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Book part
Publication date: 26 August 2019

Syed Fadhil Hanafi and Syed A Rahman

Regulation of digital currency is still at its infancy as authorities around the world grapple with its mechanics, and study its impact and the best method to regulate it…

Abstract

Regulation of digital currency is still at its infancy as authorities around the world grapple with its mechanics, and study its impact and the best method to regulate it. Significant increase in the use of digital cryptocurrency based on Blockchain technology post-Bitcoin phenomenon had challenged the conventional idea of central bank monopoly in currency issuance. This had also raised concern that digital currency being used as an instrumentality of crime given its anonymity feature that allows for the flow of funds without tracing and the fact that it is built on trustless system that provides security of transaction. This concern, plus other consideration including the prospect of issuing central bank digital currency, had driven some authorities around the world to adopt countermeasures either via an outright ban or a regulatory regime that suits the nature of digital currency, which is purely virtual and anonymous. However, in coming out with an appropriate legal regime, authorities faced multiple difficulties especially when the pace of legal development does not sync congruently with the rapid progress of technology. In addition, given the growing prominence of Islamic finance around the world, questions also arise pertaining to the legality of digital cryptocurrency from the Islamic perspective. Through a qualitative study of relevant literatures as well as legislations in different countries, this chapter discusses the various categories of digital currency, its position from the Islamic perspective, regulatory regimes of digital cryptocurrency in selected jurisdictions and challenges faced by authorities around the world in regulating this new medium of exchange.

Details

Emerging Issues in Islamic Finance Law and Practice in Malaysia
Type: Book
ISBN: 978-1-78973-546-8

Keywords

Article
Publication date: 20 September 2021

Christoph Wronka

The purpose of this paper is to discuss the effect of the issuance, adoption and use of digital currencies on economic sanctions with the focus being on the increasing…

Abstract

Purpose

The purpose of this paper is to discuss the effect of the issuance, adoption and use of digital currencies on economic sanctions with the focus being on the increasing risk of sanction evasion. The research sought to answer three key questions: What is the effect of digital currencies on economic sanctions? To what extent does the adoption and use of digital currencies increase the risk of sanction evasion? What remedial measures can be taken to enforce compliance with sanctions in the wake of increased adoption and use of digital currencies?

Design/methodology/approach

The research relied on secondary sources of data, using secondary research to collect archival data in the form of documents. Content and thematic analyses were used to synthesise the collected data.

Findings

It was found that digital currencies have significantly increased the risk of sanction evasion. This is because they facilitate the anonymous or pseudonymous conduct of international commercial transactions, which are hard or impossible to detect and track.

Originality/value

This research is the first to explore the different ways in which digital currencies as whole – and not just cryptocurrencies – affect compliance with economic sanctions.

Details

Journal of Financial Crime, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1359-0790

Keywords

Open Access
Article
Publication date: 29 March 2022

Uduak Michael Ekong and Christopher Nyong Ekong

This study aims to empirically investigate the effect of digital currency development (digital finance) on financial inclusion in Nigeria for the period. Nigeria undertook…

Abstract

Purpose

This study aims to empirically investigate the effect of digital currency development (digital finance) on financial inclusion in Nigeria for the period. Nigeria undertook her digital currency development to rip the benefits of financial inclusion, safer remittances and exchange rate regularization among others.

Design/methodology/approach

The researchers developed high-frequency quarterly data for the analysis from 2006:1 to 2020:4 in a weighted stepwise forward regression. A model similar to the one used by Demir et al. (2020) and Altunbas and Thornton (2019) with some modifications was developed.

Findings

Findings suggest that (1) a unit rise in the usage of automated teller machines by citizens spontaneously raised financial inclusion in a quarter in Nigeria by 0.012 units and were statistically significant; (2) a percentage rise in the use of point of sales transaction by citizens in the country also raised financial inclusion in Nigeria by approximately 1%; (3) a percentage increase by mobile payment users in Nigeria will spontaneously increase financial inclusion by at least 0.4%; (4) a percentage rise in web payment services reduces financial inclusion by 22% in Nigeria; (5) Cumulative positive effect of digital finances on financial inclusion in Nigeria was approximately 7%.

