The rapid evolution of Decentralized Finance (DeFi) has introduced innovative financial services, offering accessibility, efficiency, and transparency. However, the integration of DeFi into global capital markets presents systemic risks, including liquidity shocks, smart contract vulnerabilities, and regulatory arbitrage. This review explores the intersection of DeFi protocols with systemic risk frameworks to enhance capital market stability and regulatory oversight. By analyzing risk assessment methodologies, stress-testing mechanisms, and governance models, the study highlights strategies for mitigating financial contagion and ensuring market resilience. Furthermore, it examines regulatory approaches, such as real-time compliance monitoring and cross-border coordination, to bridge the gap between decentralized ecosystems and traditional financial regulations. Through case studies and empirical data, this paper underscores the importance of integrating robust risk frameworks with DeFi innovations to foster sustainable financial markets. The findings contribute to ongoing discussions on balancing financial innovation with risk management, providing insights for policymakers, regulators, and industry stakeholders navigating the evolving landscape of digital finance.
The rapid evolution of blockchain technology and decentralized finance (DeFi) has significantly disrupted traditional financial services globally. DeFi, by leveraging blockchain, enables financial services without relying on traditional intermediaries such as banks, creating a more inclusive, efficient, and transparent financial ecosystem. The chapter explores blockchain and DeFi's impact on the Indian financial services sector. The purpose is to identify how these technologies are transforming financial products, services, and regulations in India while addressing key issues like financial inclusion, security, and scalability. The research methodology involves a qualitative approach, including an analysis of secondary data, case studies of Indian blockchain startups. The study will also provide insights into the regulatory and institutional changes required to support this transformation. In conclusion, while blockchain and DeFi offer significant promise for the Indian financial sector, their adoption requires overcoming technological, regulatory, and cultural barriers.
This project presents a blockchain-powered banking application that enables users to create and manage decentralized accounts (DApp accounts) using Ethereum smart contracts. The application facilitates secure user registration, fund deposits, and peer-to-peer transfers through Solidity-based contracts deployed on the Ethereum network. The addUsers function stores user details, while bankAccount manages transactions securely on the blockchain. Python’s Web3 API is used to interact with these smart contracts, enabling seamless operations such as account creation, deposits, and fund transfers. A Django-based web server provides an intuitive interface for users to register, log in, view balances, and conduct transactions. By leveraging blockchain technology, the system ensures decentralized, transparent, and secure banking operations, eliminating intermediaries to reduce transaction costs and processing times. Users can transfer funds directly between accounts without reliance on traditional financial institutions, minimizing risks associated with centralized banking. This application demonstrates the potential of blockchain in revolutionizing financial systems, empowering users with enhanced security, financial autonomy, and efficient transaction management. Keywords: Peer-to-Peer Transactions, Blockchain, Ethereum, Smart Contracts, Web3 API, Decentralized Banking, Solidity, Django.
Decentralized finance (DeFi) lending platforms often require over-collateralization, excluding users without substantial crypto holdings. This paper introduces LFG, a novel DeFi protocol that leverages on-chain social profiles and tokenized reputation to assess creditworthiness. By integrating Ethereum smart contracts with Layer-2 solutions (Ethereum, Polygon), decentralized storage (IPFS) and zero-knowledge proofs, LFG enables undercollateralized loans while preserving privacy. We present a technical architecture, analyze security risks, and compare LFGs with traditional models using quantitative metrics. The results show a 40% reduction in collateral requirements for users with high reputation scores on the chain.
