Fast development of technologies has led to emergence of the new market – FinTech – which is very attractive for investors today. By now this market has a great number of different concepts: P2P-crediting, E-wallets, Bitcoins, mPOS-acquiring, T-commerce, mobile banks, etc. Many of these tools have already heavily entered our ordinary life. People can obtain any credits through special services on the Internet from other users without participation of banks, pay by credit card using mobile devices, and get information about expenses and incomes according to the card anywhere in the world. Users do not need to go to banks anymore and to spend their time for credit arrangements, currency exchange, to look for ATMs to remove cash. Purchases on the Internet can be paid not only in rubles, but also in new digital currency. These tools make life easier, however, they pose a serious threat for banks. Now, bank institutions should create more convenient and utility services for the clients to keep clients. Therefore, bank and credit systems start to change actively.
Die vorliegende Bachelorarbeit gibt einen Uberblick uber die Funktionsweise und Auswirkungen der Blockchain-Technologie auf den Wertpapierhandel. Dabei werden zunachst die essentiellen, technischen Grundlagen der Kryptografie und Dezentralisierung am Beispiel der fuhrenden Kryptowahrung Bitcoin untersucht. Danach werden die gewonnenen Erkenntnisse mit einer SWOT-Analyse auf den Wertpapierhandelsprozess angewandt und es wird die Implementierung eines Distributed Ledgers auf Chancen und Risiken fur die Finanzmarkte hin evaluiert. Als Essenz der Literaturauswertung ist festzustellen, dass die Starken der DLT nur nach Einigung auf einen technischen Marktstandard voll abgeschopft werden konnen. Die Basis der Bachelorarbeit sind aktuelle Studien und Arbeitspapiere von Regulierungsbehorden, Beratungsunternehmen und Finanzdienstleistern aus Europa und den USA zur Auswirkung der Distributed Ledger Technology auf den Wertpapierhandel sowie die Fachbucher und Arbeitspapiere von Narayanan (2016) und Nakamoto (2008) zur Funktionsweise der Blockchain-Technologie. Durch die Verknupfung von Informationstechnologie und Finanzwirtschaft erhofft sich der Autor einen interdisziplinaren Erkenntnisgewinn uber aktuelle Entwicklungen auf den Finanzmarkten.
Federal Reserve Governor Lael Brainard has said distributed ledger technology presents both risks and opportunities to the financial sector [ABSTRACT FROM AUTHOR]
The article discusses issues confronted by authorities in Hong Kong in the territory's financial services market as of mid-September 2016, particularly in the field of virtual currency trading. Also cited are the 72 million dollars worth of the virtual currency called bitcoins that was stolen from bitcoin trading platform Bitfinex exchange, the territory's Money Service Operator License System, and the comment by law firm Hogan Lovells' Mark Parsons on the developments.
Money laundering can be defined as any act or attempted act to conceal or disguise the identity of illegally obtained proceeds so that they appear to have originated from legitimate sources (Money Laundering, 2016). It is difficult to determine the magnitude of money laundering because these illicit financial flows remain hidden (Schott, 2006). A report issued by the United Nations Office on Drugs and Crime (UNODC) quoted that the total of all criminal proceeds amounted to $2.1 trillion in 2009. The study also shows that “Less than 1 percent of global illicit financial flows are currently seized and frozen” (Pietschmann & Walker, 2012). This is concerning because money laundering not only enables the operation of criminal organizations such as drug and human traffickers but can also significantly distort the economies in which they enter.\nThe Financial Action Task Force (FATF) is an inter-governmental policy-making body that has helped to promote anti-money laundering efforts since its formation in 1989. It has issued 40 recommendations to fight money laundering and nine special recommendations to combat terrorist financing which have been adopted by 32 countries (About - Financial Action Task Force, 2016). Unfortunately, implementing these strategies has proved to be difficult for both developed and lesser developed countries. According to a study conducted by PricewaterhouseCoopers in 2016, “over the last few years, in the U.S. alone, nearly a dozen global financial institutions have been assessed fines in the hundreds of millions to billions of dollars for money laundering and/or sanctions violations" (PricewaterhouseCoopers, 2016). It stands to say that if financial institutions are having difficulties implementing frameworks to prevent and detect money laundering, then our enforcement agencies are unable to adequately address the issue as well.\nA new hurdle that enforcement agencies have had to face is the emergence of Bitcoin, as well as other cryptocurrencies, that can be described as “a digital currency and online payment system in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank” (Swan, 2015). Being an often unrecognized currency, many banks and financial institutions have not had to worry about modifying their compliance programs. The biggest benefit of cryptocurrencies to money launderers is its decentralized nature. There is no governing authority, as members of the network handle issuances and payments. Once a disruptive technology, Bitcoin is beginning to lose momentum for a number of reasons and some its strongest proponents are now referring to it as nothing more than an experiment. The purpose of this paper is not to examine Bitcoin, but rather its underlying technology that has been found to be the actual value: blockchain. After providing a brief overview of the technology and the hurdles that financial institutions face when implementing anti-money laundering compliance programs, the possible ways in which blockchain can help alleviate these difficulties will be examined.
