Stablecoins serve as the backbone of many decentralized finance (DeFi) ecosystems, offering price stability in an otherwise volatile cryptocurrency market. This paper analyzes the economic design of stablecoins- both algorithmic (un- or under-collateralized) and asset-backed (collateralized)- and employs game-theoretic models to examine their susceptibility to speculative attacks. We present mathematical frameworks illustrating peg- maintenance mechanisms, discuss equilibrium conditions for stable pegging, and use real-world examples of USDC, DAI, and Terra-Luna to highlight the key success and failure factors. Policy and protocol design recommendations are provided to help mitigate risks of de-pegging and bank-run dynamics.
This comprehensive article explores the transformative impact of blockchain technology on financial operations, focusing on its architectural foundations, security mechanisms, and practical applications. The article explores how blockchain's distributed ledger technology revolutionizes transaction processing and verification through advanced cryptographic protocols and consensus mechanisms. The article encompasses the evolution of smart contracts, their role in automating financial agreements, and the implementation of robust security frameworks. The article also investigates blockchain's contribution to regulatory compliance and audit capabilities, while addressing future developments in the technology's integration with artificial intelligence and cross-chain interoperability protocols. The article demonstrates blockchain's significant potential in creating more efficient, transparent, and secure financial systems while highlighting the importance of balanced implementation strategies that consider both performance optimization and security requirements.
The emergence of blockchain and cryptocurrency technologies has transformed digital ecosystems, introducing opportunities for innovation and efficiency alongside profound ethical challenges. This paper explores key ethical considerations in cryptocurrency and blockchain, including the decentralization of financial systems, the balance between privacy and transparency, the use of blockchain for surveillance, and the socio-economic impacts on vulnerable populations. The authors delve into the contrasting emphasis on ethical considerations for financial solutions deployed in developed and developing countries. The borderless nature of blockchain and cryptocurrencies enables decentralised international transactions while simultaneously introducing specific challenges regarding the definition of applicable law and other jurisdictional legal matters. Through a combination of literature analysis and illustrative case studies, the authors examine the complex ethical dilemmas that accompany these technologies in combination with their actual and perceived links to crime. The findings aim to provide actionable insights for policymakers, industry leaders, and researchers, fostering the responsible and equitable adoption of blockchain and cryptocurrency technologies.
Africa is one of the fastest-growing crypto markets in the world, with its crypto transactions peaking at $20 billion per month in mid-2021, with Nigeria contributing to the world’s third largest bitcoin-holding. Evidence continues to grow, showcasing criminals who seek to use cryptocurrencies for illegal activities like money laundering which could subsequently give rise to the event of an unregulated economy and global financial instability. As a result of the challenges of these unconventional currencies and transaction methods, the Financial Action Task Force (FATF) updated its recommendations (particularly with the inclusion of Recommendation 15 on New Technologies) to address the various money laundering and terrorism financing risks associated with virtual assets (including cryptocurrencies) and Virtual Asset Service Providers (VASPs) as an attempt to encourage member states’ regulatory actions against such risks. As there has been considerable work carried out by the Intergovernmental Action Group Against Money Laundering in West Africa (GIABA) with regards to the implementation of Recommendation 15 in West African member states (and particularly Nigeria for the purpose of this research), this paper therefore investigates and evaluates the role of GIABA as an FRSB in monitoring Money Laundering in West Africa and implementing FATF Standards in the 21st-century era of virtual assets and other cryptocurrencies. Particularly, it provides an in-depth assessment of GIABA’s work in monitoring the implementation of Recommendation 15, especially with regards to cryptocurrency-based money laundering amidst the growth of cryptocurrency exchange and trading services in West Africa.
This article delves into the transformative impact of blockchain technology on enhancing transaction quality and efficiency. Since the emergence of blockchain alongside Bitcoin in 2008, its decentralised and transparent nature has significantly improved transaction speed, security, and cost efficiency. These advancements have solidified blockchain as a foundational innovation in financial services. The paper examines critical milestones in blockchain, including Bitcoin, Ethereum, and Binance Coin (BNB), and their role in reshaping global finance by automating processes and reducing reliance on intermediaries. Additionally, the study evaluates blockchain’s impact on quality management, particularly emphasising how its immutable ledger system enhances the reliability and transparency of financial transactions. Despite challenges such as scalability, energy consumption, and regulatory hurdles, the potential for blockchain to redefine transaction quality in financial services is evident. This research contributes to the growing body of literature by integrating blockchain technology and traditional quality management systems, providing a comprehensive perspective on how the two domains influence one another. The findings underscore blockchain’s ability to drive innovation in financial services while addressing security, efficiency, and operational quality concerns.
