Several years after the inception of the most dominant cryptocurrency, bitcoin, the European Central Bank in 2015 indicated the need for establishing legal clarity by relevant authorities through explaining how the current legal framework applies to cryptocurrencies. Three years later, no meaningful step has been taken by any of the European Union (EU) institutions including the parliament. By examining the EUâs legal framework governing payments services, including the Single Euro Payment Area (SEPA) Regulation, the Electronic Money Directive, the Payment Services Directive and the proposed AML/CTF Directive, this article concludes that (a) because the existing payment services laws apply to payments effected in currencies (legal tenders) and cryptocurrencies are not defined as currencies under the EU law or the laws of member states, they do not cover cryptocurrencies. It also argues that it is impossible to design sui generis payments services law for cryptocurrencies without curbing their essential features, especially decentralization. Lastly, the article proposes centralization and the creation of state cryptocurrency as possible solutions moving forward and examines their strengths and challenges.
On February 6, 2017, the Bangko Sentral ng Pilipinas (âBSPâ) issued the Guidelines for Virtual Currency Exchanges (BSP Circular No. 944, or âCircularâ), providing the rules and regulations governing operations of Virtual Currency (âVCâ) Exchanges in the Philippines. The Circular is incorporated as Section 4512N of the Manual of Regulations for Non-Bank Financial Institutions (âMORNBFIâ). This article provides an overview of the Circular.
This paper examines the market for initial coin offerings (ICOs). ICOs are smart contracts based on blockchain technology that are designed for entrepreneurs to raise external finance by issuing tokens without an intermediary. Unlike existing mechanisms for early-stage finance, tokens potentially provide investors with rapid opportunities thanks to liquid trading platforms. The marketability of tokens offers novel insights into entrepreneurial finance, which I explore in this paper. First, I document that investors earn on average 8.2% on the first day of trading. However, about 40% of all ICOs destroy investor value on the first day of trading. Second, I explore the determinants of market outcomes and find that management quality and the ICO profile are positively correlated with the funding amount and returns, whereas highly visionary projects have a negative effect. Among the 21% of all tokens that get delisted from a major exchange platform, highly visionary projects are more likely to fail, which investors anticipate. Third, I explore the sensitivity of the ICO market to adverse industry events such as China's ban of ICOs, the hack of leading ledgers, and the marketing ban on FaceBook. I find that the ICO market is highly susceptible to such environmental shocks, resulting in substantial welfare losses for investors.
This article describes the âBlockchainâ which is an upcoming technology in the current leading world and which serves as a capital market use-cases for many of the global Fintech industries across the world, is a distributed ledger of economic transactions which not only used for recording financial transactions but mostly everything of value in this world. In the current world, mostly all the transactions are done through online which mainly includes the bank as a âmiddle man,â which could be untrustworthy at times. Blockchain comes into the picture which eliminates the need of a middle man or third party between the users who are involved in the transactions. Represents a financial ledger entry of data structure which consists of record of transactions which is digitally signed and cannot be tampered as authenticity is ensured in which the ledger is considered to be of high integrity. One of the leading and highly valued platform of blockchain is âHyperledger Fabricâ which is meant for securing transactions and serves a powerful container technology for smart contract development in the global capital firms. The potential of Blockchain and DLT in capital markets in this upcoming world could remove many of the inefficiencies and costs inherent in the global capital markets across the world and could be considered as a viable technology which enable to settlement.
36 Yale Journal on Regulation 735 (2019).Fintech is the hottest topic in finance today. Recent advances in cryptography, data analytics, and artificial intelligence are visibly âdisruptingâ traditional methods of delivering financial services and conducting financial transactions. Less visibly, fintech is also changing the way we think about finance: The rise of fintech is gradually recasting our collective understanding of the financial system as simply another sphere of normatively neutral information technology and objective computer science. By making financial transactions faster, cheaper, and more easily accessible, fintech seems to promise a micro-level âwin-winâ solution to the financial systemâs many ills.This Article challenges such narratives and presents an alternative account of fintech as a systemic, macro-level phenomenon. Grounding the analysis of evolving fintech trends in a broader institutional context, the Article exposes the normative and political significance of the current fintech moment. It argues that the arrival of fintech enables a potentially decisive shift in the underlying public-private balance of powers, competencies, and roles in the financial system.In developing this argument, the Article makes three principal scholarly contributions. First, it introduces the concept of the New Deal settlement in finance: a fundamental political arrangement, in force for nearly a century, pursuant to which profit-seeking private actors retain control over allocating capital and generating financial risks, while the sovereign public bears responsibility for maintaining systemic financial stability. Second, the Article advances a novel conceptual framework for understanding the deep-seated financial dynamics that have eroded the New Deal settlement in recent decades. In particular, it offers a working taxonomy of principal mechanisms that both (a) enable private market actors to continuously synthesize tradable financial assets and scale up trading activities, and (b) undermine the publicâs ability to manage the resulting system-wide risks. Finally, the Article shows how and why specific fintech applications â cryptocurrencies, distributed ledger technologies, digital crowdfunding, and robo-advising â are poised to amplify the effect of these destabilizing mechanisms, and thus potentially exacerbate the tensions and imbalances in todayâs financial markets and the broader economy. It is this potential that renders fintech a public policy challenge of the highest order.
