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1 – 10 of 414Most Asian states recognise the benefits of cryptocurrency adoption, such as low transaction costs for remittances and the introduction of blockchain technology into public…
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DOI: 10.1108/OXAN-DB280103
ISSN: 2633-304X
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Free banking theory, as developed in Adam Smith’s 1776 treatise, “The Wealth of Nations” is a useful tool in determining the extent to which the “invisible hand of the market”…
Abstract
Purpose
Free banking theory, as developed in Adam Smith’s 1776 treatise, “The Wealth of Nations” is a useful tool in determining the extent to which the “invisible hand of the market” should prevail in regulatory policy. The purpose of this study is to provide a timely review of the literature, evaluating the theory’s relevance to regulation of financial technology generally and cryptocurrencies (cryptos) specifically.
Design/methodology/approach
The methodology is qualitative, applying free banking theory as developed in the literature to technology-defined environments. Recent legislative developments in the regulation of cryptocurrencies in the UK, European Union and the USA, are drawn upon.
Findings
Participants in volatile cryptocurrency markets should bear the consequences of inadvisable investments in accordance with free banking theory. The decentralised nature of cryptocurrencies and the exchanges on which these are traded militate against coordinated oversight by central banks, supporting a qualified free banking approach. Differences regarding statutory definitions of cryptos as units of exchange, tokens or investment securities and the propensity of these to transition between categories across the business cycle render attempts at concerted classification at the international level problematic. Prevention of criminality through extension of Suspicious Activity Reporting to exchanges and intermediaries should be the principal objective of policymakers, rather than definitions of evolving products that risk stifling technological innovation.
Originality/value
The study proposes that instead of a traditional regulatory approach to cryptos, which emphasises holders’ safety and compensation, a free banking approach combined with a focus on criminality would be a more effective and pragmatic way forward.
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Monika Chopra, Chhavi Mehta, Prerna Lal and Aman Srivastava
The purpose of this research is to primarily understand how crypto traders can use the Bitcoin as a hedge or safe haven asset to reduce their losses from crypto trading. The study…
Abstract
Purpose
The purpose of this research is to primarily understand how crypto traders can use the Bitcoin as a hedge or safe haven asset to reduce their losses from crypto trading. The study also aims to provide insights to crypto investors (portfolio managers) who wish to maintain a crypto portfolio for the medium term and can use the Bitcoin to minimize their losses. The findings of this research can also be used by policymakers and regulators for accommodating the Bitcoin as a medium of exchange, considering its safe haven nature.
Design/methodology/approach
This study applies the cross-quantilogram (CQ) approach introduced by Han et al. (2016) to examine the safe-haven property of the Bitcoin against the other selected crypto assets. This method is robust for estimating bivariate volatility spillover between two markets given unusual distributions and extreme observations. The CQ method is capable of calculating the magnitude of the shock from one market to another under different quantiles. Additionally, this method is suitable for fat-tailed distributions. Finally, the method allows anticipating long lags to evaluate the strength of the relationship between two variables in terms of durations and directions simultaneously.
Findings
The Bitcoin acts as a weak safe haven asset for a majority of new crypto assets for the entire study period. These results hold even during greed and fear sentiments in the crypto market. The Bitcoin has the ability to protect crypto assets from sharp downturns in the crypto market and hence gives crypto traders some respite when trading in a highly volatile asset class.
Originality/value
This study is the first attempt to show how the Bitcoin can act as a true matriarch/patriarch for crypto assets and protect them during market turmoil. This study presents a clear and concise representation of this relationship via heatmaps constructed from CQ analysis, depicting the quantile dependence association between the Bitcoin and other crypto assets. The uniqueness of this study also lies in the fact that it assesses the protective properties of the Bitcoin not only for the entire sample period but also specifically during periods of greed and fear in the crypto market.
