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Article
Publication date: 10 August 2015

Alicja Mikołajewicz-Woźniak and Anna Scheibe

The purpose of the paper is to determine the future role of virtual currencies. This paper indicates their pros and cons as alternatives to “real” money and explains their…

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3968

Abstract

Purpose

The purpose of the paper is to determine the future role of virtual currencies. This paper indicates their pros and cons as alternatives to “real” money and explains their appearance as the reflection of the present trends. It also presents the possible scenarios of their development.

Design/methodology/approach

The paper is based on the former foresight research results and literature review. It highlights the main trends in contemporary economy and their impact on financial services. The Bitcoin case is the starting point for the virtual currencies’ market analysis and construction of possible market changes scenarios.

Findings

Virtual currency schemes are the reflection of present trends. They are just ahead of our times but may become a common means of payment, changing the way of providing financial services, eliminating intermediaries and marginalizing the role of financial institutions.

Research limitations/implications

The multiplicity of virtual currencies and ceaseless introduction of innovations impede the presentation of the complete market picture. The lack of reliable statistical data makes the estimation of the market growth difficult.

Practical implications

This paper indicates influence of technology development, virtualization and networking on payment systems’ functioning.

Social implications

This paper shows the impact of environmental changes on consumers’ acceptance of virtual currencies.

Originality/value

The virtual currency as a payment system is quite new and still a marginalized phenomenon. Nevertheless, the pace of virtual currency market growth after its recent introduction and appearance of Bitcoin successors seems to be the signs of future changes in financial service sector.

Details

Foresight, vol. 17 no. 4
Type: Research Article
ISSN: 1463-6689

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Article
Publication date: 1 January 2013

Angela S.M. Irwin, Jill Slay, Kim‐Kwang Raymond Choo and Lin Liu

The purpose of this paper is to examine the identity and payment method verification procedures implemented by a number of popular massively multiplayer online games…

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1526

Abstract

Purpose

The purpose of this paper is to examine the identity and payment method verification procedures implemented by a number of popular massively multiplayer online games (MMOGs) and online financial service providers (OFSPs) to determine if the systems they currently have in place are sufficient to uncover the identities of those who may wish to use such environments to conduct money laundering or terrorism financing activity.

Design/methodology/approach

The paper investigates whether the payment instruments or methods used by account holders to place funds into their account(s) hinder or assist investigators to expose the real‐world identity of the account holder. The paper then discusses whether it is feasible and/or desirable to introduce know your customer (KYC) and customer due diligence (CDD) legislation into virtual environments and illustrates an effective KYC approach which may assist MMOGs and OFSPs to correctly identify their account holders, should legislation be put in place.

Findings

The systems currently in place by all of the MMOGs investigated are wholly inadequate to successfully establish the real‐world identities of account holders. None of the information required at the account setup stage is verified and, therefore, cannot be reliably associated with an account holder in a real‐world context. It appears that all three of the MMOGs investigated are leaving the serious matter of identity and payment method verification to the organisations that assist in the sale and purchase of their in‐world currency such as third party currency exchanges and Internet payment systems (collectively referred to as OFSPs). However, many of these OFSPs do not have adequate systems in place to successfully verify the identities of their account holders or users either. The authors' experiments show that it can be a very simple process to open accounts and perform financial transactions with all of the OFSPs investigated using publicly available or fictitious identity information and a prepaid Visa® gift card. Although all five OFSPs investigated in this research claim to verify the identity of their account holders, and may already be subject to KYC and CDD legislation, their systems may need some work to ensure that an account holder or user is accurately identified before financial transactions can take place.

Originality/value

The authors believe that the electronic KYC approach discussed in this paper deals effectively with the challenges of global reach, anonymity and non‐face‐to‐face business relationships experienced by virtual environment operators, thereby assisting in the effective detection and possible prosecution of individuals who wish to use these platforms for illicit and illegal purposes.

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Article
Publication date: 2 July 2019

Mohammed Ahmad Naheem

This paper aims to explore the implications of the 2014 Financial Action Task Force (FATF) publication and guidelines on virtual currency definitions and the overall…

Abstract

Purpose

This paper aims to explore the implications of the 2014 Financial Action Task Force (FATF) publication and guidelines on virtual currency definitions and the overall impact of blockchain technology on anti-money laundering (AML) compliance and regulation. The report cites three case study examples, which the FATF paper uses and which this paper questions as to their relevance, especially to the formal banking sector.

Design/methodology/approach

The paper has provided a critical analysis of a FATF publication and guideline document. Additional secondary data has been used on blockchain technology and to analyse the relevance and implications of the case studies used in the FATF document.

Findings

The main findings are that virtual currency technology has the potential to support AML frameworks within banking when and if they are better understood. However, generic case examples of virtual currency legal cases are not necessarily useful when developing AML risk assessment frameworks within the banking sector.

Practical implications

The implications from the research affect any financial organisation undertaking AML risk analysis or compliance especially for virtual currencies. It applies to the banking, insurance and auditing professions and is of interest to academics working on virtual and digital currencies.

Social implications

The social implications are that virtual currency technology can be used to add protection to banking transactions and could also be considered for client identity information such as beneficial ownership.

Originality/value

The originality of this paper is the topic of blockchain technology being considered in AML frameworks and the critical analysis of the FATF cases.

