Cryptocurrency Research Articles

The Urgency of Comprehensive and Integrated Digital Asset Regulation

Cryptocurrency has grown rapidly since it was first introduced to the public. Many countries, including Indonesia, have begun to adopt special regulations for cryptocurrencies in response to the exponential growth and penetration of cryptocurrencies in the traditional financial system. Regulations aim to protect investors, ensure economic stability, and prevent illegal activities such as terrorism, money laundering and tax evasion. In January 2023, Law Number 4 of 2023 concerning Development and Strengthening of the Financial Sector ("UU P2SK") was enacted as a form of financial sector reform. Starting January 2025, regulation and supervision of cryptocurrency transactions will be carried out by the Financial Services Authority (OJK) replacing the Commodity Futures Trading Supervisory Agency (Bappebti) which has established several regulations regarding Crypto assets. But until now There are no regulations regarding permits or prohibitions for influencers/celebrities in marketing crypto assets via social media or other media to the public even though these regulations are needed to mitigate the incidence of victims and losses, as in several cases that have occurred. In the future, a comprehensive and integrated regulation is needed with other laws and regulations such as the Terrorism Law, the Money Laundering Crime Law, the Consumer Protection Law, the ITE Law, the Criminal Code and other related laws and regulations, in order to keep up with the rapid development of cryptocurrency and the changing character of the digital world. global and borderless.

The effect of financial literacy on Gen-Z crypto investment decision through herding behavior as mediator

The progression of investment in Indonesia has witnessed rapid growth, particularly in the realm of crypto assets. By April 2023, the number of crypto investors in Indonesia had surged to 17 million, with the Gen Z cohort dominating this category of asset investors. The primary objective of this research is to examine whether herding behavior can mediate the relationship between financial literacy and crypto investment decisions among Gen Z individuals. This investigation was conducted among crypto investors residing in the city of Bengkulu. A total of 156 individuals were selected as the sample. The collected data was subsequently processed using the Smart PLS 3 application. The research findings indicate that financial literacy has a significantly positive influence on herding, and financial literacy also has a significantly positive impact on the crypto investment decisions of Gen Z. Moreover, herding serves as a mediating factor in the relationship between financial literacy and Gen Z's crypto investment decisions.

Behavioral biases of cryptocurrency investors: a prospect theory model to explain cryptocurrency returns

PurposeThe study aims to test prospect theory (PT) predictions in the cryptocurrency (CC) market. It proposes a new asset pricing model that explores the potential of prospect theory value (PTV) as a significant predictor of CC returns.Design/methodology/approachThe study comprehensively analyses a large sample set of 1,629 CCs, representing more than 95% of the CC market. The study uses a portfolio analysis approach, employing univariate and bivariate sorting techniques with equal-weighted and value-weighted portfolios. The study also employs ordinary least squares (OLS) regression, panel data methods and quantile regression (QR) to estimate the models.FindingsThis study demonstrates an average inverse relationship between PTV and CC returns. However, this relationship exhibits asymmetry across different quantiles, indicating that investor reactions vary based on market conditions. Moreover, PTV provides more robust predictions for smaller CCs characterized by high volatility and illiquidity. Notably, the findings highlight the dominant role of the probability weighting (PW) component in PT for predicting CC behaviors, suggesting a preference for lottery-like characteristics among CC investors.Originality/valueThe study is one of the early studies on CC price dynamics from the PT perspective. The study is the first to apply a QR approach to analyze the cross-section of CCs using a PT-based asset pricing model. The results shed light on CC investors' decision-making processes and risk perception, offering valuable insights to regulators, policymakers and market participants. From a practical perspective, a trading strategy centered around the PTV effect can be implemented.

A fuzzy BWM and MARCOS integrated framework with Heronian function for evaluating cryptocurrency exchanges: a case study of Türkiye

Crypto assets have become increasingly popular in recent years due to their many advantages, such as low transaction costs and investment opportunities. The performance of crypto exchanges is an essential factor in developing crypto assets. Therefore, it is necessary to take adequate measures regarding the reliability, speed, user-friendliness, regulation, and supervision of crypto exchanges. However, each measure to be taken creates extra costs for businesses. Studies are needed to determine the factors that most affect the performance of crypto exchanges. This study develops an integrated framework, i.e., fuzzy best–worst method with the Heronian function—the fuzzy measurement of alternatives and ranking according to compromise solution with the Heronian function (FBWM’H–FMARCOS’H), to evaluate cryptocurrency exchanges. In this framework, the fuzzy best–worst method (FBWM) is used to decide the criteria’s importance, fuzzy measurement of alternatives and ranking according to compromise solution (FMARCOS) is used to prioritize the alternatives, and the Heronian function is used to aggregate the results. Integrating a modified FBWM and FMARCOS with Heronian functions is particularly appealing for group decision-making under vagueness. Through case studies, some well-known cryptocurrency exchanges operating in Türkiye are assessed based on seven critical factors in the cryptocurrency exchange evaluation process. The main contribution of this study is generating new priority strategies to increase the performance of crypto exchanges with a novel decision-making methodology. “Perception of security,” “reputation,” and “commission rate” are found as the foremost factors in choosing an appropriate cryptocurrency exchange for investment. Further, the best score is achieved by Coinbase, followed by Binance. The solidity and flexibility of the methodology are also supported by sensitivity and comparative analyses. The findings may pave the way for investors to take appropriate actions without incurring high costs.

