FinTech, blockchain and Islamic finance : an extensive literature review

Purpose: The paper aims to review the academic research work done in the area of Islamic financial technology. The Islamic FinTech area has been classified into three broad categories of the Islamic FinTech, Islamic Financial technology opportunities and challenges, Cryptocurrency/Blockchain sharia compliance and law/regulation. Finally, the study identifies and highlights the opportunities and challenges that Islamic Financial institutions can learn from the conventional FinTech organization across the world. Approach/Methodology/Design: The study collected 133 research studies (50 from Social Science Research Network (SSRN), 30 from Research gate, 33 from Google Scholar and 20 from other sources) in the area of Islamic Financial Technology. The study presents the systematic review of the above studies. Findings: The study classifies the Islamic FinTech into three broad categories namely, Islamic FinTech opportunities and challenges, Cryptocurrency/Blockchain sharia compliance and law/regulation. The study identifies that the sharia compliance related to the cryptocurrency/Blockchain is the biggest challenge which Islamic FinTech organizations are facing. During our review we also find that Islamic FinTech organizations are to be considered as partners by the Islamic Financial Institutions (IFI’s) than the competitors. If Islamic Financial institutions want to increase efficiency, transparency and customer satisfaction they have to adopt FinTech and become partners with the FinTech companies. Practical Implications: The study will contribute positively to the understanding of Islamic Fintech for the academia, industry, regulators, investors and other FinTech users. Originality/Value: The study believes to contribute positively to understanding of Fintech based technology like cryptocurrency/Blockchain from sharia perspective.peer-reviewe

A "Social Bitcoin" could sustain a democratic digital world

A multidimensional financial system could provide benefits for individuals, companies, and states. Instead of top-down control, which is destined to eventually fail in a hyperconnected world, a bottom-up creation of value can unleash creative potential and drive innovations. Multiple currency dimensions can represent different externalities and thus enable the design of incentives and feedback mechanisms that foster the ability of complex dynamical systems to self-organize and lead to a more resilient society and sustainable economy. Modern information and communication technologies play a crucial role in this process, as Web 2.0 and online social networks promote cooperation and collaboration on unprecedented scales. Within this contribution, we discuss how one dimension of a multidimensional currency system could represent socio-digital capital (Social Bitcoins) that can be generated in a bottom-up way by individuals who perform search and navigation tasks in a future version of the digital world. The incentive to mine Social Bitcoins could sustain digital diversity, which mitigates the risk of totalitarian control by powerful monopolies of information and can create new business opportunities needed in times where a large fraction of current jobs is estimated to disappear due to computerisation.Comment: Contribution to EPJ-ST special issue on 'Can economics be a Physical Science?', edited by S. Sinha, A. S. Chakrabarti & M. Mitr

Evaluating Effects of the Payment Ecosystem on Central Bank Digital Currency Adoption and Design

CBDC has become a discussion topic with worldwide economic and societal relevance. Payment system efficiency is a top driver for digital currency adoption. We examine literature gaps for payment ecosystem impact on CBDC adoption and design, and conduct test for 65 World Bank countries. We measure payment alternatives and preferences impacts and estimate least squares and limited dependent variables regressions. CBDC adoption is driven by payment ecosystem, alternative characteristics, e-money usage, perceived safety, and infrastructure. This signals that user familiarity with digital payment methods, trust in authorities, and structural capabilities support CBDC adoption. Adoption is inversely related to alternatives that dampen the need for CBDC. Transaction volume and trust in authorities are linked to choosing a central database, not a digital ledger technology (DLT) infrastructure. Deviations occur from ambiguous effects of cash and DLT usage on CBDC adoption and industry concentration, architecture, and linkages

Fractional Reserve Banking as Economic Parasitism: A Scientific, Mathematical & Historical Expose, Critique, and Manifesto

This paper looks at the history of money and its modern form from a scientific and mathematical point of view. The approach here is to emphasize simplicity. A straightforward model and algebraic formula for a large economy analogous to the ideal gas law of thermodynamics is proposed. It may be something like a new ``F=ma'' rule of the emerging econophysics field. Some implications of the equation are outlined, derived, and proved. The phenomena of counterfeiting, inflation and deflation are analyzed for interrelations. Analogies of the economy to an ecosystem or energy system are advanced. The fundamental legitimacy of ``expansion of the money supply'' in particular is re-examined and challenged. From the hypotheses a major (admittedly radical) conclusion is that the modern international ``fractional reserve banking system'' is actually equivalent to ``legalized economic parasitism by private bankers.'' This is the case because, contrary to conventional wisdom, the proceeds of inflation are not actually spendable by the state. Also possible are forms of ``economic warfare'' based on the principles. Alternative systems are proposed to remediate this catastrophic flaw.fractional reserve banking money expansion parasitism capitalism greenspan gold thermodynamics perfect gas econophysics gresham's law stiglitz money supply inflation deflation growth price stability counterfeiting energy radical polemic revolution economic warfare religion doublespeak gdp scarcity fiat blips federal reserve history slavery lassaiz-fair solow keynes keynesianism cancer psychology sociology politics analogy IMF world bank GNP GDP digital cash money laundering pareto mcfadden echelon nsa free market growth conspiracy

A digital euro’s relationship with data protection, anti-money laundering and combating the financing of terrorism