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Asif Zaman, Issam Tlemsani, Robin Matthews and Mohamed Ashmel Mohamed Hashim
The rapid rise of Islamic crypto assets, underpinned by blockchain technology, has introduced a novel dimension to the Islamic financial landscape, raising questions about their…
Abstract
Purpose
The rapid rise of Islamic crypto assets, underpinned by blockchain technology, has introduced a novel dimension to the Islamic financial landscape, raising questions about their potential as safe havens within emerging Islamic economies. However, the opportunities and challenges associated with this phenomenon remain insufficiently explored. In this context, this study aims to empirically investigate the extent to which blockchain technology can establish Islamic crypto assets as safe havens in equity markets within Islamic economies.
Design/methodology/approach
This study addresses the need for rigorous empirical analysis to understand the dynamics between Islamic crypto assets and stock markets in emerging Islamic economies, focusing on the transmission of volatility. While the evolving nature of the Islamic financial sector demands reliable data, the reliance on the most available data offers insights into the expected future trends in this emerging field. The research specifically focuses on three essential assets in the Islamic financial portfolio: OneGram Coin and X8XToken, both backed by gold and MRHB DeFi, an Islamic DeFi asset lacking gold backing. These crypto assets are compared with corresponding assets in seven stock markets of emerging Islamic economies. Using daily log returns of the Islamic crypto assets from various sources and seven Islamic stock indices. The data covers the period from December 27, 2021, to December 28, 2022, capturing the fluctuations in Islamic stocks and cryptocurrency markets during the post-COVID-19 era. This research uses advanced econometric techniques, including pairwise dynamic correlation and the DCC GARCH model.
Findings
The findings indicate that Islamic crypto assets exhibit distinct characteristics, with lower volatility and low correlations compared to their conventional counterparts in non-Islamic contexts. This outcome suggests that these Islamic crypto assets could potentially serve as safe havens within Islamic stock markets, offering valuable insights for various stakeholders, including investors, governments and policymakers.
Research limitations/implications
The findings are based on a specific set of Islamic crypto assets and may vary with a different selection. Market dynamics can also influence the relationships observed. Nevertheless, the outcomes provide valuable insights for investors, policymakers and researchers interested in the intersection of Islamic finance, cryptocurrency and technology.
Originality/value
In essence, this research not only unveils the potential of Islamic crypto assets as stabilizing forces but also delineates a trajectory for subsequent research endeavours within the realm of emerging Islamic Fintech, elucidating the challenges, opportunities and benefits that lie therein. With a discerning eye on circumventing the pitfalls entrenched within conventional crypto finance, this study contributes to a heightened comprehension of the transformative role that Islamic crypto assets can assume, ultimately enriching the financial resilience of Islamic economies.
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Rahman Ullah Khan, Karim Ullah and Muhammad Atiq
This study aims to synthesize the existing literature with insights gained from interviews conducted with regulatory experts. The objective is to analyse the challenges associated…
Abstract
Purpose
This study aims to synthesize the existing literature with insights gained from interviews conducted with regulatory experts. The objective is to analyse the challenges associated with incorporating cryptocurrencies into regulatory frameworks and to explore constraints in the regulatory institutionalization of cryptocurrencies.
Design/methodology/approach
The study methodology consists of two steps. The first step is to identify regulatory constraints in the literature review and in the next step, interviews are conducted with officials of the State Bank of Pakistan (SBP). The study used a qualitative case study methodology, in which a single case (regulatory constraint) was selected as a unit of analysis.
Findings
The findings show that lack of traceability, legal status, lack of governmental control due to decentralization, difficulty enforcing laws, volatility, lack of skills with regulators and difficulty integrating cryptocurrencies into the current financial system are the main obstacles to the introduction of a regulatory framework. Thus, on a broader conceptual level, the findings can be grouped into opportunism, lack of strategic capability and fragmented global laws.
Research limitations/implications
This study could inform global cryptocurrency regulation discussions, sharing a developing country’s views on balancing the government, central banks, the financial sector and public interests. This could guide countries to consider cryptocurrency adoption in similar situations. This could affect the cryptocurrency market, impacting demand, supply and investor trust in Pakistan.
Practical implications
The study has implications for policy making officials. The research aims to offer valuable insights to the SBP and other regulatory authorities, helping them identify potential risks and create an effective regulatory framework for cryptocurrencies.