Dinesh Babu K D, M. K. Badrinarayanan, Chinapaga Ravi, Avinash Kumar · 6 authors
In this paper, we discuss fractional NFT-based asset tokenization and explore it as a mechanism to democratize wealth distribution. However traditional high-value assets such as real estate, art, and business equity have generally been out of the reach of the many because of their high costs and illiquidity. This research using blockchain technology and Non-Fungible Tokens (NFT) proposes a method of fractionalizing ownership of these assets to open these wealth-enhancing opportunities to all. The model generates Fractional NFTs (F-NFTs) that represent smaller, tradable parts of assets, allowing people to acquire high-value assets without having to put in so much capital. This paper explores the technical aspects of the overall F-NFT architecture, including the smart contract functionalities, valuation mechanisms of the assets based on the governance model, and the method of decentralized decision-making. The research also looks into the possibility that this model could enhance the financial inclusion of millions of people, providing micro-investments and improving liquidity for more illiquid assets and global participation. The paper also addresses key issues of market volatility, regulatory compliance, and security and presents innovative solution ideas to navigate through such risks. The study shows that fractional NFT tokenization can transform traditional investment paradigms using use-case scenarios, which include real estate and art tokenization. In this research, we brainstorm a potential way to democratize access to necessary financial system inputs — assets.
Cryptocurrencies were designed to function as money without banks. How, then, could they run into a banking crisis in 2022? We argue that the evolution of the crypto sphere into a credit based system is driven by its inherent contradictions: Bitcoin and other cryptocurrencies only became money-like when centralised exchanges began to create credit claims on crypto tokens, thus providing liquidity and elasticity to crypto markets. Stablecoins connect the crypto sphere to the conventional banking system, thereby securing indirect sovereign backing. Both centralized exchanges and stablecoin issuers are functionally equivalent to shadow banks. Stablecoins additionally fulfil the defining criteria of shadow money. The contemporary cryptocurrency sphere comprises an internal hierarchy of credit that is firmly integrated into the conventional monetary system. The emergence of ‘crypto shadow banking’ can be understood as the latest chapter in the long and turbulent history of unregulated private monetary innovation. Our analysis not only explains the 2022 crisis, it also demonstrates that credit theories of money can, counterintuitively, account for the anti-credit project of cryptocurrencies.
Introduction. The modern world is undergoing a transformation that encompasses all aspects of the economy, technology, and social life, and the financial sector is no exception. Financial technologies are becoming the driving force of this evolution, changing approaches to money management, investments, lending, and financial services in general. Thanks to the integration of artificial intelligence, blockchain, big data, and other innovations, financial services are becoming more accessible, personalized, and efficient, opening up new horizons for business and society. At the same time, this industry faces a number of challenges, such as the need to adapt to the regulatory environment, the growth of cyber threats, and ensuring financial inclusion for broad segments of the population. The development of financial technologies is taking on unique features in different regions of the world, from innovative platforms in the United States and Europe to revolutionary changes in financial services in Asia, Africa, and Ukraine. This multifaceted nature emphasizes the importance of global cooperation, technological progress, and a strategic approach to shaping the financial ecosystem of the future, which will be not only stable but also adapted to the needs of modern society. The purpose of the research is to deepen theoretical and methodological approaches to the management of financial services and innovative technologies aimed at optimizing, simplifying and reducing the cost of financial processes. Research methods. In the process of implementing the established goal of the scientific research, both general scientific and specific research methods were used, namely: generalization, induction and deduction, financial analysis and synthesis when establishing the influence of technological and innovative factors. The results. It was found that the future of financial technologies is promising. The main areas of development will be artificial intelligence, blockchain, open banking and decentralized finance (DeFi). It is expected that financial services will become even more personalized thanks to data analytics and customer behavior prediction. It was established that the development of supervisory (SupTech) and regulatory (RegTech) technologies will allow for more effective market monitoring, risk identification and transparency in the financial sector. Innovations in the field of cybersecurity will also become a priority, as users increasingly trust digital platforms with their financial data. The role of financial inclusion is identified, which will develop through the creation of accessible mobile platforms that provide services to people even in the most remote regions. Special emphasis will be placed on the development of financial literacy so that users can effectively use new tools. It is predicted that financial technologies will create new business models and stimulate their economic growth through innovation, which will have a significant impact not only in the financial sector, but also in people’s daily lives, changing the way they interact with their finances. The future of financial technologies is a digital transformation that will make financial services more accessible, efficient and secure for everyone. Prospects. Further research should be aimed at: creating and implementing a regulatory ‟sandbox” for rapid testing of innovations in the financial sector; increasing the level of financial literacy and involvement among the population and business; forming an educational base focused on implementing the concept of open banking; developing innovations in supervision and regulation technologies that ensure financial market stability, increase process efficiency, contribute to expanding the client base, as well as identifying and minimizing risks.
