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Article
Publication date: 18 October 2019

Michael Wong

To provide an overview of the Hong Kong regulatory regime for crypto-related investment products.

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Abstract

Purpose

To provide an overview of the Hong Kong regulatory regime for crypto-related investment products.

Design/methodology/approach

Describes the existing regulatory regime in Hong Kong for crypto-related investment products prior to November 2018 and, following circulars issued by the Hong Kong Securities and Futures Commission (SFC) in November 2018, regulatory standards relating to virtual asset portfolio managers and fund distributors and a conceptual framework for potential regulation of virtual asset trading platform operators. Discusses the implications of the regulatory standards and conceptual framework.

Findings

The regulatory standards have aligned the requirements relating to crypto-related securities and futures contracts with those for crypto-related assets that do not fall within such definitions. The opt-in approach under the conceptual framework demonstrates that the SFC is actively trying to learn about the operations of platform operators and develop appropriate regulations accordingly.

Originality/value

Practical guidance from experienced lawyer with expertise in fund formation, fund investments and retail fund registration

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Article
Publication date: 23 June 2021

Sherena Sheng Huang

The UK authority published its first regulatory guidance on crypto-assets in July 2019. This paper aims to critically evaluate the effectiveness of the crypto-asset…

Abstract

Purpose

The UK authority published its first regulatory guidance on crypto-assets in July 2019. This paper aims to critically evaluate the effectiveness of the crypto-asset regulation in the UK and the consistency of the existing regulatory scheme.

Design/methodology/approach

This paper adopts comparative methods to carry out the analysis. The paper begins by elaborating the development of crypto-assets alongside the financial innovation in the world and pinpointing the core Acts and Regulations applied to crypto-assets in the UK. The paper also discusses a court case in the EU to highlight an argument among legal professions concerning crypto-assets classification.

Findings

Through carefully analysing relevant primary and secondary legislation of the UK and EU, this paper identifies some unclarified issues in the regulatory framework and discovers three flaws in the regulatory system. The paper concludes that the effectiveness of the current regulatory scheme is poor and room for improvement exists.

Originality/value

The paper provides the first review and a thorough analysis of the Laws and Acts applied to the crypto-asset regulation in the UK. It also calls on a simpler and clearer regulatory scheme from the perspectives of market participants and consumers. The discovered issues in the crypto-asset regulation in the UK may urge authorities to improve the existing regulatory frameworks and legal provisions.

Details

Journal of Financial Regulation and Compliance, vol. 29 no. 3
Type: Research Article
ISSN: 1358-1988

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Book part
Publication date: 21 May 2021

Serdar Ögel and İlkin Yaran Ögel

Introduction: As internet and communication technologies are getting developed, the commercial transaction is becoming more electronic. This change also brings new…

Abstract

Introduction: As internet and communication technologies are getting developed, the commercial transaction is becoming more electronic. This change also brings new approaches to new payment mechanisms like emergence of crypto currencies. They are virtual and digital currencies which can only be used in electronic environment but they are increasingly treated as a new payment and investment tool. Nevertheless, their use has not spread into the general public, yet. At this point, it will better to take the complex nature of the crypto currencies into consideration because it may still lead to some risks for people and the type of the risks perceived by consumers may influence their attitudes toward and intention to use crypto currencies.

Aim: Accordingly, this study attempts to examine the interaction between perceived risk, attitudes toward and intention to use crypto currencies within the context of Bitcoin, as the first crypto currency.

Method: This study was designed as a causal research. The sample of the study was reached by using convenience sampling method and data were collected with survey. The compiled data were tested with Structural Equation Model.

Findings: A statistically significant and negative relationship was found between perceived financial, time and psychological risk and attitudes toward the use of Bitcoin, and a statistically significant and positive relationship was found between attitudes toward and intention to use Bitcoin. The findings of the study are expected to contribute to both relevant literature and practice by explaining the financial behavior of the individuals within the context of perceived risk theory.

Details

New Challenges for Future Sustainability and Wellbeing
Type: Book
ISBN: 978-1-80043-969-6

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The Emerald Handbook of Blockchain for Business
Type: Book
ISBN: 978-1-83982-198-1

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Article
Publication date: 22 March 2021

Vijay Kumar Shrotryia and Himanshi Kalra

With the unprecedented growth of digitalization across the globe, a new asset class, that is cryptocurrency, has emerged to attract investors of all stripe. The novelty of…

Abstract

Purpose

With the unprecedented growth of digitalization across the globe, a new asset class, that is cryptocurrency, has emerged to attract investors of all stripe. The novelty of this newly emerged asset class has led researchers to gauge anomalous trade patterns and behavioural fallacies in the crypto market. Therefore, the present study aims to examine the herd behaviour in a newly evolved cryptocurrency market during normal, skewed, Bitcoin bubble and COVID-19 phases. It, then, investigates the significance of Bitcoin in driving herding bias in the market. Finally, the study gauges herding contagion between the crypto market and stock markets.

