90 research outputs found
Trends in crypto-currencies and blockchain technologies: A monetary theory and regulation perspective
The internet era has generated a requirement for low cost, anonymous and
rapidly verifiable transactions to be used for online barter, and fast settling
money have emerged as a consequence. For the most part, e-money has fulfilled
this role, but the last few years have seen two new types of money emerge.
Centralised virtual currencies, usually for the purpose of transacting in
social and gaming economies, and crypto-currencies, which aim to eliminate the
need for financial intermediaries by offering direct peer-to-peer online
payments.
We describe the historical context which led to the development of these
currencies and some modern and recent trends in their uptake, in terms of both
usage in the real economy and as investment products. As these currencies are
purely digital constructs, with no government or local authority backing, we
then discuss them in the context of monetary theory, in order to determine how
they may be have value under each. Finally, we provide an overview of the state
of regulatory readiness in terms of dealing with transactions in these
currencies in various regions of the world
A Regulatory and Economic Perplexity: Bitcoin Needs Just a Bit of Regulation
The use of Bitcoin as an alternative to traditional âflatâ currency is âunnerving precisely because a world where it is used for all transactions is one where the ability of a central bank to guide the economy is destroyed, by design.â Bitcoin, the first decentralized digital currency, is a peer-to-peer payment system that allows international transactions to take place at any hour and in any place for very low cost. This Note analyzes Bitcoin and ultimately proposes a short-term solution to Bitcoinâs regulatory uncertainty that aims to strike a balance between the governmentâs interest in regulation and Bitcoinâs rejection of central authority â a loosely defined legal framework that operates with a minimal degree of governmental intervention
Cryptocurrenciesâ Internal and External Relations: a Descriptive Analysis of Cryptocurrency Dynamics and Relations to the US Equity Market
This thesis is a descriptive statistical analysis of cryptocurrency market and its relation within cryptocurrencies and across asset classes, using correlation functions, orthogonalized impulse response functions and OLS regressions. Consistent with Wang (2014), bitcoin does not suffer from a liquidity trap, even though bitcoin is a decentralized system. This thesis concludes that bitcoin has a lead effect on only 2 out of 8 of the top cryptocurrencies, endowing diversification benefits within cryptocurrency market. This paper provides evidence on cryptocurrency marketâs and US equity marketâs impulse response dynamics which are insignificant, consistent with Gangwalâs (2016) results that adding cryptocurrencies to a diversified portfolio will yield to a higher Sharpe ratio. Lastly, the study reports bitcoin momentum factor having an impact on banking and financial industriesâ excess returns
Regulating Decentralized Cryptocurrencies Under Payment Services Law: Lessons from the European Union
Several years after the inception of the most dominant cryptocurrency, bitcoin, the European Central Bank in 2015 indicated the need for establishing legal clarity by relevant authorities through explaining how the current legal framework applies to cryptocurrencies. Three years later, no meaningful step has been taken by any of the European Union (EU) institutions including the parliament. By examining the EUâs legal framework governing payments services, including the Single Euro Payment Area (SEPA) Regulation, the Electronic Money Directive, the Payment Services Directive and the proposed AML/CTF Directive, this article concludes that (a) because the existing payment services laws apply to payments effected in currencies (legal tenders) and cryptocurrencies are not defined as currencies under the EU law or the laws of member states, they do not cover cryptocurrencies. It also argues that it is impossible to design sui generis payments services law for cryptocurrencies without curbing their essential features, especially decentralization. Lastly, the article proposes centralization and the creation of state cryptocurrency as possible solutions moving forward and examines their strengths and challenges
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