The study aims to assess the dual (positive and negative) impact of FinTech in financial institutions. In this study, secondary data were used, and they were collected from Web of Science, Scopus, ScienceDirect, and Google Scholar. In this regard, the key FinTech technologies are identified, including blockchain and distributed ledger technology, artificial intelligence and machine learning, robo-advisors, mobile banking and digital banking, regulatory technology, and cloud computing. While major financial crimes are fraud, money laundering, insider trading, bribery and corruption, tax evasion, and cybercrime, The study shows that AI algorithms help to identify criminal activities, including credit card fraud, theft, and account takeovers, and ensure data privacy, accountability, and transparency. Blockchain is useful for trustless transactions since it creates an unchangeable and secure, transparent record of every transaction. Big data analytics help to acquire insights into customer behaviour and preferences. RegTech tracks online transactions in real time to spot anomalies in the realm of digital payments. On the other hand, FinTech is one of the most effective tools to facilitate cybercrime. Moreover, the study shows the framework FinTech has for mitigating wrongdoing, regulatory shortages, and customer threats. The article provides several implications for several stakeholders in the financial sector.
Blockchains are the backbone behind cryptocurrency networks, which have developed rapidly in the last two decades. However, this growth has brought several challenges due to the features of these networks, specifically anonymity and decentralization. One of these challenges is the fight against fraudulent activities performed in these networks, which, among other things, involve financial schemes, phishing attacks or money laundering. This article will address the problem of identifying fraud cases among a large set of transactions extracted from the Bitcoin network. More specifically, our study’s goal was to find reliable techniques to label Bitcoin transactions, taking into account their features. The approach followed involved two kinds of Machine Learning methods. On the one hand, anomaly detection algorithms were applied to determine whether fraudulent activities tend to show anomalous behaviour without resorting to manually obtained labels. On the other hand, Heterogeneous Graph Transformers were used to leverage the heterogeneous relational nature of the cryptocurrency information. As a result, the article will provide reasonable conclusions to acknowledge that unsupervised approaches can be useful for fraud detection on blockchain networks. Furthermore, the effectiveness of supervised graph methods was revalidated, emphasizing the importance of data heterogeneity.
Abstract This study investigates the dark side of the non-fungible token (NFT) marketplace, with a focus on understanding the risks, and underlying factors driving fraud in the NFT ecosystem. Using the fraud triangle framework, this study examines pressure, opportunity, and rationalization from individual and organizational perspectives. The research provides a comprehensive understanding of the contributing factors to NFT marketplace fraud by analyzing the reasons behind fraudulent actions. A conceptual framework is developed that includes ten propositions to aid in understanding the complexity of this issue. This study’s outcomes will assist policymakers in crafting efficient approaches to mitigate fraud within the NFT marketplace.
Smart contracts enable autonomous execution between contracting parties without a centralized authority, thereby reducing contract management costs and enhancing the transparency and reliability of contracts. However, the absence of such a certification authority increases the risk of fraud. Rug-pull, a typical form of fraud, involves developers hiding backdoor codes in smart contracts to steal funds under certain conditions, causing significant damage to users. A Rug-pull list warns users of potential fraud, but it only identifies risks after damage has occurred. Additionally, existing backdoor code analysis tools are limited in their ability to detect backdoor codes hidden through modifications to existing patterns or suffer from low accuracy because they rely on comparisons with predefined backdoor codes. Therefore, this paper proposes a balance-tracking-based backdoor code detection model to identify backdoor codes in smart contracts. The proposed model detects backdoor codes by extracting functions from Ethereum bytecodes and inspecting the extracted functions to track balance changes. This approach allows for the detection of balance changes even when backdoor codes are concealed. Experimental results verifying the effectiveness of this model demonstrate 98% accuracy, 0.96 recall, and 0.98 precision. These results are expected to contribute significantly to effectively reducing fraud risks such as Rug-pull.