Practical implications

The researches show, using in-sample forecast, that while financial inclusion will grow in Nigeria, it will not be without systemic fluctuations. Based on the outcome, it is proposed that if the present digital currency penetration for the country is sustained at the present growth rate, the country may be more financially inclusive by 2% additionally by 2025 and 4% more by 2030.

Originality/value

Originally, it is found that digital currency development are positive derivatives for financial inclusion in Nigeria. Cumulatively, the effect of digital finances on financial inclusion in Nigeria is approximately 7% positive.

Details

Journal of Internet and Digital Economics, vol. 2 no. 1
Type: Research Article
ISSN: 2752-6356

Keywords

Article
Publication date: 18 June 2021

Betty L. Louie and Martha Wang

To answer key questions about China’s forthcoming digital currency, the Digital Currency Electronic Payment (DCEP) or “digital yuan.”

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Abstract

Purpose

To answer key questions about China’s forthcoming digital currency, the Digital Currency Electronic Payment (DCEP) or “digital yuan.”

Design/methodology/approach

Discusses prospective legal standards and guidelines; expected features compared with traditional payment methods and other digital currencies; how DCEP works; status of pilot programs; use of DCEP for cross-border payments; transparency, data protection and cybersecurity issues; and key implications for foreign businesses and financial institutions in China.

Findings

When DCEP is officially launched in China, there is little doubt that the population can easily adapt to its use. The launch of DCEP can have significant ramifications on a global scale, as it could reduce China’s reliance on the SWIFT system for international banking and offers the first glimpse of the internationalization of the renminbi (RMB).

Practical implications

Foreign companies operating in China, hi-tech businesses, retailers, financial institutions, and mobile app developers need to track the development and acceptance of DCEP, monitor arising risks, assess how their financial products fit, and adjust business operations, reporting requirements and financial reserves related to the requirements and use of DCEP, expected growth in fintech surrounding digital currencies.

Originality/value

Practical advice from experienced mergers and acquisitions, private equity, strategic investment and capital markets lawyers.

Details

Journal of Investment Compliance, vol. 22 no. 2
Type: Research Article
ISSN: 1528-5812

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Article
Publication date: 7 January 2022

Peterson K. Ozili

The purpose of this paper is to gain some insight into central bank digital currency research by reviewing the recent advances in central bank digital currency (CBDC…

Abstract

Purpose

The purpose of this paper is to gain some insight into central bank digital currency research by reviewing the recent advances in central bank digital currency (CBDC) research in a way that would help researchers, policy makers and practitioners to take a closer look at CBDC.

Design/methodology/approach

The paper uses a systematic literature review methodology.

Findings

The review shows a general consensus that a CBDC is a liability of the central bank and it has cash-like attributes. The review also presents the motivation and benefits of issuing a CBDC such as the need to increase financial inclusion, the need to improve the conduct of monetary policy and to foster efficient digital payments. The review also shows that many central banks are researching the potential to issue CBDCs due to its many benefits. However, a number of studies have called for caution against over-optimism about the potential benefits of CBDC due to the limiting nature of CBDC design and its inability to meet multiple competing goals. Suggested areas for future research are identified such as the need to find the optimal CBDC design that meets all competing objectives, the need for empirical evidence on the effect of CBDC on the cost of credit and financial stability, and the need to find a balance between limiting the CBDC holdings of users and allowing users to hold as much CBDC as they want, and there is a need to undertake country-specific and regional case studies of CBDC design.

Originality/value

This review paper offers new areas for further research in central bank digital currencies.

Details

Journal of Money Laundering Control, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1368-5201

Keywords

Open Access
Article
Publication date: 29 November 2021

Ruby Khan and Tahani Ali Hakami

The objective of this study is to examine the nature of cryptocurrencies, risks involved in using it due to its volatile nature, advantages, disadvantages and its…

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Abstract

Purpose

The objective of this study is to examine the nature of cryptocurrencies, risks involved in using it due to its volatile nature, advantages, disadvantages and its functions as money.