This world is being increasingly inundated with new technologies. Some fit in and improve the existing system, while others create imbalances in the market and challenges to the present legal structure. Examples of the latter include the Model T Ford assembly line, cellular telephones and the Internet. One such emerging and potentially disruptive technology taking the technological world by storm is the blockchain, the technology underlying Bitcoin. The blockchain is a distributed ledger which allows for a decentralised system of interactions. Its nascent application, Bitcoin, allows for secure financial transactions in virtual currency between parties who do not otherwise know each other and without the need of centralised services, such as banks or Paypal. The blockchain is now being developed to work with a variety of interactions between parties, whether to create autonomous self-executing smart contracts or establish a dependable and inviolable land title registry, all without the need for intermediaries. It has vast potential to change social constructs which have traditionally relied upon third parties to act as trusted intermediaries. However, in order for this innovation to develop its full potential and not become subject to misuse, some form of regulatory response is necessary.
In March 2015 the UK Government set out its approach to digital crypto-currencies. London has thereby taken a lead in this area, adopting a friendlier regulatory stance than its counterparts in New York or Frankfurt. The UK Chancellor, George Osborne, announced UK Government plans to regulate digital crypto-currencies and invest money not only into the ‘opportunities and challenges’ of digital crypto-currencies such as Bitcoin, but also into the potential future of leveraging ‘Blockchain technology’ to fundamentally change the financial world. Blockchain technology has now also attracted interest from Central Banks, financial institutions and technology firms, who are currently discussing and investigating the opportunities and challenges in using Blockchain technology. The financial industry is realising that Blockchain technology has enormous potential. This Blockchain technology could fundamentally change the way the whole financial industry operates and delivers the opportunity to completely reinvent the banking industry. In this paper the various initiatives and potential use cases of the Blockchain technology will be discussed. This technology could have serious consequences especially for the payments industry. The possibilities of the Blockchain technology will not only be limited to digital cash and payments systems. They also enable the issuance and trading shares on decentralised digital exchanges, allow new ways of communication without third-party providers, and enable users to draft and enforce digital contracts known as ‘smart contracts’.
Information technology has become an indispensable part of the U.S. banking industry. The industries commitment to evolving advantageous technology is evident in the growing financial commitment to distributed ledger or "blockchain" technology. The advancing technology is transforming the configuration of the U.S. banking industry model established with the passing of the Federal Reserve Act in 1913. The present paper investigates the literature to provide an understanding of the transformation of the U.S. banking industry created by advancing technology.
There has been a huge amount of coverage in the press about the great potential uses of bitcoin-related technology for financial markets, such as improvements in efficiency. In addition to the supporters of blockchain, many have been critical of its real-life applications within the business world and suggest that what we are witnessing is nothing short of “blockchain hype, ” and that this technology can only be applied to bitcoins. This paper will demonstrate that there are real business cases for improving financial markets based on the lessons learned from cryptocurrencies, but, unlike what the hype-enthusiasts suggest, they are not application of a technology to the existing business models within financial markets. They are reforms of the business model itself. What needs to be exported from the world of cryptocurrencies are aspects of the market organization, inspiration for a different accounting and legal system, and some aspects of the technology. These can result in a huge contribution towards more robust, efficient, and stable markets. However, the process cannot be immediate and effortless, and can only be achieved within a market-wide strategic perspective. In this paper, I develop these concepts initially within a parallel analysis of cryptocurrencies and financial markets. Then, I will focus on a specific business case regarding the collateralization of financial derivatives, which will highlight quantifiable benefits in terms of reducing costs, capital, and risk. It is an example of a situation where the use of cryptocurrency technology is not more important than the business ideas developed in the analysis of cryptocurrencies; yet it was inconceivable prior to the advent of distributed ledgers, smart contracts, and oracles
Id. (The article summarizes the process through 6 steps: (1) broadcasting the information to the network; (2) each node in the network compiles the information; (3) each node checks the information by solving a complicated process; (4) each node broadcast the proof that it solved the checking process; (5) the nodes accept the broadcast only if the information included is proven to be correct; and (6) the nodes add to the chain the new information, where it is, timestamp, and its location in the chain is contingent on the previous elements of the chain.).