Kripto paralar 21. yüzyılın ilk çeyreğine damgasını vuran finansal varlıklardır. Finansal piyasalarda işlem görmeye başlamalarının ardından kısa süre içerisinde işlem hacimlerinin artması ile çok sayıda yeni kripto para birimi üretilerek piyasada işlem görmeye başlamıştır. Kripto paraların üretim süreçleri, fiziksel varlığa sahip olmamaları, merkeziyetsiz yapıları gibi geleneksel finansal varlıklardan ayrılan özellikleri dikkat çekmiştir. Dikkat çeken bir diğer önemli özellikleri ise şüphesiz kripto para birimlerinde yaşanan ciddi fiyat dalgalanmaları olmuştur. Kripto para birimlerinin yaşamış oldukları bu fiyat dalgalanmaları piyasanın volatil yapısını ön plana çıkarmıştır. Bu nedenle kripto varlıklar arasındaki volatilite yayılımın analiz edilmesi gerek yatırımcılar gerekse araştırmacılar açısından önem kazanmıştır. Bu çalışmada kripto para piyasasında en yüksek piyasa değerine sahip 4 kripto para birimi arasındaki volatilite yayılımı analiz edilmiştir. Analizlerde BTC (Bitcoin), ETH (Ethereum), BNB (Binance Coin) ve SOL (Solano) için 13.07.2020 ile 05.09.2024 tarihleri arasına ait günlük getiriler kullanılmış ve volatilite yayılımının analizi için TVP-VAR modeli oluşturularak kripto para birimleri arasındaki dinamik bağlantı incelenmiştir. Analiz bulgularından, kripto para birimlerinin volatilitelerindeki toplam dinamik bağlantının Covid-19 Pandemisi ve Bitcoin ETF’lerinin onaylanmasına ilişkin gelişmelerden etkilendiği ve bu dönemlerde artış gösterdiği tespit edilmiştir. Ayrıca, kripto para birimleri arasındaki toplam volatilite yayılımının gücünün yüksek olmadığı, kripto para birimlerinden BNB ve BTC’nin analiz dönemi içerisinde volatilite yayıcısı, ETH ve SOL’un ise volatilite alıcısı özellik gösterdiği bulgusu elde edilmiştir. Kripto para birimleri arasında volatilite yayıcısı olan değişkenler etki güçleri açısından sıralandığında en güçlü volatilite yayıcısı olan para biriminin BNB olduğu ve bunu BTC’nin takip ettiği belirlenmiştir. Diğer yandan SOL, volatilite alıcısı olan kripto para birimleri arasında volatiliteyi en çok alan kripto para birimi olurken, ETH ise ikinci sıradadır. Kripto para birimlerinin volatilitelerindeki değişimin açıklanmasında öncelikle ilgili kripto para biriminin kendi geçmiş fiyat şoklarının etkili olduğu belirlenmiştir. Analizlerde dikkat çeken bir diğer husus ise özellikle BNB ve BTC’nin SOL’a güçlü şekilde volatilite yaymasıdır. Analize dahil edilen 4 kripto para biriminin volatilite yayılım ilişkisinin çok yüksek olmaması, aynı portföyde bulundurulabilecekleri ve birbirlerine risk bulaştırıcı etkilerinin sınırlı olabileceği şeklinde değerlendirilebilir. Bunun yanı sıra BNB’nin en yüksek volatilite yayıcısı olma özelliği dikkate alınarak portföylerin oluşturulması ve takip edilmesi, yatırım verimliliği açısından önem taşıyacaktır. Benzer şekilde SOL’un da diğer kripto para birimlerinden güçlü şekilde volatilite alması, yatırım süreçlerinde dikkat edilmesi gereken bir diğer husus olarak değerlendirilebilir.