The field of cryptocurrencies is in existence and dynamically evolving for over 14 years. Each year introduces new cryptocurrencies, with their total number exceeding 8,500. However, to date, there is no exhaustive categorization of cryptocurrencies that could possibly fully describe the landscape of the cryptocurrency market, which underscores the relevance of this research. The objective of this study is to construct a hierarchical categorization (taxonomy) of cryptocurrencies based on their main characteristics and functions. The principal research method is a retrospective analysis of the development of the cryptocurrency field from the creation of Bitcoin to the present day. As the industry evolved, new projects emerged, which significantly differed in their properties from what existed before, thus forming entirely new categories and niches in the cryptocurrency space. Moreover, the emergence of certain types of cryptocurrencies could lead to changes in the existing classification. The outcome of this research is a taxonomy of interchangeable cryptocurrencies/tokens. The proposed taxonomy is accompanied by a detailed examination of the cryptocurrencies associated with each category, as well as a consideration of the largest cryptocurrencies in terms of capitalization through its prism. The scientific novelty of this research lies in the absence of similar studies that look at the issue of categorizing cryptocurrencies through a historical lens.
Blockchain technology, characterized by features such as decentralization, is transforming the financial system and providing new tools for financial crime governance. However, its characteristics like anonymity are also exploited by criminals, giving rise to new types of financial crime. This paper analyzes its "double-edged sword" effect from a financial professional perspective: first, it outlines the technical principles and current applications; then, it explores its empowering mechanisms as a "sharp sword" in anti-money laundering, combating terrorist financing, and enhancing transaction transparency. Subsequently, it analyzes its abuse as a "dark blade" in criminal activities such as cryptocurrency money laundering. Employing the financial regulation "trilemma" framework, the paper argues for the necessity and challenges of seeking a balance between decentralization, privacy protection, and effective regulation. It proposes comprehensive governance pathways, including building an adaptive regulatory framework that synergizes "RegTech" and "Compliance Tech." The research indicates that guiding blockchain technology to serve financial security and stability requires acknowledging and mastering its dual nature.
Stablecoins have become a critical element of the cryptocurrency ecosystem, offering benefits such as value stability, efficient cross-border transactions, and enhanced access to Decentralized Finance (DeFi) and everyday payment systems.Their increasing adoption demonstrates their capacity to transform financial processes by enabling faster transactions, reducing fees through blockchain technology, and expanding financial inclusion for unbanked populations.However, these advantages come with significant national security concerns, including the risks of illicit financial activities, gaps in regulatory oversight, and potential disruptions to monetary policy.This article explores the implications of stablecoins for Nigeria's national security, focusing on their usage, regulatory challenges, and associated risks.It highlights vulnerabilities such as the potential for market manipulation, exploitation by criminal networks, and the use of stablecoins for money laundering, cyberattacks, and other illicit financial activities.The article also examines how these risks could undermine financial stability and national security, particularly in a context of limited regulatory capacity.By drawing lessons from global regulatory frameworks, the study stresses the urgent need for Nigeria to develop robust regulatory measures to address these risks and ensure financial stability.It calls for a balanced approach that promotes innovation while safeguarding the integrity of the financial system.
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Terrorism, Counterterrorism, and Political Violence
In the era of deep integration between the digital economy and globalization, virtual currencies represented by Bitcoin, with their decentralized architecture, anonymous transaction characteristics, and crossborder circulation advantages, have become a new carrier for cross-border money laundering crimes. Statistics show that the global virtual currency money laundering scale exceeded the $20 billion threshold in 2024, with cross-border money laundering accounting for 60%. The cross-regional mobility, technological concealment, and regulatory arbitrage characteristics of such crimes pose a subversive challenge to the traditional anti-money laundering governance system. Through in-depth deconstruction of the four core models of virtual currency money laundering—anonymous wallet mixing services, cross-chain bridging and decentralized finance (DeFi) operations, and darknet trading ecosystems—it is evident that they face governance dilemmas in electronic data forensics, such as massive and decentralized data storage and enhanced anonymity technology countermeasures. In response to the new patterns of money laundering crimes in the big data era, public security and judicial authorities need to break down industry barriers, establish cross-departmental judicial collaboration mechanisms, and promote the construction of cloud-based think tank systems. These measures will significantly improve the efficiency and accuracy of electronic data forensics, providing a solid judicial guarantee and technical support for combating cross-border virtual currency money laundering crimes and safeguarding national financial security and order.
