidas sobre Governança da Internet (IGF), de 2014, 2015 e 2016. A capitalização e a rápida expansão geográfica do uso de criptomoedas chamaram a atenção de pesquisadores e mobilizaram representantes da sociedade civil e empresários em várias partes do mundo, que demonstraram interesse no desenvolvimento de inovações impulsionadas pela expansão do uso globalizado desse novo tipo de atividade econômica. Os principais objetivos deste trabalho são: analisar como a recente crise financeira do capitalismo influiu no surgimento e na expansão geográfica do uso de criptomoedas; refletir sobre serviços e atividades que usam criptomoedas, bitcoin e blockchain; e debater os desafios colocados pelo crescimento desse uso.
In 2008, following the outbreak of the global financial crisis, a new trading system emerged that was made possible by cryptographically-produced currencies. Among them, the most popular digital cryp-tocurrency is undoubtedly the Bitcoin. This alternative way of trading quickly captured the interest of both businesses and consumers. Combined with a general lack of confidence towards financial institu-tions, central governments, and the effect of capital controls imposed across several countries, Bitcoins begun being used extensively for funds transfer across borders and general payments. How-ever, it is unclear whether the use of Bitcoins is extensive enough so as to lead to complete or partial disintermediation of monetary transactions, and whether users understand how the technology works and what are the inherit risks of this alternative payment mechanism. This paper addresses these ques-tions through a survey-based study, conducted within the Greek context, where capital controls are still active and awareness regarding cryptocurrencies seems to be on the rise. Our findings show that despite that end-users of Bitcoin are somewhat concerned with regards to security issues, they are nevertheless interested in its use for identifying new business opportunities and bypassing residency-based measures, such as capital controls.
The recent growth of financial technology ventures involves several types of financial players, including stock exchanges. Many of them are exploring blockchain applications to their multiple business lines, focusing in particular on post trading activities. Potential benefits include the reduction in counterparty risk and post trading costs as well as the increase of liquidity and transparency. At current stage exchanges are mainly exploring the technology looking for proofs of concept, with the exception of some more advanced projects like at Nasdaq and ASX. The mass adoption will require longer efforts and is expected to come in a decade, at least. Fintech developments are receiving strong attention also by regulators and international organizations, given the potential of distributed ledger technology for both competition enhancement and cyber risk reduction. A coordination between market players and regulators is essential to guarantee the effective implementation of new technologies, as their benefits can be delivered only in presence of a common framework and a proper management of risks.
Stefanie Roos, Pedro Moreno-Sánchez, Aniket Kate, Ian Goldberg
Path-based transaction (PBT) networks, which settle payments from one user to\nanother via a path of intermediaries, are a growing area of research. They\novercome the scalability and privacy issues in cryptocurrencies like Bitcoin\nand Ethereum by replacing expensive and slow on-chain blockchain operations\nwith inexpensive and fast off-chain transfers. In the form of credit networks\nsuch as Ripple and Stellar, they also enable low-price real-time gross\nsettlements across different currencies. For example, SilentWhsipers is a\nrecently proposed fully distributed credit network relying on path-based\ntransactions for secure and in particular private payments without a public\nledger. At the core of a decentralized PBT network is a routing algorithm that\ndiscovers transaction paths between payer and payee. During the last year, a\nnumber of routing algorithms have been proposed. However, the existing ad hoc\nefforts lack either efficiency or privacy. In this work, we first identify\nseveral efficiency concerns in SilentWhsipers. Armed with this knowledge, we\ndesign and evaluate SpeedyMurmurs, a novel routing algorithm for decentralized\nPBT networks using efficient and flexible embedding-based path discovery and\non-demand efficient stabilization to handle the dynamics of a PBT network. Our\nsimulation study, based on real-world data from the currently deployed Ripple\ncredit network, indicates that SpeedyMurmurs reduces the overhead of\nstabilization by up to two orders of magnitude and the overhead of routing a\ntransaction by more than a factor of two. Furthermore, using SpeedyMurmurs\nmaintains at least the same success ratio as decentralized landmark routing,\nwhile providing lower delays. Finally, SpeedyMurmurs achieves key privacy goals\nfor routing in PBT networks.\n
New cryptocurrencies are emerging almost daily, and many interested parties are wondering whether central banks should issue their own versions. But what might central bank cryptocurrencies (CBCCs) look like and would they be useful? This feature provides a taxonomy of money that identifies two types of CBCC – retail and wholesale – and differentiates them from other forms of central bank money such as cash and reserves. It discusses the different characteristics of CBCCs and compares them with existing payment options.