Privately created money based on Distributed Ledger Technology (DLT) emerged in the late 2000s at the same time as mobile money. The latter, exemplified by M-Pesa, has become a prevalent form of money in several countries, especially in Africa. DLT-based cryptocurrencies, in contrast, have achieved a rather limited monetary presence. This paper compares the creation and functioning of these two forms of digital money to establish reasons for the relatively weak social acceptability of cryptocurrencies. For the most prominent cryptocurrencies, such as Bitcoin and Ether, these reasons are shown to include deficiency as units of account, high costs of use, and fragmentation of blockchains. Ultimately, these are due to the decentralized and permissionless character of privately created DLT-based monies, which invites peculiar forms of capitalist profit making, including speculation. Despite its weaknesses, such money has the potential to become widely used, but that would require state intervention, which would alter its character.
Swiss banks are at a pivotal moment as digital assets gain traction, presenting both challenges and opportunities. This study examines how Swiss banks can leverage their internal resources and capabilities to establish a competitive advantage in the digital asset ecosystem. Using the Resource-Based View and the VRIO (Value, Rarity, Imitability, and Organization) framework, this study investigates the strategic importance of key services such as custody, staking, and tokenization. Drawing on expert interviews with Swiss banking leaders, this research identifies these services as vital for maintaining Switzerland’s financial leadership. Findings suggest that Swiss banks’ established reputation for trust, combined with regulatory clarity under the Distributed Ledger Technology Act, creates a strong foundation for digital asset adoption. While digital asset custody services address the growing demand for security, tokenization presents significant growth potential, particularly in real-world asset markets. This study concludes that Swiss banks can sustain their competitive edge by investing in blockchain expertise, fostering fintech partnerships, and enhancing educational initiatives. By combining traditional banking strengths with innovative digital asset services, Swiss banks are well positioned to capitalize on this evolving financial landscape.
The implementation of open banking frameworks together with Application Programming Interfaces (APIs) creates significant market changes because they boost financial innovation as well as customer satisfaction while promoting market competition. The research study examines the impact of regulatory movements along with technical advancements which rebuilds conventional banking systems through open banking processes. The security of financial data exchange facilitated through open banking APIs allows financial institutions to link with third-party providers for delivering state-of-the-art personalized services and better access to credit and seamless payments. This analysis focuses on the opportunities along with issues that come from using open banking technology together with the necessity of standardizing API protocols because of privacy threats and digital security vulnerabilities. Open banking serves as a technology that builds financial inclusion by giving consumers full control of their financial data. The findings from industry studies with case examples demonstrate how open banking joint with APIs transitions finance toward a decentralized user-focused system that connects different entities. The research shows that open banking success depends on the teamwork between stakeholders while strong regulatory guides and innovative efforts drive complete exploitation of its potential
Enforcing a delay between deposits and withdrawals within decentralized finance protocols may make them more secure but less composable. A delay makes flash loan attacks more expensive, but restricts interactions between protocols. In this work, we analyse public blockchain data to determine if this concern is warranted in practice. We measure the duration between corresponding direct deposit and withdrawal function calls across several decentralized finance protocols on Ethereum. We show that direct callers of DeFi protocols typically leave assets locked in these protocols for many blocks, meaning that artificial withdrawal delays are not likely to have a negative impact on user experience.