Social implications
The study has implications for society in knowing about the volatile nature of cryptos and anonymity of their issuers, which poses regulatory constraints. This then implies its harmfullness to its traders and the huge losses that may arise from their trading due to its volatile nature.
Originality/value
This study contributes to the literature on the constraints, responsibilities and consultation framework of cryptocurrency regulations.
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Jamal Wiwoho, Irwan Trinugroho, Dona Budi Kharisma and Pujiyono Suwadi
The purpose of this study is to formulate a governance and regulatory framework for Islamic crypto assets (ICAs). A balanced regulatory framework is required to protect consumers…
Abstract
Purpose
The purpose of this study is to formulate a governance and regulatory framework for Islamic crypto assets (ICAs). A balanced regulatory framework is required to protect consumers and to encourage digital Islamic finance innovation.
Design/methodology/approach
This study focuses on Indonesia and compares it to other countries, specifically Malaysia and the UK, using statutory, comparative and conceptual research approaches.
Findings
The ICAs are permissible (halal) commodities/assets to be traded if they fulfil the standards as goods or commodities that can be traded with a sale and purchase contract (sil’ah) and have an underlying asset (backed by tangible assets such as gold). Islamic social finance activities such as zakat and Islamic microfinance activities such as halal industry are backed by ICAs. The regulatory framework needed to support ICAs includes the Islamic Financial Services Act, shariah supervisory boards, shariah governance standards and ICA exchanges.
Research limitations/implications
This study only examined crypto assets (tokens as securities) and not cryptocurrencies. It used regulations in several countries with potential in Islamic finance development, such as Indonesia, Malaysia and the UK.
Practical implications
The ICA regulatory framework is helpful as an element of a comprehensive strategy to develop a lasting Islamic social finance ecosystem.
Social implications
The development of crypto assets must be supported by a regulatory framework to protect consumers and encourage innovation in Islamic digital finance.
Originality/value
ICA has growth prospects; however, weak regulatory support and minimal oversight indicate weak legal protection for consumers and investors. Regulating ICA, optimising supervision, implementing shariah governance standards and having ICA exchanges can strengthen the Islamic economic ecosystem.
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Aline Renda and Stefano Caneppele
Criminals have quickly discovered the advantage of crypto assets, with its pseudo-anonymity, untraceability and the ability to freely exchange crypto assets across borders, which…
Abstract
Purpose
Criminals have quickly discovered the advantage of crypto assets, with its pseudo-anonymity, untraceability and the ability to freely exchange crypto assets across borders, which makes it an ideal tool for money laundering activities. Switzerland has a technology-neutral framework, and crypto assets are regulated by the existing anti-money laundering (AML) legislation. The purpose of this paper is to gain insights into the industry adoption of measurements to prevent money laundering through crypto assets and if they are compliant with national and international AML regulations.
Design/methodology/approach
Semi-structured expert interviews were conducted with participants having expertise in compliance, AML and crypto assets with focus on Switzerland. The interviews were analyzed using the thematic analysis.
Findings
The experts have a general consensus that Switzerland is a pioneer when it comes to regulating crypto assets. It is perceived that legislations are released without industry consultation and that AML processes for fiat transactions also work for crypto assets, which is not the case. The results show that the industry wants a consortium to fight money laundering in crypto assets in Switzerland. The current measures to identify money laundering are not optimal, yet, it is the best solution and according to national and international regulations the businesses are perceived to be compliant.
Originality/value
This paper offers new insights on the challenges of AML regulations in crypto assets, given the limited information available. It also provides good practice examples for addressing these challenges, benefiting policymakers, regulators and practitioners in the crypto asset ecosystem.
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Blanka Škrabić Perić, Ana Rimac Smiljanić and Ivana Jerković
Crypto-asset can be traded on many different exchanges worldwide with servers located in countries with different financial characteristics and institutional surroundings. Trading…
Abstract
Purpose
Crypto-asset can be traded on many different exchanges worldwide with servers located in countries with different financial characteristics and institutional surroundings. Trading volume on these servers varies considerably regarding the server’s location, even though the prices do not differ greatly. Crypto-asset markets are poorly regulated and, as such, may leave a place for potential fraudulent activities and be linked to corruption. This paper aims to examine the role of country’s institutions in attracting Bitcoin traders.