This article examines the pricing efficiency of Bitcoin Investment Trust. We investigate the deviation between prices and net asset values and find that there is a significant and persistent premium with an average of 44%. Such evidence points to pricing inefficiency of the currently available trust and encourages practitioners to introduce better instruments such as Exchange Traded Funds as alternatives to investors interested in having exposure to bitcoins and the digital currencies market.
Blockchain technology is likely to be a key source of future financial market innovation. It allows for the creation of immutable records of transactions accessible by all participants in a network. A blockchain database is made up of a number of blocks ?chained? together through a reference in each block to the previous block. Each block records one or more transactions, which are essentially changes in the listed owner of assets. New blocks are added to the existing chain through a consensus mechanism in which members of the blockchain network confirm transactions as valid. The technology allows the creation of a network that is ?fully peer to peer, with no trusted third party, ? such as a government agency or financial institution.
Les autorités monétaires et bancaires qui ont été pendant des siècles les tuteurs non acceptés des individus, représentant la puissance publique et sa coercition font l’objet d’un rejet souvent bien compréhensible. De nouvelles monnaies, ou pseudo-monnaies, fondées sur la cryptographie, sont apparues et se développent à l’aide de la technique des chaînes de blocs, avec des réseaux décentralisés de personnes actives ne souhaitant plus collaborer avec les banques. Quelles sont les promesses et les menaces de cette nouvelle approche pécuniaire ? Ses avantages compensent-ils ses risques ? C’est ce que nous allons tenter de préciser en combinant, approche diachronique, données d’enquêtes et recoupements multidimensionnels. Le principal résultat est que les monnaies virtuelles demeurent risquées et ne constituent pas un substitut définitif des faiblesses bancaires.
We introduce blockchains and distributed ledgers and describe their potential applications to money and banking. The analysis compares public and private ledgers and outlines the suitability of various types of ledgers for different purposes. Furthermore, a few historical prototypes of blockchains and distributed ledgers are presented, and results of their hard forking are illustrated. Next, some potential applications of distributed ledgers to trading, clearing and settlement, payments, trade finance, etc. are outlined. Monetary circuits are argued to be natural applications for blockchains. Finally, the role of digital currencies in modern society is articulated and various forms of digital cash, such as central bank issued electronic cash, bank money, bitcoin and P2P money, are compared and contrasted. Keywords: blockchains, distributed ledgers, digital currencies, modern monetary circuit; credit creation banking; interconnected banking network.
The agencies of money gain new currency as new privately owned systems for creating and transferring value occupy the imagination of industry players and regulators, as well as us everyday folk. Experts have predicted the end of cash and coin almost as soon as modern governments standardized their issue. But before there was coin, there were records of transactions warranting other transactions and literally inscribing (in clay, stone, papyrus) the distributed agencies of human interaction. Asking after the infrastructures facilitating that transfer leads to the role of accounting not as a record of monetary interaction, but as that interaction itself. It is precisely a question of the distribution of agency: who shall make entries into the great ledger of human transaction and exchange? As the ledger pluralizes, who controls the cross-referencing, the gateways between newly dispersed accounts?