<b>RESUMO:</b> A última década testemunhou a consolidação das Finanças Descentralizadas (DeFi) e a busca por maior eficiência nos mercados de capitais através da tokenização de Ativos do Mundo Real (RWA). Este artigo propõe o Unified Structured Finance Protocol (USFP), uma arquitetura DeFi híbrida projetada para a tokenização e negociação de produtos estruturados (como Debêntures, ETFs e COEs) no contexto regulatório brasileiro. O problema de pesquisa central é: Como desenvolver um <i>framework</i> de protocolo DeFi que preserve a eficiência e a liquidez da descentralização, ao mesmo tempo em que acomoda os requisitos rigorosos de <i>Anti-Money Laundering</i> (AML), <i>Know Your Customer</i> (KYC), e relatórios regulatórios exigidos para a tokenização de valores mobiliários no Brasil? Os objetivos são: 1) Propor o <i>Unified Structured DeFi Note</i> como um meta-ativo tokenizado. 2) Detalhar uma arquitetura de protocolo que integra um Módulo de Compliance (<i>RegTech</i>) e um AMM Regulado (RL-AMM). 3) Analisar o encaixe conceitual dessa arquitetura no panorama regulatório brasileiro (CVM/BACEN). A contribuição principal (Tese) é que a viabilidade de protocolos DeFi para o mercado de capitais brasileiro reside na separação funcional entre a liquidação descentralizada (<i>trustless</i>) e o acesso permissionado (<i>trusted</i>) [8]. Esta abordagem define um novo modelo de Infraestrutura de Mercado de Capitais Programável (<i>D-CMI – Decentralized Capital Market Infrastructure</i>), essencial para a tokenização de RWA regulamentados. A centralização intencional dos pontos de controle de acesso (KYC/AML) e de relatórios permite que o regulador mantenha a supervisão, enquanto as operações de <i>payoff</i> e negociação se beneficiam da eficiência <i>on-chain</i>
A última década testemunhou a consolidação das Finanças Descentralizadas (DeFi) e a busca por maior eficiência nos mercados de capitais através da tokenização de Ativos do Mundo Real (RWA). Este artigo propõe o Unified Structured Finance Protocol (USFP), uma arquitetura DeFi híbrida projetada para a tokenização e negociação de produtos estruturados (como Debêntures, ETFs e COEs) no contexto regulatório brasileiro. O problema de pesquisa central é: Como desenvolver um <i>framework</i> de protocolo DeFi que preserve a eficiência e a liquidez da descentralização, ao mesmo tempo em que acomoda os requisitos rigorosos de <i>Anti-Money Laundering</i> (AML), <i>Know Your Customer</i> (KYC), e relatórios regulatórios exigidos para a tokenização de valores mobiliários no Brasil? Os objetivos são: 1) Propor o <i>Unified Structured DeFi Note</i> como um meta-ativo tokenizado. 2) Detalhar uma arquitetura de protocolo que integra um Módulo de Compliance (<i>RegTech</i>) e um AMM Regulado (RL-AMM). 3) Analisar o encaixe conceitual dessa arquitetura no panorama regulatório brasileiro (CVM/BACEN). A contribuição principal (Tese) é que a viabilidade de protocolos DeFi para o mercado de capitais brasileiro reside na separação funcional entre a liquidação descentralizada (<i>trustless</i>) e o acesso permissionado (<i>trusted</i>) [8]. Esta abordagem define um novo modelo de Infraestrutura de Mercado de Capitais Programável (<i>D-CMI – Decentralized Capital Market Infrastructure</i>), essencial para a tokenização de RWA regulamentados. A centralização intencional dos pontos de controle de acesso (KYC/AML) e de relatórios permite que o regulador mantenha a supervisão, enquanto as operações de <i>payoff</i> e negociação se beneficiam da eficiência <i>on-chain</i>.