Design/methodology/approach

The study employs daily closing prices of cryptocurrencies and relevant stocks of S&P 500 (USA), S&P BSE Sensex (Index) and MERVAL (Argentina) indices for a period spanning from June 2015 to May 2020. Quantile regression specifications of Chang et al.’s (2000) absolute deviation method have been used to locate herding bias. Dummy regression models have also been deployed to examine herd activity during skewed, crises and COVID-19 phases.

Findings

The descriptive statistics reveal that the relevant distributions are leptokurtic, justifying the selection of quantile regression to diagnose tails for herding bias. The empirical results provide robust evidence of crypto herd activity during normal, bullish and high volatility periods. Next, the authors find that the assumptions of traditional financial doctrines hold during the Bitcoin bubble. Further, the study reveals that the recent outbreak of COVID-19 subjects the crypto market to herding activity at quantile (t) = 0.60. Finally, no contagion is observed between cryptocurrency and stock market herding.

Practical implications

Drawing on the empirical findings, it is believed that in this age of digitalization and technological escalation, this new asset class can offer diversification benefits to the investors. Also, the crypto market seems quite immune to behavioural idiosyncrasies during turbulence. This may relieve regulators of the possible instability this market may pose to the entire financial system.

Originality/value

The present study appears to be the first attempt to diagnose leptokurtic tails of relevant distribution for crypto herding in the wake of two remarkable events: the crypto asset bubble (2016–2017) and the outbreak of coronavirus (early 2020).

Details

Review of Behavioral Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1940-5979

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Article
Publication date: 9 October 2019

Saeed Rouhani and Ehsan Abedin

Crypto-currencies, decentralized electronic currencies systems, denote a radical change in financial exchange and economy environment. Consequently, it would be attractive…

Abstract

Purpose

Crypto-currencies, decentralized electronic currencies systems, denote a radical change in financial exchange and economy environment. Consequently, it would be attractive for designers and policy-makers in this area to make out what social media users think about them on Twitter. The purpose of this study is to investigate the social opinions about different kinds of crypto-currencies and tune the best-customized classification technique to categorize the tweets based on sentiments.

Design/methodology/approach

This paper utilized a lexicon-based approach for analyzing the reviews on a wide range of crypto-currencies over Twitter data to measure positive, negative or neutral sentiments; in addition, the end result of sentiments played a training role to train a supervised technique, which can predict the sentiment loading of tweets about the main crypto-currencies.

Findings

The findings further prove that more than 50 per cent of people have positive beliefs about crypto-currencies. Furthermore, this paper confirms that marketers can predict the sentiment of tweets about these crypto-currencies with high accuracy if they use appropriate classification techniques like support vector machine (SVM).

Practical implications

Considering the growing interest in crypto-currencies (Bitcoin, Cardano, Ethereum, Litcoin and Ripple), the findings of this paper have a remarkable value for enterprises in the financial area to obtain the promised benefits of social media analysis at work. In addition, this paper helps crypto-currencies vendors analyze public opinion in social media platforms. In this sense, the current paper strengthens our understanding of what happens in social media for crypto-currencies.

Originality/value

For managers and decision-makers, this paper suggests that the news and campaign for their crypto in Twitter would affect people’s perspectives in a good manner. Because of this fact, the firms, investing in these crypto-currencies, could apply the social media as a magnifier for their promotional activities. The findings steer the market managers to see social media as a predictor tool, which can analyze the market through understanding the opinions of users of Twitter.

Details

International Journal of Ethics and Systems, vol. 36 no. 1
Type: Research Article
ISSN: 2514-9369

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Article
Publication date: 9 May 2019

Sam Maxson, Stuart Davis and Rob Moulton

To analyse the final report of the UK Cryptoassets Taskforce published in October 2018 and discuss the UK’s policy and regulatory approach to crypto-assets and distributed…

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Abstract

Purpose

To analyse the final report of the UK Cryptoassets Taskforce published in October 2018 and discuss the UK’s policy and regulatory approach to crypto-assets and distributed ledger technology in financial services.

Design/methodology/approach

This article considers some of the key aspects of the final report of the UK Cryptoassets Taskforce and provides a summary of the next steps the UK authorities have committed to taking in relation to regulation of crypto-assets in the UK.

Findings

The approach to regulation of crypto-assets in the UK is evolving and the relevant UK authorities are continuing to improve their understanding of crypto-assets in order to assess the appropriate type and level of regulation that should apply to them. Whilst risks relating to consumer detriment and anti-money laundering have been identified as needing to be addressed as a matter of priority, the UK authorities appear to be taking a measured approach to regulation of crypto-assets. They also remain supportive of the adoption of distributed ledger technology in financial services, whilst noting some potential challenges to scalability.

Originality/value

This article contains valuable information about current policy direction and regulatory thinking in the UK in relation to crypto-assets, and analysis from leading FinTech lawyers.

Details

Journal of Investment Compliance, vol. 20 no. 2
Type: Research Article
ISSN: 1528-5812

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Article
Publication date: 3 September 2019

Mikayla Novak

The purpose of this paper is to conceptualise the chief aspects of policy interest in blockchain technology.

