Blockchain Papers

John Taskinsoy

No abstract is available for this record.

Katrin Tinn, Christophe Dubach

No abstract is available for this record.

Bikramaditya Datta, Idan Hodor

No abstract is available for this record.

Kyoung Jin Choi, Ryan Henry, Alfred Lehar, Joel Reardon · 5 authors

No abstract is available for this record.

Gina Pieters

No abstract is available for this record.

Victor von Wachter, Johannes Rude Jensen, Omri Ross

Decentralized financial (DeFi) applications on the Ethereum blockchain are highly interoperable because they share a single state in a deterministic computational environment. Stakeholders can deposit claims on assets, referred to as 'liquidity shares', across applications producing effects equivalent to rehypothecation in traditional financial systems. We seek to understand the degree to which this practice may contribute to financial integration on Ethereum by examining transactions in 'composed' derivatives for the assets DAI, USDC, USDT, ETH and tokenized BTC for the full set of 344.8 million Ethereum transactions computed in 2020. We identify a salient trend for 'composing' assets in multiple sequential generations of derivatives and comment on potential systemic implications for the Ethereum network.

Bo Tang, Yang You

Cryptocurrency prices differ across countries, and these price deviations fluctuate widely. Our paper provides evidence that distrust toward domestic authorities can explain the dynamics of local cryptocurrency prices relative to the U.S. dollar price. The price deviation rises after an outbreak of a financial crisis, political scandal, or socioeconomic event that undermines confidence in the domestic government or economy. With panel regressions, we show that Bitcoin price deviations increase by 1.8% when the institutional failure index rises by one standard deviation. These price responses are much stronger in countries with lower trust levels and during periods with tighter capital controls.

Wulf A. Kaal

No abstract is available for this record.

Xiaotong Sun

No abstract is available for this record.

John Crawford, Lev Menand, Morgan Ricks

We are entering a new monetary era. Central banks around the world— spurred by the development of privately controlled digital currencies as well as competition from other central banks—have been studying, building, and, in some cases, issuing central bank digital currency (“CBDC”). Although digital fiat currency is one of the hottest topics in macroeconomics and central banking today, the discussion has largely overlooked the most straightforward and appealing strategy for implementing a U.S. dollar-based CBDC: expanding access to bank accounts that the Federal Reserve already offers to a small, favored set of clients. These accounts consist of entries in a digital ledger—like other digital currencies—and are extremely desirable, offering high interest, instant payments, and full government backing with no limit. But U.S. law restricts these accounts to an exclusive clientele consisting primarily of banks. Privileged access to these accounts creates a striking asymmetry at the core of our monetary framework: government-issued physical currency is available to all, but government-issued digital currency (in the form of central bank accounts) is not. This dichotomy is unwarranted. Congress should authorize the Federal Reserve to give everyone—individuals, businesses, and institutions—the option to maintain accounts at the central bank. We call these accounts FedAccounts. Unlike the CBDC approaches currently under discussion, which would use complicated and inefficient distributed ledger technology and be walled off from the existing system of money and payments, FedAccounts would be seamlessly interoperable with the mainstream payment system, relying on technologies that the Federal Reserve has used for decades.