Identifying and quantifying the drivers for adopting blockchain technologies are important for developing effective launch plan. Technology Acceptance Model (TAM) and its derivatives have been used for this purpose. However, some of these models only use a few standardized, predetermined independent variables to collectively represent the drivers. Low predictive power of TAM leads to questions on whether this restriction may detrimentally constrain the exploration of other driving factors. Some other extended models with higher R2 are considered impractical and lack of theoretical foundations. This paper demonstrates that reasonable predictive power can be achieved even with simple, practically implementable model when research targets are sampled and segmented properly. By employing a more fundamental theory, this study has also included additional variable that would normally not be considered in TAM.
Tobias Riasanow, Rob Jago Flötgen, David Soto Setzke, Markus Böhm · 5 authors
The emergence of financial technology companies (Fintechs) through the easy access of digital technologies is transforming the entire financial industry, heralding a new era of business models. With digital technologies like mobile payments, robo advisors, and distributed ledgers or blockchain, Fintechs are challenging the prevailing position of traditional financial institutions. However, literature does not provide a structured overview of the digital transformation in the financial industry, including inter- organizational innovation patterns. By analyzing 792 Fintechs, this paper visualizes the 22 generic roles and value streams within the financial ecosystem using the e3- value method. Moreover, we identify and discuss seven inter-organizational innovation patterns of the digital transformation in the financial industry. We contribute to literature by examining digital transformation in the financial industry from an inter- organizational perspective. Practitioners may apply the model to position themselves and to identify disruptive actors or potential business opportunities. We also analyze the influence of blockchain technology.
The logical consequence of the concept of regional autonomy is the presence of fiscal decentralization. The independence of rural communities in the formulation of programs for the administration of governance and development at the village level becomes the space of urgency of village financial management, because substantially, through the enormous financial support Central Government, Provincial Government and Regency / City Government, the village is required to be able to organize governance and development implementation properly and correctly. Furthermore, increasing public demand for good governance has encouraged the central government and regional governments to implement public accountability. Krina describes accountability as a principle that guarantees that every administration activity can be accounted openly by the perpetrator to those affected by the implementation of the policy. Based on the problem, the paper builds on literature reviews covering various dimensions of Open Government and its applicability to village finance to build the empirical evidence and the frameworks. \nKeywordsâTransparency, Village Finance system, Open \nGovernment Partnership
The information age has dawned upon us through the comprehensive and boundless adoption of the internet; E-banking and smart-phones thus, causing a reliance on online transaction sys-tems reducing the need to handle tangible cash notes. The current monetary system is arguably on the cusp of an evolutionary moment through the adoption of virtualised currencies, this phe-nomenon potentially possesses the next metamorphic step in contemporary global economic money. Cryptocurrency is a radical new innovation, and has become a widely debated topic over the past few years despite this, the topic of the diffusion of innovation and the procedures which the phenomenon needs to overcome have had relatively small amounts of academic attention in comparison to other fields of research. Therefore, this study aims to identify how cryptocurrency is diffusing through the diffusion of innovation model with the intention of identifying the current location of diffusion; this in turn will create a more universalised understanding of the phenomenon in regards to other radical innovations. Due to the nature of the study, the conducted research utilised a qualitative method. Additional-ly, the focus on collecting data which will positively reflect an academic study with the purpose of uncovering information in alignment with the research questions of the study at hand lead to an âinterpretivistâ methodology. Hence, 10 interviews were conducted of which the interviewees came from a range of different countries allowing the researcher to identify information rich da-ta. This approach allowed for two pathways of research to occur. Firstly, the non/potential in-vestors of which had basic cryptocurrency knowledge and secondly, current users/investors of which had an overall understanding of the cryptocurrency phenomenon. Furthermore, the pri-mary data alongside the utilisation of secondary survey questions and the literature allowed for a wider understanding of the phenomenon. The results of the study unveiled a range of trends and developments in the diffusion process. Accordingly, these findings advance the understanding of the micro, macro and psychological factors which are present in the diffusion of the cryptocurrency innovation. Thereby, the re-search draws attention to how a range of barriers synergistically working together requires a synergistic strategic approach from governments and individuals to surpass the current diffu-sion position and progress further, in turn increasing the chances of mainstream adoption.