Design/methodology/approach

This is an inductive approach to a descriptive analysis (Qualitative research). In order to come to an adequate conclusion, we reviewed several studies and articles previously published in this field related to our research questions, and then explored the nature of Cryptocurrencies, their advantages and disadvantages, risks associated with cryptocurrency usage and their user-friendliness in Saudi Arabia.

Findings

The findings of this study reveal that anonymity and concealment are important aspects of cryptocurrencies. This system does not follow a transparent process that can make it parallel to conventional fiat currency.

Research limitations/implications

Although this study focuses on the issue of trust, it fails to recognize more technological factors hampering its transaction mechanism instead of enhancing it, owing to a lack of facts and knowledge.

Practical implications

Like conventional transaction system users must sign their crypto transactions that others must duly verify easily. Once a promise is made, one will not be able to back out of it until it is protected from revocation by the signer.

Originality/value

In comparison with reviewed literature, this study focuses more on the issue of volatility, which accounts for the fact that cryptocurrency has not been accepted as a permanent tool of monetary policy. Additionally, the study finds that the Saudi public is largely pessimistic toward such currencies.

Details

Journal of Money and Business, vol. 2 no. 1
Type: Research Article
ISSN: 2634-2596

Keywords

Article
Publication date: 1 April 2021

Doron Goldbarsht

The purpose of this paper is to explore the various characteristics of frequent-flier programs and the threats they pose to the Australian anti-money laundering regime.

Abstract

Purpose

The purpose of this paper is to explore the various characteristics of frequent-flier programs and the threats they pose to the Australian anti-money laundering regime.

Design/methodology/approach

A thorough literature review was conducted on frequent-flier programs and the associated money-laundering threats. Money laundering (ML) risks were identified in relation to the three stages of ML and effective law enforcement.

Findings

The findings indicate that as ML continues to gravitate towards the weaknesses in the financial system, frequent-flier programs provide yet another avenue for criminals to exploit. The risk factors associated with frequent-flier programs – specifically, anonymity, elusiveness, the rapidity of transactions occurring in a digital environment, ambiguity regarding responsibility for compliance, the global network of participants and members, difficulty in accessing records and an overall lack of oversight – were all integral considerations in establishing the ML risks of such programs.

Practical implications

The global environment in which individuals conduct financial transactions continues to evolve rapidly, exacerbating ML risks for regulators and governments alike. Unless there are globally unified efforts to heighten awareness, the threats posed by virtual currency will increase at a rapid rate. With this in mind, the starting point of this paper is an attempt to analyse the ML risks pursuant to frequent-flier programs in Australia.

Originality/value

The findings from this study can be used to gain greater insights into frequent-flier programs and can have broader application for evaluating other similarly structured loyalty programs, both in Australia and globally. Additionally, the findings from the study can enhance overall awareness of the ever-increasing threat to global financial integrity through the expansion of virtual currency.

Details

Journal of Money Laundering Control, vol. 25 no. 1
Type: Research Article
ISSN: 1368-5201

Keywords

Article
Publication date: 3 February 2021

Mohammed Sawkat Hossain

The authors make a fundamental initial effort to conduct a systematic review analysis on “cryptocurrency,” mainly to analyze the way it has been changing the “stereotype”…

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Abstract

Purpose

The authors make a fundamental initial effort to conduct a systematic review analysis on “cryptocurrency,” mainly to analyze the way it has been changing the “stereotype” financial transactions, and also identify the probable unexplored research avenues on this innovative investment regime. The study aims to draw the landscape of the current state, prospects, challenges, trends and possible agendas of cryptocurrency in the global market.

Design/methodology/approach

Using a quali-quantitative approach widely known as meta-literature review, the synthesis analysis on “cryptocurrency” is conducted. Methodologically, the authors review and analyze the most recent and relevant papers preferably published between 2016 and 2020 in leading business and finance journals of ISI Web of Science (ISI WOS) through bibliometric analysis particularly coupled with content analysis.

Findings

The findings of the meta-analysis summarize the relevant stylized facts of the cryptocurrency market: distinctive features of blockchain technology, decentralized payment method, low-cost facility, ensuring pseudo-anonymity, independence from central authority, double spending attack protection, organic and instantaneous nature, among others. In addition, the analysis identified several future research regimes: pricing model, prospect of investment regime, hedging properties, volatility dynamics, information asymmetry, underlying risk factors and bubble-like nature in global cryptocurrency market.