The purpose of this article is to explore the key aspects of cryptocurrency exchange systems, including their role in storage, exchange, and token staking. By examining the characteristics and features of these exchanges, cryptocurrency users can make informed decisions about how to allocate and store their funds effectively.There are two main types of cryptocurrency exchanges: centralized exchanges (CEX) and decentralized exchanges (DEX). Centralized exchanges are governed by a central authority that manages user funds, providing a more streamlined and user-friendly experience. However, this centralization creates security risks, as users must trust the exchange with their assets. If the platform is compromised or experiences technical failures, users may suffer significant losses. Moreover, centralized exchanges often require identity verification and other regulatory procedures, which can be a barrier for those who prioritize privacy or anonymity in their transactions. On the other hand, decentralized exchanges (DEXs) operate without a central governing body, allowing users to retain control over their funds and trade directly with each other using smart contracts on a blockchain. This decentralization reduces reliance on intermediaries and enhances privacy, but it also presents challenges. DEXs tend to be more complex to use and may require greater technical expertise.Future research should examine how various groups – ranging from individual investors to large financial institutions – are incorporating cryptocurrency exchanges into their financial strategies.
This study provides a bibliometric analysis of the research trends in financial derivatives within the banking and finance literature. By examining citation patterns, co-authorship networks, and keyword co-occurrences, the study identifies key research themes and their evolution over time. The analysis reveals the central role of derivatives in risk management and financial stability, particularly in the wake of financial crises. It highlights the growth of computational techniques in derivatives pricing and risk management, with an increasing focus on advanced models and simulations. The study also explores the emerging influence of blockchain technology and decentralized finance in reshaping the derivatives landscape. The bibliometric map underscores the global nature of financial derivatives research, with significant contributions from the United States, China, and the United Kingdom. The study provides valuable insights for scholars, practitioners, and policymakers, suggesting areas for further research, particularly in regulatory frameworks, pricing models, and the integration of new technologies in the derivatives market.
Embedded finance represents a transformative shift in how financial services integrate within non-financial platforms, creating seamless user experiences that eliminate traditional friction points. This comprehensive article explores how companies have leveraged embedded payment infrastructures to create extensive ecosystems that transcend their original business models. The technical infrastructure powering these innovations—including API-first banking, regulatory technology, and microservices architecture—enables real-time processing at scale while maintaining security and compliance. The evolution toward Super Apps demonstrates how financial transactions can become invisible utilities within broader digital experiences, while artificial intelligence enhances these platforms through predictive analytics and conversational interfaces. Despite technical challenges related to data security, scalability, and cross-border complexity, emerging trends including decentralized finance integration, context-aware services, and embedded insurance promise continued innovation in this rapidly developing field
This comprehensive article explores the rapid advancement of financial technologies (FinTech), highlighting their transformative role in enhancing transaction efficiency and security across global financial markets. The integration of artificial intelligence and machine learning in financial services has revolutionized fraud detection, credit assessment, and customer service delivery while presenting new implementation challenges. As digital payment systems and banking platforms continue to evolve from early electronic transfers to sophisticated mobile applications and neobanks, they reshape traditional financial models and expand access to previously underserved populations. The interplay between emerging technologies like distributed ledger systems, cloud computing, and biometric authentication creates a dynamic ecosystem where established institutions and innovative startups both compete and collaborate. Regulatory frameworks worldwide adapt to balance innovation facilitation against consumer protection, while specialized compliance technologies address increasingly complex requirements. Despite cybersecurity threats including data breaches and ransomware attacks, advanced security measures provide essential protection for the digital financial landscape.
This study explores the transformative potential of blockchain technology in revolutionizing cross-border payment systems. Traditional methods are hindered by inefficiencies such as high transaction fees, prolonged processing times, and opaque operations, which impede seamless global financial interactions. Blockchain, with its decentralized and immutable ledger, offers a secure and transparent alternative that can significantly streamline payment processes. This paper examines how blockchain can facilitate real-time settlements, eliminate intermediaries, and enhance data integrity, thereby reducing costs and improving efficiency. Further, it addresses the practical applications and regulatory challenges associated with integrating blockchain into existing payment infrastructures. Ultimately, this research aims to provide actionable insights for developing a more efficient, transparent, and cost-effective cross-border payment ecosystem.
