7,758 research outputs found

    European Legal Regulation of Cryptocurrencies through the AML Scope

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    This article deals with cryptocurrencies and its impact nowadays on the AML field at a European Union level . The article will be divided into an introduction, four chapters and a conclusion; it will define elementary information and defitions, will identify ways of practical use of cryptocurrencies, will introduce risks connected with the use of cryptocurrencies and will introduce legal regulation of cryptocurrencies by the V . AML Direction . In the conclusion the quality of communitary regulation will be evaluated and a few de lege ferenda tips will be devised to improve regulation for the future.This article deals with cryptocurrencies and its impact nowadays on the AML field at a European Union level . The article will be divided into an introduction, four chapters and a conclusion; it will define elementary information and defitions, will identify ways of practical use of cryptocurrencies, will introduce risks connected with the use of cryptocurrencies and will introduce legal regulation of cryptocurrencies by the V . AML Direction . In the conclusion the quality of communitary regulation will be evaluated and a few de lege ferenda tips will be devised to improve regulation for the future

    The next generation of digital currencies: in search of stability. Bruegel Policy Contribution Issue #15 December 2019

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    Four major developments have challenged the status quo and reopened the debate on the forms that money will take in the future: 1) use of cash as a medium of exchange has declined; 2) distributed ledger technology (DLT) has led to the emergence of thousands of digital cryptocurrencies; 3) some global tech giants are planning to provide private digital currencies to their billions of users in the form of stablecoins; and 4) in turn, public authorities are thinking about providing their own digital currencies to the general public. • These developments raise questions about the implications for financial stability, the transmission of monetary policy and financial intermediation. This Policy Contribution focuses on the consequences stablecoins and central bank digital currencies could have. • Stablecoins, such as Facebook’s Libra, differ from earlier generations of cryptocurrencies in three fundamental ways. First, they would start with large networks of users and global accessibility, two pivotal features for the critical uptake of a new currency. Second, given the current limitations of DLT, including in terms of energy efficiency, new stablecoins would rely on (more) centralised systems to validate transactions. Third, stablecoins would focus particularly on reducing the volatility in the value of the new currency. • These new features of stablecoins attempt to correct some of the critical deficiencies identified in first-generation cryptocurrencies, which meant they did not acquire the main functions of money. However, new stablecoins raise other questions and potentially create new problems. One issue could arise from the more centralised (permissioned) validation system, which could lead to collusion problems. Another issue could arise from the reserve system that is supposed to ensure the stability of stablecoins, such as Libra, which could be incompatible with the profit maximisation behaviour of a private issuer. • Facebook’s Libra plan has been a wake-up call to central banks and governments which, afraid of losing their monetary sovereignty, have renewed their interest in central bank digital currencies (CBDCs) as a potential solution. CBDCs could make private digital currencies less attractive and slow down their adoption. • But there are other reasons to give the general public access to central bank liabilities. One important reason to provide CBDCs to citizens is that if cash disappears, citizens will lose direct access to sovereign money. Another benefit of the introduction of CBDCs is that monetary policy could be strengthened by transmitting it directly to the general public. • However, the introduction of CBDCs could also be disruptive and create risks. In particular, CBDCs could have major consequences for financial intermediation. These risks would have to be evaluated by policymakers before any decisions are taken. • If CBDCs are introduced, central banks would have to carefully calibrate their properties to minimise these risks. But, eventually, if these risks – and in particular the risk of structural financial disintermediation – do materialise, central banks would have various instruments to counter the

    Defining and Regulating Cryptocurrency: Fake Internet Money or Legitimate Medium of Exchange?

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    Digitalization makes almost everything quicker, sleeker, and more efficient. Many argue cryptocurrency is the future of money and payment transfers. This paper explores how the unique nature of cryptocurrencies creates barriers to a strict application of traditional regulatory strategies. Indeed, state and federal regulators remain uncertain if and how they can regulate this cutting-edge technology. Cryptocurrency businesses face difficulty navigating the unclear regulatory landscape, and consumers frequently fall prey to misinformation. To reconcile these concerns, this paper asserts cryptocurrency functions as “currency” or “money” and should be treated as such for regulatory purposes. It also proposes each state implement a uniform cryptocurrency-specific framework following the Uniform Regulation of Virtual-Currency Business Act. Such a harmonious approach would reduce compliance costs for cryptocurrency businesses, protect consumers, and provide satisfactory state and federal oversight

    Cryptocurrency: History, Advantages, Disadvantages, and the Future

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    Cryptocurrency is a digital asset that has seen a large amount of attention within the past five years. Its origin is intriguing to some based upon its newness, yet it has invoked mysticism and skepticism in others. Bitcoin is the most recognizable currency, receiving heavy media attention. There are several other cryptocurrencies as well, less in the spotlight. Most appealing to cryptocurrency could include lack of government oversight, and increased privacy available to the consumer(s) (Bunjaku, Gjorgieva-Trajkovska, and Miteva-Kacarski, 2017, p. 37). Additional advantages include the simplicity in the start-up process, the ease of transferability, and the opportunity to have a seamless process in investing and/or exchanging monies. Cryptocurrency creates the ability to invest for some people groups that could never invest before and diversify investment portfolios (Theron and van Vuure, 2018, p. 2). While the newness of cryptocurrency certainly has been appealing for some, it also has been perceived oppositional by others. There has been concerns identified with regard to the level of trust required, an obvious and significant drawback if valid. Another identified disadvantage to cryptocurrency is its low amount of oversight and liquidity hurt for investing future. The ability for cryptocurrency to be used for illegal and/or evil activity is an ethical drawback (Nian and Chuen, 2015, p. 15). Lastly, the uncertainty of the future is a significant drawback. The future of cryptocurrency requires much economic forecasting. The new changes that cryptocurrency will bring to traditional economic institutes is an area which cryptocurrency needs to explored more. Lastly, is cryptocurrency a fad or an economic bubble