Lewis Rinaudo Cohen, Rinaudo Tyler, David Contreiras, Pamela Buxton
The article discusses examples of how blockchain technology will practically affect the financial markets. Topics covered include blockchain's role as a distributed ledger technology that underlies cryptocurrencies such as bitcoin, potential applications to types of financial products such as commercial paper notes, derivative instruments, and asset-backed securities (ABS), and blockchain-based solutions using smart contracts to replicate legal agreements
Christian Thiel, Christopher Brown, Mario Hellenkamp, Marius Spancken
Der Abschlussbericht fasst die Ergebnisse des Forschungs- und Entwicklungsprojektes 2015/2016 im Studiengang Master of Science Wirtschaftsinformatik (FH Münster) zur Themenstellung "Kryptowährungen und Smart Contracts" zusammen. Das Projekt analysierte die Einsatzzwecke, Potenziale und Architekturen von Blockchain-Anwendungen. Des Weiteren wurden verschiedene Fragestellungen zum Nutzen der Blockchain-Technologie in modernen Geschäftsprozessen und zu den technischen Herausforderungen mittels der Entwicklung zweier Prototypen betrachtet. Der erste Prototyp realisiert eine eigene Blockchain, in der verschiedene Angriffsszenarien durchgespielt werden können. Der zweite Prototyp realisiert eine Clearinghouse-Anwendung in Form einer verteilten Smart-Contract-Implementierung (in Ethereum). Der Bericht vermittelt einen Überblick über Ansätze, Strukturen, interne Abläufe und Rahmenbedingungen aktueller Blockchain-Implementierungen. Die erzielten Ergebnisse verdeutlichen neben dem Nutzen auch die Besonderheiten und Einschränkungen der Blockchain-Technologie.
The paper reviews the last technological tools that arguably can contribute to reducing the excessively high costs of remittance transactions in Africa. Indeed, despite huge remittance inflows to and within the continent, Africa is the most expensive destination to send money to. As remittances have become more important than Overseas Development Assistance and Foreign Direct Investment inflows in some countries, it has become crucial to explore technological advances that can contribute to reducing their transaction costs. Such reduction would enable the end beneficiaries to capture a larger share of these external resources, which in turn could have an even bigger impact on development in Africa. In addition to revisiting the role of mobile banking in lowering remittance transaction prices, the paper takes a closer look at the newest available technology, the Bitcoin blockchain technology that underpins digital currencies. At this early stage, very few social science researchers have addressed the role that such digital currency could play in the reduction of the remittance transaction prices, except for a few innovative Bitcoin operators. The paper proceeds as follows. It first looks at the causes of the high remittance transaction costs. Then, it reviews, presents and analyses the official remittances data downloaded from the World Bank's Remittances Prices Worldwide database. It also briefly reviews a few remittance transfer technological instruments. Given the novelty of the topic, the review of the most recent existing "literature" on Bitcoin is mainly retrieved from either on - line news sources or information from a few leading Bitcoin operators. In the light of the UN Global Working Group Post-2015 Development Agenda and Sustainable Development Goals proposal to reduce by 2030 the remittance transaction costs to even less than 3%, the effectiveness of these new technological instruments to reach such objective are discussed. Finally, a number of appropriate policy actions to foster the economic impact of remittances are proposed.
Abstract We show how decentralized individual investments can efficiently allocate capital to innovating firms via equity crowdfunding. We develop a model where consumers have privately known consumption preferences and may act as investors. Consumers identify worthwhile investments based on their own preferences and invest in firms whose product they like. In the presence of aggregate demand uncertainty, an efficient capital allocation is achieved if all groups of consumers have enough liquidity to invest. If some groups of consumers cannot invest, capital flows reflect preferences of liquid investors but not future demand. Comparing with traditional financing forms, crowdfunding in the absence of liquidity constraints can be superior unless traditional financiers are fully competitive and perfectly informed.
Paulo Nicolás Carrillo, Pe ntilde a Clara I., de La Rosa Josep Ll.
With the popularization of online games and social networks, the virtual currencies have acquired a boom growing as solution of alternative payment and best adapted to the particular needs of the exchange of goods or virtual services offering faster, more secure and low cost transactions of value. This work proposes a case study to create the Eurakos Next cryptocurrency based on a virtual currency named Eurakos which currently works using digital contracts. The idea is to allow agreements to be signed by two peers and validated by other peers in a mobile social community network using Smart Contracts through the Ethereum framework to take advantage of the Blockchain technology.