The study focuses on the possibility of a central bank digital currency (CBDC) for the euro area and its relationship with data protection and anti-money laundering / combating the finance of terrorism (AML/CFT) policies. Its objective was to identify the state of the art on the subject and some of the main opportunities, challenges and risks which should be considered in the ongoing process of a digital euro. The research was based on a critical review of reports and surveys about CBDCs produced by central bank community, international institutions and European Union agencies, the regulatory framework and international standards about data protection and AML/CFT, complemented by academic and professional experts’ literature. It was conducted under a qualitative method following the premise that in Fintech innovation is crucial to understand current and emerging regulations that can be relevant. Digital euro’s architecture, independently of the adopted model (accountbased, token-based or hybrid), should: (1) allow CBDC holders identification and comprise traceability mechanisms in accordance with AML/CFT requirements; (2) respect the General Data Protection Regulation, namely data protection by design and by default through privacyenhancing technologies. The status of the European Central Bank and national central banks of euro countries is incompatible with their subjection to the legislation on AML/CFT applicable to the participants on digital money transfers market, so all the operations related with the end-users must be full intermediated by private sector entities submitted, beyond financial supervision, to guidelines, regulation and supervision by AML/CFT authorities.O estudo tem como objeto a possibilidade de uma moeda digital de banco central (MDBC) na zona euro e a sua relação com proteção de dados e combate ao branqueamento de capitais e financiamento do terrorismo (CBCFT). Pretendeu-se investigar o estado da arte e principais oportunidades, desafios e riscos no processo em curso de um euro digital. A investigação baseou-se na revisão crítica de relatórios e estudos sobre MDBCs produzidos pela comunidade de bancos centrais, instituições internacionais e órgãos da União Europeia, do quadro regulatório e orientações internacionais sobre proteção de dados e CBCFT, complementados por estudos de académicos e outros especialistas. Foi adotado um método qualitativo à luz da premissa de que para a inovação Fintech é fundamental compreender regulamentações atuais e emergentes relevantes. A arquitetura de um euro digital, independentemente do modelo adotado (baseado em contas, em tokens ou híbrido), deverá: (1) permitir identificação dos titulares de MDBCs e compreender mecanismos de rastreamento conformes às exigências CBCFT; (2) respeitar o Regulamento Geral sobre Proteção de Dados, nomeadamente, proteção de dados desde a conceção e por defeito através de tecnologias de proteção da privacidade. O estatuto do Banco Central Europeu e dos bancos centrais dos países do euro é incompatível com a sua submissão às exigências CBCFT aplicáveis aos participantes no mercado de transferências digitais de dinheiro, pelo que as operações relativas aos utilizadores finais devem ser integralmente intermediadas por entidades privadas sujeitas, além da supervisão financeira, a diretrizes, regulação e supervisão pelas autoridades de CBCFT

Distributed Ledger Technology (DLT) Applications in Payment, Clearing, and Settlement Systems:A Study of Blockchain-Based Payment Barriers and Potential Solutions, and DLT Application in Central Bank Payment System Functions

Payment, clearing, and settlement systems are essential components of the financial markets and exert considerable influence on the overall economy. While there have been considerable technological advancements in payment systems, the conventional systems still depend on centralized architecture, with inherent limitations and risks. The emergence of Distributed ledger technology (DLT) is being regarded as a potential solution to transform payment and settlement processes and address certain challenges posed by the centralized architecture of traditional payment systems (Bank for International Settlements, 2017). While proof-of-concept projects have demonstrated the technical feasibility of DLT, significant barriers still hinder its adoption and implementation. The overarching objective of this thesis is to contribute to the developing area of DLT application in payment, clearing and settlement systems, which is still in its initial stages of applications development and lacks a substantial body of scholarly literature and empirical research. This is achieved by identifying the socio-technical barriers to adoption and diffusion of blockchain-based payment systems and the solutions proposed to address them. Furthermore, the thesis examines and classifies various applications of DLT in central bank payment system functions, offering valuable insights into the motivations, DLT platforms used, and consensus algorithms for applicable use cases. To achieve these objectives, the methodology employed involved a systematic literature review (SLR) of academic literature on blockchain-based payment systems. Furthermore, we utilized a thematic analysis approach to examine data collected from various sources regarding the use of DLT applications in central bank payment system functions, such as central bank white papers, industry reports, and policy documents. The study's findings on blockchain-based payment systems barriers and proposed solutions; challenge the prevailing emphasis on technological and regulatory barriers in the literature and industry discourse regarding the adoption and implementation of blockchain-based payment systems. It highlights the importance of considering the broader socio-technical context and identifying barriers across all five dimensions of the social technical framework, including technological, infrastructural, user practices/market, regulatory, and cultural dimensions. Furthermore, the research identified seven DLT applications in central bank payment system functions. These are grouped into three overarching themes: central banks' operational responsibilities in payment and settlement systems, issuance of central bank digital money, and regulatory oversight/supervisory functions, along with other ancillary functions. Each of these applications has unique motivations or value proposition, which is the underlying reason for utilizing in that particular use case

The central banks’ approach to digital currencies : a literature review

Considering the growing relevance of digital currencies and the constant speculation regarding their future, this work aims to analyze the existing literature on the treatment given by central banks to digital currencies. Adopting the form of a systematic literature review, we focus on central bank digital currencies, debating their pros and cons, and elaborating on how they should be designed. We find that the pros seem to outcome the cons, and that there is a clear preference from the authors for a retail digital currency.Considerando a relevância crescente das moedas digitais e a constante especulação relativamente ao seu futuro, este trabalho procura analisar a literatura existente relativa ao tratamento dado pelos bancos centrais a moedas digitais. Através de uma revisão de literatura sistemática, o foco está nas moedas digitais emitidas por bancos centrais, nos seus prós e contras, e no debate relativamente à forma como estas devem ser desenhadas. Assim, conseguimos perceber que há um domínio dos prós relativamente aos contras e que os autores demonstram uma clara preferência por uma moeda digital de retalho disponível para todos os intervenientes