Following years of study the Gulf Cooperation Council (GCC) appears ready to adopt the recommendations of the International Monetary Fund (IMF) and put in place a tax system that will stabilize revenue. A value added tax (VAT) and corporate income tax (CIT) are considered. A VAT Framework Agreement, that functions like the VAT Directive in the EU, has been agreed. Although new, the GCC VAT is very worthy of attention. From a tax policy perspective, it is making notable improvements to EU VAT design. The GCC VAT is (potentially) the world’s first real-time, blockchain-secured, multi-jurisdictional VAT. This is a remarkable accomplishment, and it indicates that the GCC has learned and applied a number of global VAT and technology lessons. One of the most visible flaws in the EU VAT is its openness to cross-border frauds – both intra-community and extra-community frauds. Missing traders are the problem. This is what the GCC has corrected. The perpetrators of tax fraud are not at all concerned about the specific tax law that they are abusing; they are looking solely at revenue streams, and the probability that they will get caught. As a result, when a fraudster finds a single activity that attacks multiple tax systems, it becomes a favored vector, and we find a nexus of frauds clustered around a unitary fraud operation. The government’s perspective is just the opposite of the fraudster’s. A focus on one kind of tax fraud may well resolve many more kinds of fraud. This appears to be what will happen as the GCC VAT is rolled out after January 1, 2018. The example considered in this paper involves the illicit cigarette trade. By resolving missing trader frauds, the GCC may (unintentionally) make a serious dent in the illicit cigarette trade and the theft of cigarette tax revenues (a manufacturer’s tax), precisely because the operation of the GCC VAT will increase the cigarette fraudster’s probability of detection. A “tax fraud nexus” that could easily be replicated in the GCC (if an unmodified EU-style VAT were to be adopted) can be seen in the Danish chocolate frauds. These frauds were examined in the first program of the three part Danish documentary, How Fraudulent Denmark (Sådan Svindles Danmark). The documentary appeared on DR TV January 12 and 25, and February 1, 2016. The fraud vehicle was candy that was re-sold by traders who purchased expired chocolate from the Mars Denmark Company. The primary fraud, re-packaging and then re-selling expired chocolate was carried out in a manner that attacked two tax regimes – the chocolate tax (a manufacturer’s tax) and the VAT (a consumption tax). This scheme funded organized crime; a different scheme examined in the second program of the documentary funded Islamic terrorists. The GCC seems to be very aware of the missing trader fraud discussed in the documentary. Technology innovations that will suppress it are set out in Article 71 of the GCC Framework Agreement. No other VAT Framework or VAT Directive has such a provision. One of the tax-related side benefits from resolving missing trader fraud in the GCC VAT will likely be the suppression of cigarette smuggling, and the recovery of important revenues from the cigarette tax, which has been raised to a 200% levy. If Denmark had a VAT provision similar to Article 71 it would likely solve the VAT and Chocolate Tax frauds considered in the documentary.
Securities regulators in the world do not actively regulate cryptocurrency yet. For an effective, active securities regulation, I introduce four novel propositions for the regulators. First, the cryptocurrency technology and its peer-to-peer network are meaningless without the activities of the involved people. Second, the private key of cryptocurrency should be utilized as an identification tool. Third, the active regulation should include a mandatory reporting provision of cryptocurrency transactions and balance. Fourth, the transaction size and ledger length of cryptocurrency should be used as regulatory risk measures. My propositions are founded on a combined analysis of law, finance, math, and technology. Then, I discuss a possible unification of currencies across the globe, with the potential to establish an international cryptocurrency authority.
Morten Linnemann Bech, Yuuki Shimizu, Paul T. P. Wong
This feature looks at technology in payment systems. It compares the diffusion of real-time gross settlement (RTGS) systems for wholesale payments with that of faster systems for retail payments (fast payments). RTGS systems emerged in the 1980s and were adopted globally within a span of 30 years. Fast payments followed in the early 2000s, offering instant payments on a 24-hour, seven-day basis. So far, the diffusion of fast payments mirrors that of RTGS, and it is primed to take off. Yet even while adoption of fast payments is under way, the next generation of payment systems, such as those based on distributed ledger technology, is under development.
Roman Beck, Christian Becker, Juho Lindman, Matti Rossi
This report documents the program and the outcomes of Dagstuhl Seminar 17132 "Opportunities and Risks of Blockchain Technologies". Blockchain-based applications such as Bitcoin or Ethereum are emerging technologies, but a dramatic increase in industrial and academic interest in the technology is evident. Start-ups and large financial players are working intensely on blockchain-based applications, making this one of the most promising drivers of financial innovation. However, the design and implementation of blockchain-based systems requires deep technical know-how in various areas, as well as consideration of economic and societal issues. These opportunities and challenges provided the starting point for the Dagstuhl Seminar where we analyzed and synthesized the current body of knowledge on the emerging landscape of blockchain technologies. We linked cryptographic economic systems to already established research streams around trust-related issues in payment systems and digital currencies, and digital asset management.