Abstract

Purpose

The purpose of this paper is to conceptualise the chief aspects of policy interest in blockchain technology.

Design/methodology/approach

The paper outlines policymaking processes in the context of innovation and technological change, assesses generic variations in policy treatment towards blockchain, and identifies manifestations of policy entrepreneurship using national case studies of blockchain policies.

Findings

Favourable policy dispositions towards blockchain technology are interpreted as political efforts to develop local, blockchain-enabled economies. So-called “crypto-friendly” jurisdictions proactively clarify regulatory and tax treatments of cryptocurrency and other blockchain applications, and trial blockchain uses in fields predominated by public sector activity. Policymakers in countries hostile towards blockchain-related activity have instigated bans or strict limitations with respect to blockchain engagement by developers and users.

Research limitations/implications

Reliance upon case studies suggests the need for alternative study approaches (e.g. index construction, empirical research) as blockchain use consolidates throughout the global economy.

Practical implications

This paper provides insight to policymakers and blockchain practitioners regarding the attributes of accommodative policies towards distributed ledger technology.

Social implications

Countries and sub-national regions exhibiting a more welcoming policy stance are more likely to attract entrepreneurs and investors in the crypto-economic blockchain space.

Originality/value

This paper develops a policy “crypto-friendliness” construct to assess the extent to which policymakers enact accommodative policies for blockchain development.

Details

Journal of Entrepreneurship and Public Policy, vol. 9 no. 2
Type: Research Article
ISSN: 2045-2101

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Article
Publication date: 12 July 2019

Ikhlaas Gurrib

The purpose of this paper is to shed fresh light into whether an energy commodity price index (ENFX) and energy blockchain-based crypto price index (ENCX) can be used to…

Abstract

Purpose

The purpose of this paper is to shed fresh light into whether an energy commodity price index (ENFX) and energy blockchain-based crypto price index (ENCX) can be used to predict movements in the energy commodity and energy crypto market.

Design/methodology/approach

Using principal component analysis over daily data of crude oil, heating oil, natural gas and energy based cryptos, the ENFX and ENCX indices are constructed, where ENFX (ENCX) represents 94% (88%) of variability in energy commodity (energy crypto) prices.

Findings

Natural gas price movements were better explained by ENCX, and shared positive (negative) correlations with cryptos (crude oil and heating oil). Using a vector autoregressive model (VAR), while the 1-day lagged ENCX (ENFX) was significant in estimating current ENCX (ENFX) values, only lagged ENCX was significant in estimating current ENFX. Granger causality tests confirmed the two markets do not granger cause each other. One standard deviation shock in ENFX had a negative effect on ENCX. Weak forecasting results of the VAR model, support the two markets are not robust forecasters of each other. Robustness wise, the VAR model ranked lower than an autoregressive model, but higher than a random walk model.

Research limitations/implications

Significant structural breaks at distinct dates in the two markets reinforce that the two markets do not help to predict each other. The findings are limited by the existence of bubbles (December 2017-January 2018) which were witnessed in energy blockchain-based crypto markets and natural gas, but not in crude oil and heating oil.

Originality/value

As per the authors’ knowledge, this is the first paper to analyze the relationship between leading energy commodities and energy blockchain-based crypto markets.

Details

Studies in Economics and Finance, vol. 36 no. 3
Type: Research Article
ISSN: 1086-7376

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Article
Publication date: 10 November 2020

Florin Aliu, Artor Nuhiu, Besnik A. Krasniqi and Gent Jusufi

This study aims to compare the diversification risk of the crypto portfolio with those of equity portfolios. For this purpose, the hypothetical index was constructed with…

Abstract

Purpose

This study aims to compare the diversification risk of the crypto portfolio with those of equity portfolios. For this purpose, the hypothetical index was constructed with 20 cryptocurrencies that hold the highest market capitalization in the Coin Market Cap database, named as the Crypto-Index 20.

Design/methodology/approach

The portfolio diversification techniques were used to identify risk linked with the six largest European equity indexes and compared with the Crypto-Index 20. Indexes were considered as an independent portfolio while analysis was completed separately for each of them. Data concerning stock prices and their trade volume were collected from the Thomson Reuters Eikon database while crypto prices and their trade volume from the Coin Market Cap database. The diversification risk of the stock indexes was measured separately for each portfolio with the same risk techniques and the same methodological process.

Findings

Research results indicate that Crypto-Index 20 on average was 76 times riskier than FTSE 100, 55 times riskier than FTSE MIB, 44 times riskier than IBEX 35, 10 times riskier than CAC 40 and 9 times riskier than DAX and MDAX. Crypto-Index 20 comprises a stronger positive correlation and is exposed to higher volatility than six selected European equity indexes.

Originality/value

This research provides practical implications for the investors on the diversification benefits and risks attached to the cryptocurrencies portfolio by comparing it with the traditional equity portfolios. From a policy perspective, regulators might obtain information on the risk properties involved into cryptocurrencies and the possibility of creating an optimal portfolio.

Details

Studies in Economics and Finance, vol. 38 no. 1
Type: Research Article
ISSN: 1086-7376

Keywords

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