Practical implications

This academic novelty significantly contributes to enhance our knowledge on the current state-of-the-art of digital finance, outlines the research agenda and eventually provides important investment implications for financial managers, research analysts, investors, market practitioners, regulatory compliance professionals and policymakers. Therefore, the findings shed the lights on new investment opportunity in the global market.

Originality/value

Cryptocurrency, virtual currency or digital asset having cryptography for idiosyncratic security features, seems to be a persistent paradigm shift in the digitalized financial system. Despite the continuing growth, the academic research on cryptocurrency is still at nascent stage, particularly because researchers did not deeply draw attention at this financial innovation. In addition, the authors argue that none of the earlier studies yet conducted a meta-analysis on this latest investment regime. Therefore, this review study is the initial attempt to fill up the gap in the finance literature.

Article
Publication date: 7 January 2019

Umut Uyar and Ibrahim Korkmaz Kahraman

This study aims to compare investors of major conventional currencies and Bitcoin (BTC) investors by using the value at risk (VaR) method common risk measure.

Abstract

Purpose

This study aims to compare investors of major conventional currencies and Bitcoin (BTC) investors by using the value at risk (VaR) method common risk measure.

Design/methodology/approach

The paper used a risk analysis named as VaR. The analysis has various computations that Historical Simulation and Monte Carlo Simulation methods were used for this paper.

Findings

Findings of the analysis are assessed in two different aspects of singular currency risk and portfolios built. First, BTC is found to be significantly risky with respect to the major currencies; and it is six times riskier than the singular most risky currency. Second, in terms of inclusion of BTC into a portfolio, which equally weights all currencies, it elevates overall portfolio risk by 98 per cent.

Practical implications

In spite of the remarkable risk level, it could be considered that investors are desirous of making an investment on BTC could mitigate their overall exposed risk relatively by building a portfolio.

Originality/value

The paper questions the risk level of Bitcoin, which is a digital currency. BTC, a matter of debate in the contemporary period, is seen as a digital currency free from control or supervision of a regulatory board. With the comparison of major currencies and BTC shows that how could be risky of a financial instrument without regulations. However, there is some advice for investors who would like to invest digital currencies despite the risk level in this study.

Details

Journal of Money Laundering Control, vol. 22 no. 1
Type: Research Article
ISSN: 1368-5201

Keywords

Article
Publication date: 8 May 2018

Mohammed Ahmad Naheem

The purpose of this paper is to consider the recent (Dec`15) introduction of the Bitlicensing rules in New York and consider from a banking perspective how this will…

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Abstract

Purpose

The purpose of this paper is to consider the recent (Dec`15) introduction of the Bitlicensing rules in New York and consider from a banking perspective how this will impact on their own risk assessment processes. The paper also outlines the challenges of applying financial regulation to companies that have an area of expertise and business that is more aligned to software development, rather than financial service provision.

Design/methodology/approach

This paper is a viewpoint paper, which offers a critical discussion on the FATF guidelines on virtual currencies. The paper compares developments that are currently occurring within the virtual currency sector in particularly the new Bitlicensing process in New York State and discusses the implications to the banking sector on risk assessment processes for virtual currency transactions.

Findings

This paper will benefit the banking and regulation industries as well as economic and banking academics and anyone with an interest in virtual and digital currency technology.

Originality/value

This paper is unique in that it examines the issue of virtual currency regulation from a banking perspective. It explains the virtual currency technology as a means to be enhancing banking risk assessment, for clients seeking to incorporate virtual currency transactions into their business. This paper impacts on the banking and regulatory sectors because it critically examines the current practice of over regulation and the impact that this has on alternative financial systems, such as digital and virtual currencies. The paper offers a theoretical framework as well as citing current practical reports of how regulation has already started to affect the financial services landscape. The impact of getting this wrong can lead to increased criminal activity, and this paper highlights how susceptible the financial sector is to this.

Details

Journal of Financial Crime, vol. 25 no. 2
Type: Research Article
ISSN: 1359-0790

Keywords

1 – 10 of over 5000