The ChatGPT effect on AI-themed cryptocurrencies

ChatGPT is an artificial intelligence (AI) chatbot that provides users with detailed responses and accurate answers to any questions. It has garnered significant attention after its launch in November 2022. We analyze the returns of AI-themed crypto assets around the launch and widespread attention towards ChatGPT. We reveal significant abnormal returns for AI tokens after the launch of ChatGPT, up to 41% over the course of two weeks. Moreover, 90% of tokens exhibit positive abnormal returns. This suggests that the attention towards ChatGPT and AI in general has transitioned to cryptocurrency markets, resulting in positive price effects for AI-related cryptocurrencies.

Financial Reporting and Accounting Treatment of Crypto Assets: Professional Accountants Perspectives

Financial Reporting and Accounting Treatment of Crypto Assets: Professional Accountants Perspectives

The nexus between the volatility of Bitcoin, gold, and American stock markets during the COVID-19 pandemic: evidence from VAR-DCC-EGARCH and ANN models

The spread of the coronavirus has reduced the value of stock indexes, depressed energy and metals commodities prices including oil, and caused instability in financial markets around the world. Due to this situation, investors should consider investing in more secure assets, such as real estate property, cash, gold, and crypto assets. In recent years, among secure assets, cryptoassets are gaining more attention than traditional investments. This study compares the Bitcoin market, the gold market, and American stock indexes (S&P500, Nasdaq, and Dow Jones) before and during the COVID-19 pandemic. For this purpose, the dynamic conditional correlation exponential generalized autoregressive conditional heteroskedasticity model was used to estimate the DCC coefficient and compare this model with the artificial neural network approach to predict volatility of these markets. Our empirical findings showed a substantial dynamic conditional correlation between Bitcoin, gold, and stock markets. In particular, we observed that Bitcoin offered better diversification opportunities to reduce risks in key stock markets during the COVID-19 period. This paper provides practical impacts on risk management and portfolio diversification.

Kepastian Hukum Aset Kripto sebagai Instrumen Investasi dalam Persfektif Hukum Islam dan Hukum Positif

Cryptocurrency is a virtual currency without physical form or concrete existence in the virtual world. One of them is Crypto Assets, which are becoming increasingly popular as a means of online payment, even though the government has banned it. In early 2019, the Indonesian government issued regulations legalizing Crypto Assets in Commodity Futures Trading. The use of Crypto Assets as commodities and exchange tools in online transactions has sparked pros and cons among religious scholars and economic experts. This study aims to determine the status of cryptocurrency as a commodity in Indonesia and the opportunities for Crypto Assets as subjects in Sharia commodities on the Commodity Exchange. The theory used is the theory of valid and invalid business transactions in Islam. This research is a literature study and qualitative in nature. The data analysis technique used is analytical descriptive with a normative juridical Islamic law approach. The research found that cryptocurrency can be traded in Sharia commodity exchanges with the condition that the country must protect the trade with legal umbrella and issue cryptocurrency with its value based on gold or the country's currency. Crypto Assets cannot be used as commodities in Sharia Derivative Contracts in Indonesia because they still contain speculation, maysir, and are vulnerable to being used for illegal activities. Therefore, Crypto Assets are haram due to external factors, so it is best to avoid them.

Taxation of digital financial assets in the context of classical rules of taxation

Subject. The existing mechanisms of taxation of transactions with crypto assets on the territory of the Russian Federation are analyzed in the article. The choice of the research object is due to the increasing role of crypto assets in the modern Russian economy, as well as the necessity to propose new mechanisms to ensure the tax security of the state in the face of new challenges.The purpose of the study. The existing mechanisms of taxation of transactions related to the use and turnover of crypto assets in Russia are considered. Authors analyze both the main problems faced by individuals and legal entities operating with cryptocurrencies. The analysis of the current legislation is provided, possible ways to improve the legislation are suggested.Methodology. In the course of their work, the researchers were guided by philological and systematic ways of interpreting current legal norms, as well as existing explanations of financial authorities related to current approaches to taxation of transactions with crypto assets.Conclusions. It is concluded that the approaches proposed by the legislator to taxation of transactions with crypto assets are similar to the mechanisms that apply to traditional financial instruments, but at the same time, assets that are not similar to traditional ones remain outside the regulation.