Design/methodology/approach
Assuming heterogeneity between countries where crypto-asset exchange servers are located, the Pool Mean Group Estimator is used.
Findings
Results indicate that, from institutional variables, corruption in the country attracts while internal and external conflicts repel investors. Additionally, the growth of global uncertainty and the decline in the local stock markets motivate investors to trade Bitcoin.
Originality/value
Previous research has empirically proved the importance of institutions’ quality for financial market development. This paper goes one step further and tries to empirically confirm the theoretical assumptions and investigate in detail the role of institutions in choosing servers in a particular country for Bitcoin trading.
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The purpose of this paper is to examine potential financial accounting treatments for cryptocurrencies, including the current guidance, and compare the benefits and shortcomings…
Abstract
Purpose
The purpose of this paper is to examine potential financial accounting treatments for cryptocurrencies, including the current guidance, and compare the benefits and shortcomings of each method. It proposes the introduction and use of an intangible asset revaluation model. The study aims to inform both standard setters and financial statement preparers of the most appropriate accounting treatment of this digital asset.
Design/methodology/approach
This paper uses an exploratory analysis and conceptualizes each technical treatment option. For each potential treatment, this paper describes the technical accounting guidance and financial statement implications. The study also uses an illustration to compare the outcomes of each treatment option.
Findings
This paper provides insights into the most appropriate financial accounting treatment of cryptocurrencies. Findings indicate the best option is an intangible asset revaluation model that allows firms to elect a fair value option and record fluctuations in market value to other comprehensive income. This model would improve the accuracy of asset numbers while maintaining the relevance of income amounts by preventing large gains or losses from fair value fluctuations from flowing through the income statement.
Research limitations/implications
The number of firms that hold cryptocurrencies on their balance sheet remains small, thus the research is limited to anecdotal and expository analysis.
Practical implications
The study includes implications for accounting standard setters as they continue to deliberate the appropriate financial accounting treatment for cryptocurrencies. The study can inform the standard setting process and impact future authoritative guidance.
Social implications
The use of cryptocurrency is extremely popular among individual investors and consumers. Updating accounting guidance on crypto can help support a robust crypto market through a useful, informative approach to measurement and reporting. This can also aid in improving the economic prosperity of crypto investors.
Originality/value
This paper fulfills an identified need to examine and understand appropriate accounting guidance for cryptocurrencies. Current guidance has been deemed ineffective and there is debate regarding the proper treatment moving forward. This paper contextualizes this debate and provides suggested solutions.
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Aishath Muneeza, Saeed Awadh Bin-Nashwan, Magda Ismail Abdel Moshin, Ismail Mohamed and Abdelrahman Al-Saadi
This paper aims to examine the existing practice of accepting zakat payments using cryptocurrencies and crypto assets by discussing its Shariah issues.
Abstract
Purpose
This paper aims to examine the existing practice of accepting zakat payments using cryptocurrencies and crypto assets by discussing its Shariah issues.
Design/methodology/approach
This is qualitative research in nature, as unstructured interviews with experts in the field were conducted to understand the existing practice regarding zakat on cryptocurrencies/crypto assets while literature on the topic was reviewed to derive conclusions.
Findings
It is found that there are divergent views among contemporary Shariah scholars on the Shariah permissibility of cryptocurrency and crypto assets. As such, by evaluating the existing practices of some companies, this study has concluded that there is room to pay zakat using cryptocurrencies and from investments made on crypto assets. As long as they have been screened and classified as Shariah-compliant, they can be qualified to be part of one’s wealth from which zakat shall be paid. However, the findings of this research shall be subject to the fatwa and rules adopted in the specific jurisdiction in which the zakat payer resides. Laws made by the ruler to benefit the public ought to be considered in upholding the masalih (public interests) of all, which is in line with the legal maxim of “tasarruf al imam manut bi al-maslahah” (the ruler’s decision is dictated in favor of the people).
Originality/value
It is anticipated that the findings of this research will benefit zakat organizations and zakat payers in understanding how they should deal with cryptocurrencies and crypto assets in the collection and payment of zakat.
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