Details

Journal of Money Laundering Control, vol. 22 no. 3
Type: Research Article
ISSN: 1368-5201

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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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18044

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

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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. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1368-5201

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Article
Publication date: 7 August 2018

Jurgita Miseviciute

This paper aims to explain the current stage of blockchain and virtual currency regulation in the EU.

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1290

Abstract

Purpose

This paper aims to explain the current stage of blockchain and virtual currency regulation in the EU.

Design/methodology/approach

The paper explains the current state of blockchain and virtual currency regulation in the EU, presenting the EU institutions’ main policy and regulatory initiatives on, and approaches to, blockchain and virtual currency.

Findings

Though the EU is looking seriously at the potential of blockchain and distributed ledger technologies, many European institutions are of the opinion that it is still too early to regulate in this field. As far as virtual currencies are concerned, Member States’ central banks do not consider them to be equivalent to money or legal tender. However, with the current high profile of and interest in virtual currencies, one can expect the European Commission to at least consider what regulation might be called for.

Originality/value

This study provides practical guidance on and introduction to the current regulatory and policy landscape of blockchain and virtual currency in the EU.

Details

Journal of Investment Compliance, vol. 19 no. 3
Type: Research Article
ISSN: 1528-5812

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Article
Publication date: 7 August 2017

Xuexin Xu, Xiaodong Yang, Junhua Lu, Ji Lan, Tai-Quan Peng, Yingcai Wu and Wei Chen

Massively multiplayer online role-playing games (MMORPGs) create quasi-real social systems in which players can interact with one another, and quasi-real economic systems…

Abstract

Purpose

Massively multiplayer online role-playing games (MMORPGs) create quasi-real social systems in which players can interact with one another, and quasi-real economic systems where players can consume and trade in-game items with virtual currency. The in-game currency price, an important indicator of a virtual economy, is highly contingent on players’ behavioral interaction in MMORPGs. The purpose of this paper is to adopt a network perspective to examine how topological characteristics of social networks in an MMORPG, namely, network externalities, density, and closure, would exert impacts on the in-game currency price.

Design/methodology/approach

Players’ behavioral data were collected from a popular MMORPG in China on a weekly basis for 52 weeks. With a time series analytical approach, the empirical model for the price function of in-game currency was estimated with vector autoregression.

Findings

The results show that the number of core avatars and network density are positively associated with in-game currency price, while network closure has a negative effect on in-game currency price. However, in-game currency price is found to have no significant relationship with the trade volume of the currency.

Originality/value

This study fills in an important research gap by investigating factors influencing the in-game currency price of MMORPGs from a network perspective, which contributes to the existing literature of network effects and advances our understanding about how players’ interaction will influence the dynamics of a virtual economy. The findings could offer useful insights for online game companies to better understand their players’ social interaction and consumption behavior.

Details

Internet Research, vol. 27 no. 4
Type: Research Article
ISSN: 1066-2243

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Article
Publication date: 5 May 2015

Jeffrey Simser

This paper aims to explore the challenge posed by Bitcoin to regulators, particularly anti-money laundering regulators. Bitcoin is a crypto-currency based on open-source…

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3843

Abstract

Purpose

This paper aims to explore the challenge posed by Bitcoin to regulators, particularly anti-money laundering regulators. Bitcoin is a crypto-currency based on open-source software and protocols that operates in peer-to-peer networks as a private irreversible payment mechanism. The protocol allows cross-border payments, for large and small items, with little or no transactional costs.

Design/methodology/approach

Case studies and case law are examined as are relevant reports by regulators.

Findings

Bitcoin is based on complex computer code supported by a robust community in a peer-to-peer network. Unlike other virtual currencies, Bitcoin appears to have obtained purchase and as such poses unique challenges to regulators.

Research limitations/implications

Bitcoin is at a nascent stage and the evolution of the virtual currency is difficult to predict.

Practical implications

Those who study financial systems, anti-money laundering regimes and asset forfeiture laws will have an interest in this topic.

Originality/value

This is a new and emerging currency; there is limited literature on the implications of this currency to anti-money laundering systems.

Details

Journal of Financial Crime, vol. 22 no. 2
Type: Research Article
ISSN: 1359-0790

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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

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Article
Publication date: 5 May 2015

Evan L. Greebel, Kathleen Moriarty, Claudia Callaway and Gregory Xethalis

– To explain and draw conclusions from six recent bitcoin and virtual currency regulatory and law enforcement developments.

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2447

Abstract

Purpose

To explain and draw conclusions from six recent bitcoin and virtual currency regulatory and law enforcement developments.

Design/methodology/approach

Discusses and draws conclusions from six recent, important developments: two administrative rulings from the Financial Crimes Enforcement Network (FinCEN), recent remarks by New York State Department of Financial Services Superintendent Benjamin Lawsky, remarks by Mark Wetjen of the Commodity Futures Trading Commission (CFTC), a recent Securities and Exchange Commission (SEC) informational sweep of crowdsales of crypto-equity, and the US Department of Justice proceedings against Trendon Shavers.

Findings

Rather than trying to stifle or control virtual currencies, US governmental entities recognize the long-term value of virtual currencies and are trying to create a regulatory regime to foster growth and development, and an atmosphere where institutional and retail investors are protected.

Originality/value

Provides an overview of the key United States regulatory issues facing companies engaged in Bitcoin-related businesses.

Details

Journal of Investment Compliance, vol. 16 no. 1
Type: Research Article
ISSN: 1528-5812

Keywords

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