A última década testemunhou a consolidação das Finanças Descentralizadas (DeFi) e a busca por maior eficiência nos mercados de capitais através da tokenização de Ativos do Mundo Real (RWA). Este artigo propõe o Unified Structured Finance Protocol (USFP), uma arquitetura DeFi híbrida projetada para a tokenização e negociação de produtos estruturados (como Debêntures, ETFs e COEs) no contexto regulatório brasileiro. O problema de pesquisa central é: Como desenvolver um <i>framework</i> de protocolo DeFi que preserve a eficiência e a liquidez da descentralização, ao mesmo tempo em que acomoda os requisitos rigorosos de <i>Anti-Money Laundering</i> (AML), <i>Know Your Customer</i> (KYC), e relatórios regulatórios exigidos para a tokenização de valores mobiliários no Brasil? Os objetivos são: 1) Propor o <i>Unified Structured DeFi Note</i> como um meta-ativo tokenizado. 2) Detalhar uma arquitetura de protocolo que integra um Módulo de Compliance (<i>RegTech</i>) e um AMM Regulado (RL-AMM). 3) Analisar o encaixe conceitual dessa arquitetura no panorama regulatório brasileiro (CVM/BACEN). A contribuição principal (Tese) é que a viabilidade de protocolos DeFi para o mercado de capitais brasileiro reside na separação funcional entre a liquidação descentralizada (<i>trustless</i>) e o acesso permissionado (<i>trusted</i>) [8]. Esta abordagem define um novo modelo de Infraestrutura de Mercado de Capitais Programável (<i>D-CMI – Decentralized Capital Market Infrastructure</i>), essencial para a tokenização de RWA regulamentados. A centralização intencional dos pontos de controle de acesso (KYC/AML) e de relatórios permite que o regulador mantenha a supervisão, enquanto as operações de <i>payoff</i> e negociação se beneficiam da eficiência <i>on-chain</i>.<br>
A última década testemunhou a consolidação das Finanças Descentralizadas (DeFi) e a busca por maior eficiência nos mercados de capitais através da tokenização de Ativos do Mundo Real (RWA). Este artigo propõe o Unified Structured Finance Protocol (USFP), uma arquitetura DeFi híbrida projetada para a tokenização e negociação de produtos estruturados (como Debêntures, ETFs e COEs) no contexto regulatório brasileiro. O problema de pesquisa central é: Como desenvolver um <i>framework</i> de protocolo DeFi que preserve a eficiência e a liquidez da descentralização, ao mesmo tempo em que acomoda os requisitos rigorosos de <i>Anti-Money Laundering</i> (AML), <i>Know Your Customer</i> (KYC), e relatórios regulatórios exigidos para a tokenização de valores mobiliários no Brasil? Os objetivos são: 1) Propor o <i>Unified Structured DeFi Note</i> como um meta-ativo tokenizado. 2) Detalhar uma arquitetura de protocolo que integra um Módulo de Compliance (<i>RegTech</i>) e um AMM Regulado (RL-AMM). 3) Analisar o encaixe conceitual dessa arquitetura no panorama regulatório brasileiro (CVM/BACEN). A contribuição principal (Tese) é que a viabilidade de protocolos DeFi para o mercado de capitais brasileiro reside na separação funcional entre a liquidação descentralizada (<i>trustless</i>) e o acesso permissionado (<i>trusted</i>) [8]. Esta abordagem define um novo modelo de Infraestrutura de Mercado de Capitais Programável (<i>D-CMI – Decentralized Capital Market Infrastructure</i>), essencial para a tokenização de RWA regulamentados. A centralização intencional dos pontos de controle de acesso (KYC/AML) e de relatórios permite que o regulador mantenha a supervisão, enquanto as operações de <i>payoff</i> e negociação se beneficiam da eficiência <i>on-chain</i>.
This study aims to investigate the presence of herding behavior in the cryptocurrency market during major geopolitical crises, including the COVID-19 pandemic, the Russo-Ukrainian conflict, and the Israeli-Palestinian conflict. Relying on the CSSD and CSAD approaches, we analyze daily returns for a panel of 17 cryptocurrencies, classified as either "clean" or "dirty" based on their consensus mechanisms and associated energy consumption levels, over the period from December 30, 2019, to December 31, 2024. The results reveal that herding is not a persistent phenomenon across all market phases or crises. However, signs of convergence in investor behavior are detected during the COVID-19 period, particularly among clean cryptocurrencies. The inclusion of a sentiment index indicates that economic uncertainty has a negative and significant impact on returns, suggesting heightened risk aversion during turbulent periods. Moreover, structural break analysis confirms that clean cryptocurrencies are more sensitive to stress events, exhibiting greater behavioral shifts. These findings underscore the heterogeneous nature of investor behavior in the cryptocurrency market and the influence of crisis-induced sentiment over traditional price dynamics. This highlights the need for closer monitoring of environmentally labeled crypto assets under extreme market conditions.