    Specific features of state regulation of operations with cryptocurrencies in the conditions of digitalization

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    Purpose: The article investigates specific features of state regulation of operations with cryptocurrencies in the conditions of the world economy digitalization. Design/Methodology/Approach: In order to form the state regulation of operations with cryptocurrencies, which create additional risks for the national currencies functioning in international financial and credit relations, it is necessary to consider this phenomenon first, from the position of a complete ban on the use of cryptocurrencies as a means of payment, second, in combination of a ban on the use of cryptocurrencies as means of payment, third, from the possibility of expanding the range of cryptocurrency users by including legal entities into it and fourth, the full legalization of the cryptocurrency. Findings: The authors developed and proposed a set of measures aimed at the formation of common standards and norms of state regulation of operations with cryptocurrencies in international financial relations. Practical Implications: The results of the study can be applied in the development of legal regulation of virtual currencies not only at the national level, but also at the international level. Originality/Value: The main contribution of the study is to identify possible risks in the sphere of state regulation of cryptocurrencies based on the experience of some countries: from formal permission (including recommendations on possible risks) or the application of general principles of regulation in the field of payments to the complete ban of such activities.peer-reviewe

    Implementation of ICO European best practices by SMEs

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    The article deals with a new financial tool of attracting capital, known as Initial Coin Offering (ICO). In conditions of reduced banking lending and difficult access to finance for SMEs, ICO is viewed to be one of the possible ways to access capital. It considers the main advantages and disadvantages of ICO performance, including its typical features, challenges and regulatory approaches to tax regulation, cybersecurity. The authors of the article determine stages of the ICO mechanism, identifying potential risks and ways to mitigate them, focusing primarily on the need to control and regulate ICO projects. The authors identify the main types of ICO funding, including hybrid and pure funding. The research contains an analysis of ICO trends and their duration for the period of 2013-2017. The capital raised through ICO performance over the period of 2013-2017 is analysed, and determination of the exponential trend line showing the level of its approximation is determined. The study covers the territorial distribution of ICO, in which the top positions regarding the amount of capital raised by ICO are attributed to the USA and EU member states. The existence of ICO regulation in European countries, such as Switzerland and UK, was defined positive in terms of further development of the relevant regulation in the financial market. The article considers the best ICO practices in EU member states. To mitigate risks relating to ICO performance and to increase the level of investment, it would be reasonable to create regulatory rules in every country where cases of ICO performance are reported, based on the practice of the mentioned European countries. The authors give recommendations regarding ICO regulation in Ukraine, taking into consideration the relevant European experience

    Classification of cryptocurrency coins and tokens by the dynamics of their market capitalisations

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    We empirically verify that the market capitalisations of coins and tokens in the cryptocurrency universe follow power-law distributions with significantly different values, with the tail exponent falling between 0.5 and 0.7 for coins, and between 1.0 and 1.3 for tokens. We provide a rationale for this, based on a simple proportional growth with birth & death model previously employed to describe the size distribution of firms, cities, webpages, etc. We empirically validate the model and its main predictions, in terms of proportional growth (Gibrat's law) of the coins and tokens. Estimating the main parameters of the model, the theoretical predictions for the power-law exponents of coin and token distributions are in remarkable agreement with the empirical estimations, given the simplicity of the model. Our results clearly characterize coins as being "entrenched incumbents" and tokens as an "explosive immature ecosystem", largely due to massive and exuberant Initial Coin Offering activity in the token space. The theory predicts that the exponent for tokens should converge to 1 in the future, reflecting a more reasonable rate of new entrants associated with genuine technological innovations

    Cashless Societies and the Rise of the Independent Cryptocurrencies: How Governments Can Use Privacy Laws to Compete with Independent Cryptocurrencies

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    Many individuals (including governments) envision living in a future world where physical currency is a thing of the past. Many countries have made great strides in their efforts to go cashless. At the same time, there is increasing awareness among citizens of the decreasing amount of privacy in their lives. The potential hazards cashless societies pose to financial privacy may incentivize citizens to hold some of their money in independent cryptocurrencies. This article argues that in order for governments in cashless societies to keep firm control over their money supply, they should enact stronger privacy law protections for its citizens in order to decrease the real or perceived loss of (financial) privacy. This paper compares the privacy laws that exist today in both the United States and the European Union and suggests combining elements of both legal systems in order create a more privacy-friendly legal framework that can enable governments to complete against independent cryptocurrencies
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