Heike Joebges, Hansjörg Herr, Christian Kellermann
Abstract Crypto assets’ partial money-like use promotes toxic developments in the financial system. Even though crypto assets might be regarded as close substitutes to traditional money, we show that they lack important functions of money. Traditional fiat money requires several interacting institutions to stabilize its value and regulate its use. In our analysis, we elaborate on the risks associated with the difficulty of setting up regulatory institutions in the crypto sphere and the likelihood of periods of high volatility as well as their repercussions on the traditional financial system due to reciprocal integration. The shift of banking functions into the unregulated area of decentralized finance triggers a new quality of instability in the global financial system with an increasing probability of effects on the real economy. Regulation of crypto assets remains an urgent issue.
This study employs wavelet analysis to examine the contagion between cryptocurrency returns and sovereign bond yields within the West African Monetary Zone (WAMZ) economies, capturing both the frequency-dependent nature of the relationship and time-varying behavior. We analyze daily data spanning 01/26/2021 to 10/07/2022, with a total observable value of 444. The study selected periods of uncertainty within financial markets, namely, the COVID-19 pandemic and the Russia–Ukraine war because there was a need to understand how securities react during such times to help investors plan accordingly. Our results show a negative correlation between sovereign bond yields and cryptocurrency returns, suggesting that investors can use these asset classes as hedge agents, diversifiers, and safe-haven instruments. These findings provide valuable insights for investors and policymakers, shedding light on the potential interdependencies and diversification benefits between these two asset classes.
We explore the adoption of graph representation learning (GRL) algorithms to investigate similarities across services offered by Decentralized Finance (DeFi) protocols. Following existing literature, we use Ethereum transaction data to identify the DeFi building blocks. These are sets of protocol-specific smart contracts that, similarly to “financial LEGO bricks”, are utilized in combination within single transactions and encapsulate the logic to conduct specific financial services such as swapping or lending cryptoassets. We propose a method to categorize these blocks into clusters based on their smart contract attributes and the graph structure of their smart contract calls. We employ GRL to create embedding vectors from building blocks and agglomerative models for clustering them. To evaluate whether they are effectively grouped in clusters of similar functionalities, we associate them with eight financial functionality categories and use this information as the target label. We find that in the best-case scenario purity reaches .888. We use additional information to associate the building blocks with protocol-specific target labels, obtaining comparable purity (.864) but higher V-Measure (.571) and discuss plausible explanations for this difference. In summary, this method helps categorize existing financial products offered by DeFi protocols, and can effectively automatize the detection of similar DeFi services, especially within protocols.
The subject of discussion has become the effects of the blockchain and decentralized finance (DeFi) on the conventional banking, as well as the perspectives and threats of such solutions. By adopting PageRank analysis, Sharpe ratio evaluation, Gini Index measurement and K-means clustering the study explores the impact, risk-adjusted returns, inequality features and transaction characteristics of the DeFi platforms with the incumbent banking systems. The PageRank analysis revealed that traditional banks generally hold higher influence scores (JPMorgan: Comparing it with other DeFi platforms such as Uniswap, Curve has slightly lower cash cow coefficient equal to 0. The result of Sharpe Ratio analysis revealed that overall DeFi platforms like Uniswap has a Sharpe ratio of 0.60, which is higher than the Sharpe ratio of US Treasury Bonds 0. The Gini Index measurement indicated greater inequality in transaction distribution among DeFi platforms (Compound: Further, there is the fee per transaction charged to the client which varies where in the case of PayPal it is $ 0. 45 whereas in traditional banks, it is $ 0. According to the K-means clustering, the existing financial behaviors were analyzed and traditional banks were dominating in the aspect of transaction volumes and market capitalization as compared to the DeFi platforms. These research highlights the benefits of blockchain applications and DeFi in improving the financial systems, at the same time identifying the barriers that people would encounter when applying them including fluctuation and imbalance. Thus, the conclusion of this research calls for the further investigation of the possibilities of the consultation of decentralized systems within the current framework of regular banking.