Dirk Andreas Zetzsche, Linn Anker-Sørensen, Maria Lucia Passador, Andreas Wehrli

Financial law and regulation have, to date, assumed that regulated activities and functions are concentrated in a single legal entity responsible and accountable for operations and compliance. Even with regard to financial market infrastructure where the regulatory perspective acknowledges the need for interoperability of many entities as a system, each entity is subject to its own rules and regulations, and can thus meet its own compliance requirements independent of other system participants. The entity-focused regulatory paradigm is under pressure in the world of DLT-based payment arrangements where some ledgers, and thus the performance of the services as such, are distributed. DLT arrangements could provide an alternative to the traditional reliance on a mutually trusted central entity to transfer funds and enable the creation of new foundational infrastructures by distributing technical functions or linking existing systems. As such, we identify and outline concepts for use cases where DLT is potentially improving the efficiency of cross-border payments, namely a Best Execution DLT, a DLT application for a Network of Central Banks, a DLT as an AML/KYC utility, as well as DLT arrangements for an Identity Platform, a Small Payments Platform and, finally, an Interoperability Platform connecting multiple closed-loop and proprietary banking systems. Despite the wide-ranging interest in DLT-based payment systems, research so far has focused on technical concepts and lacked legal details. This article seeks to fill this gap by providing an initial analysis of the legal challenges related to DLT-based payment systems. From a legal perspective, the distribution of functions in DLTs comes with new risks created from the joint performance of services and functions as main characteristic of a distributed ledger, and the need for additional agreements, ongoing coordination across, and governance arrangements among the nodes. Further, in a cross-border context, multiple regulators and courts of various countries (asking for compliance with their own set of rules and regular reporting) will be involved. All of these must decide whether for compliance with any single rule they look at the DLT as a whole (herein called ‘the ledger perspective’) or each individual node (that is each institution participating in the DLT, herein called ‘the node perspective’). Moreover, financial and private law must provide for risk allocation, liability, responsibility and accountability for all legal obligations related to each function and activity. This article examines the extent to which the ledger perspective or the node perspective should prevail against the backdrop of a range of DLT use cases, resulting in policy recommendations for regulators. In this article, we propose the adoption of what we call an enabling approach for payment systems: ledger operators must specify in a Plan of Operations subject to regulatory approval to which rights and obligations the ledger perspective applies; in the absence of such a stipulation, rules apply based on the node perspective. However, for systemic risk controls, AML/CFT, data protection and governance, as well as DLT governance, we propose a reversed default rule in which the ledger perspective prevails in the absence of rules stipulating that the node perspective applies. Finally, in private law matters, we propose protecting consumers and SME clients through a standardised payment services contract structure, without mandating details.

Roberto Moncada, Enrico Ferro, Alfredo Favenza, Pierluigi Freni

No abstract is available for this record.

Sören Karau

No abstract is available for this record.

Peterson K Ozili

Cryptocurrencies have become popular. Economic agents use cryptocurrency such as bitcoins to make payments and it pose a threat to fiat currency. Central banks have begun to respond to this threat. They realize that they need to join the race to offer a digital currency and dominate the digital currency landscape which can lead to the collapse of most private digital currencies that are not issued by a central bank or a monetary authority. In this paper, I show how the issuance of a central bank digital currency can lead to the collapse of private digital currencies such as bitcoin. I argue that central banks will leverage on their monetary powers, and the trust that citizens have in government-backed money. This may give central banks strong incentives to issue a central bank digital currency. The issuance of a central bank digital currency can erode trust in cryptocurrencies, and lead to lack of trust in cryptocurrency, thereby leading to the collapse of cryptocurrencies although not immediately.

Roman Kozhan, Ganesh Viswanath-Natraj

No abstract is available for this record.

Min Dai, Wei Jiang, Steven Kou, Cong Qin

No abstract is available for this record.

Christine A. Parlour

No abstract is available for this record.

John Taskinsoy

No abstract is available for this record.

Thomas Conlon, Shaen Corbet, Richard McGee

Can technology protect investors from extreme losses? This paper investigates the short- and long-run hedging and safe haven properties of Bitcoin for the US dollar over the period 2010-2023, incorporating the COVID-19-related market turmoil. Our findings reveal that (i) Bitcoin acts as a strong hedge for all US dollar currency pairs examined, (ii) Bitcoin functions as a weak safe haven for the US dollar at short investment horizons, as indicated by a limited relationship during acute negative price movements, (iii) Bitcoin, instead of acting as a safe haven may, instead, increase aggregate risk at long horizons during periods of extreme losses. The analysis, performed using a series of horizon-dependent econometric tests, provides evidence of some US dollar risk-reduction benefits from Bitcoin but limited potential for enduring relief from long-run extreme negative US dollar rate movements.

Stephen B. McKeon, Derek Edward Schloss

No abstract is available for this record.

Felix Bekemeier

No abstract is available for this record.

David Murakami, Ganesh Viswanath-Natraj

We rationalize cryptocurrency adoption in a small open economy model. We show that digital dollarization, where stablecoins pegged to the USD are used for transactions, can improve social welfare. In contrast, the adoption of volatile cryptocurrencies, such as El Salvador’s 2021 decision to make Bitcoin legal tender, results in welfare losses. This outcome aligns with the observed low take-up of Bitcoin as legal tender. The welfare benefits of digital dollarization increase with the magnitude of macroeconomic shocks, providing motivation for the growing use of stablecoins in emerging markets as a safeguard against high inflation and macroeconomic instability .

Alex Ferko, Amani Moin, Esen Onur, Michael A. Penick

No abstract is available for this record.

Nipun Agarwal

No abstract is available for this record.