Cryptocurrencies such as Bitcoin might revolutionize the economy through enabling peer-to-peer based transactions by abolishing the need for a trusted intermediary. As for now, Bitcoin remains to be the best recognized cryptocurrency, in particular in terms of market capitalization. However, as this paper shows, there are plenty of alternatives. This paper outlines the historical roots which have led to the creation of privately emitted, cryptography based digital currencies. Additionally, this paper discusses future possible hurdles of the development of cryptocurrencies and outlines features which might influence the success of a cryptocurrency. Insights into the beginning of cryptocurrency development are gained by analysis of the publicly available DOACC dataset. The paper does so by providing an overview of the techniques and mechanisms used by cryptocurrencies. It shows that newly created cryptocurrencies tend to be very similar in some properties in the early stages but new features and more diversity developed in more recent years. Additionally, newly created cryptocurrencies tend more and more to create a fixed number of coins before the initial announcement in order to sell these in Initial Coin Offerings. Even when the amount of premining increases over years, it remains at lower levels on the aggregate.
Distributed Ledger Technology (DLT) creates a decentralized system for trust and transaction validation using executable smart contracts to update information across a distributed database. This type of ecosystem can be applied to Commodity Trade Finance to alleviate critical issues of information asymmetry and the cost of transacting which are the leading causes of the Trade Finance Gap (ie. the lack of supply of capital to meet total trade finance demand). The possibility of scaling up such ecosystems with a number of Institutional Investors and micro small medium enterprises (MSME) would be advantageous, however, it brings up its own set of challenges including the stability of the system design. Agent-based modeling (ABM) is a powerful method to assess the financial ecosystem dynamics. DLT ecosystems model well under ABM, as the agents present a clearly defined taxonomy. In this study, we use ABM to assess the Aquifer Institute Platform - a DLT-based Commodity Trade Finance system, in which a growing number of participating parties is closely related to the circulation of utility tokens and transaction flows. We study the system dynamics of the platform and propose an appropriate setup for different transaction loads.
In this paper, we provided a general insight into the burgeoning cryptocurrency market. Having inspected the capabilities of cryptocurrencies as investment assets, we saw value in developing a price prediction model in this highly volatile market. Ether was chosen as the subject due to its unparalleled potential amongst its competitors. Driven by the similarities presented between cryptocurrency and stock, coupled with evidence of hidden states in the financial market, this paper conducted the first application of the Hidden Markov Model to the cryptocurrency space. Our main objectives were to first model the time series data of Ether since its establishment, then use the trained model to forecast future closing prices of Ether before finally devising an investment strategy. HMM was used to solve three fundamental problems namely the Evaluation Problem, Learning Problem and Decoding Problem. Given 936 observations of daily Ether prices obtained from Yahoo Finance, 80% of this data was used as a training set while the remaining 20% was used as the testing set. The Forward algorithm and Baum-Welch algorithm helped obtained the model parameters. Thereafter, Viterbi algorithm decoded the likely state sequence of the observations. Using Mean Absolute Percentage Error as the indication of forecasting power, the selected Hidden Markov Model (HMM) has 3 states and 3 mixtures of Gaussian distribution, with the lowest MAPE of 4.63568. Via Monte Carlo simulations, our HMM investment strategy produced a superior weekly return of 5.68% as compared to 3.94% for the ânaĂŻveâ strategy. This indicated the successful adaptation of HMM in the cryptocurrency market despite limitations from the inherent assumption. Future extensions to the paper could include the use of more model inputs, account for transaction fees and consider the heavy correlation between cryptocurrencies. We also anticipate that our findings require re-validation over time given the rapidly evolving nature of the market.