In spite of a still very low volume at the global level, in comparison with the main reserve currencies, digital currencies attract a lot of attention. The paper reminds that it is above all the exchange mechanism incorporated in digital currencies (the distributed ledger technology) which should contribute to their success. It is shown that a widespread use of these currencies is likely to materialize only under conditions that woulDeessentially leave unchanged the capacity of the central bank to pursue the same inflation target using the same instruments as today, by setting an interest rate level. However, some adjustments may have to be made to the definition of monetary aggregates and possibly also to the base and/or the ratios of reserve requirements. Even in the most extreme and unlikely scenario, where the central bank would issue CBDC the public would have access to and massively adopt, banks role in distributing credit would likely not be seriously impaired. Banks might rather have less direct information on their clients. They would possibly also become more dependent on central bank refinancing, which would call for a clear and pre-announced lending of last resort policy in order to limit moral hazard considerations.
Bitcoins original idea proposed a trustless monetary system, without the need of \nintermediaries. In recent years, these very intermediaries it originally tried to circumvent, have \ngained an increased interest in Bitcoin’s underlying technology, the Blockchain. It presents a \ndecentralized database technology, suitable for exchanging value in an untrusted environment. \nConsequently, it introduces an innovation in both economics and information technology. \nIn this explorative study, we aim to investigate how Bitcoin and Blockchain technology may \nimpact the monetary and financial system. By conducting 20 in-depth interviews from a broad \nrange of stakeholders and a literature review in this new topic of interest, we have identified \ntwo main themes introduced with this new technology. First, we seek to understand how the \nfuture of money could unfold with Cryptocurrencies and Central Bank issued Digital Currency \n(CBDC). The former is recognized to have a series of specialized architectures, spanning from \nsimple monetary transactions to complex platforms enabling a decentralized economy to \nevolve. CBDC is not necessarily reliant on blockchain technology, but the of digitally issued \ncurrencies and blockchains introduces new fiscal and monetary policy toolkits. There are \nhowever a series of intricate questions that needs to be addressed before CBDC could act as a \ncomplement or replacement for physical currency. Lastly, we explore how the future of \nfinance will be affected by blockchain technology and the cryptoeconomy. Banks may be \nfacing increased competition from new entrants, where blockchain technology may facilitate \nreduced costs in terms of regulatory compliance, efficiency in transactions and settlement, and \nreconciliation. Moreover, new financial services are introduced by financial technology \ninnovation. This might change the business model of banks and other financial institutions \ndrastically. Furthermore, cryptocurrencies introduce new funding possibilities and enables \norganizations to evolve with no governing body. This might facilitate a new economic system, \ncalled the cryptoeconomy. \nDevelopment in blockchain technology is mentioned to be at the same maturity stage as the \nInternet by the early 1990s. There are several uncertainties regarding its future applications. \nHowever, smart contracts seems to be an interesting application, facilitating automation in a \nrange of applications.
The objective of this research is to provide the reader an overview of the distributed ledger technology (DLT), its fundamental challenges, the current and potential future uses in the financial industry, and to suggest future fields of the topic to be researched. The first task of this thesis is trying to answer, “how will the distributed ledger technology impact the financial industry”. Although the thesis will not cover exhaustively all the financial industry’s needs towards the distributed ledger technology, it will give an overview of the DLTs probable usage in the industry. By reading the thesis and especially its use cases from the fields of private equity, and settlement and clearing of public securities’ trading, the reader should get a more accurate answer to the secondary question “how can the public securities and private equity markets use distributed ledger technology in the near future”. The question about the distributed ledger technology’s impact on the whole market is complicated. Despite the amount of financing this technology has acquired in the recent years, there are no new, disruptive or widespread usages for the DLT in the financial industry. However, it is expected that during the next five years, the DLTs become reality. This is due to their enormous potentiality in security, efficiency and automation, which all could save the financial industry up to 50% of their current costs. Additionally, during the same time period, it is highly expectable that some financial service applications, basing on the DLT, will be presented for the consumers by the players from outside the traditional markets. To answer the secondary question, the both markets will face significant changes during the upcoming years: public securities’ post-trade processes will benefit from the more secure and rapid settlement, whereas the private equity market’s whole nature can become a more accessible for both the investors and the businesses seeking for financing.