Is cryptocurrency a hedging tool during economic policy uncertainty? An empirical investigation

In light of the increasing investor interest in cryptocurrencies (CR) as alternative financial assets in financial markets, we sought to examine the connection between economic policy uncertainty (EPU) and cryptocurrencies. To do so, monthly data for Bitcoin (BTC), Ethereum (ETH), and Tether (THT) from January 2021 to April 2023 were employed. We utilized quantile regression and Granger causality analysis to investigate the relationship between EPU and cryptocurrencies. The initial results of this study suggest that EPU has little effect on the cryptocurrency market in the short-term. To enhance the strength and validity of these findings, we performed separate evaluations tailored to the unique contexts of the United States and China. The results revealed that the effects of EPU were adverse and statistically insignificant for China, while the situation differed slightly for the United States. Given that the United States has the most developed economy, its policies have a significant influence globally. As a result, cryptocurrencies have the potential to serve as efficient hedging tools. Furthermore, we incorporated nonlinear autoregressive distributed lag (NARDL) analysis to assess the asymmetric impact of EPU on cryptocurrencies by adopting both short-term and long-term perspectives. The outcomes demonstrated that both Bitcoin and Ethereum can serve as hedging tools in the short-term, although this utility diminishes in the long-term. Conversely, Tether displayed a positive association with EPU in the long-term. The findings of this study hold significance for policy-makers, offering valuable insights related to structuring efficient policies. The recommendations include fostering a rational framework for active participation from various stakeholders, including investors, governmental bodies, central banks, stock exchanges, and financial institutions. This collaborative effort aims to mitigate irrational fluctuations and enhance the acceptability of cryptocurrencies. In essence, this research underscores the potential of cryptocurrencies as a secure hedge against short-term EPU. However, we caution against assuming that any single cryptocurrency can consistently serve as a dependable investment haven.

Crypto Currency on the Development of Nigeria Banking System with Particular Reference to the First Bank Nigeria Plc

The study examined the effect of crypto currency on the development of Nigerian banking system with particular reference to the first bank Nigeria Plc. The study specifically examined the effect of Bitcoin (BTC) payment system and Litecoin (LTC) payment system, Ethereum (ETH) payment system and Bitcoin Cash payment system on the profit for the year of first bank Nigeria Plc. Data for the study was sourced through annual reports and accounts of first bank Plc for a period of 10 years, data collected were analysed using multiple regression analysis. Result of the analysis shows that Bitcoin (BTC) payment system has a positive and significant effect on the profit for the year of first bank Nigeria Plc. It was also observed that Litecoin (LTC) payment system has a negative significant effect on the profit for the year of first bank Nigeria Plc. The study further shows that that there is a negative effect of Ethereum on Profit for the year of first bank Plc. The study further indicates that Bitcoin Cash has a positive and significant effect on Profit for the year of firs bank Plc. Several financial regulatory authorities and institutions issued casual warnings to the general public, advising of the risks of involvement in digital currencies; however, digital currencies (especially cryptocurrencies) are thriving since the number of businesses and persons who accept them as payment are increasing by the day. A significant number of people are now fully convinced that the digital currency-Bitcoin is legitimate, safe and has value. "Bitcoin is going to be transformative" but unfortunately, since it is virtually untraceable it has been used for a host of nefarious purposes. Although, digital currencies may be very attractive to cybercriminals and fraudsters and present a host of new challenges to law enforcement in Nigeria, its adoption as a tool for national development in the digital age should be widely encouraged.

Cryptocurrency: A Currency or Investment Asset?

As most countries use currencies to denote paper money created as a medium of exchange for buying and selling goods or services. Nevertheless, there are attempts from several entities to create a crypto asset named cryptocurrencies which aims to replace the functions of paper money. The issue arises whether cryptocurrency is valid to be used as a currency or investment asset according to Shariah’s perspective. This article aims to clarify the Shariah views on the legality of cryptocurrency, analyze the suitability of cryptocurrencies as a currency or investment assets, and finally, suggest that cryptocurrency is one of the investment assets or commodities in line with the requirements of Shariah. The research adopts pure legal research methodology utilizing content analysis on the primary and secondary sources. The research findings revealed that Islamic scholars have conflicting views regarding the legality of cryptocurrency as a means of exchange to replace the function of paper money and as an investment asset. Nevertheless, cryptocurrency and crypto assets are required today because of Maqasid Shariah, maslahah, and qawaid fiqhiyyah. Future research should focus on the usage and practice of cryptocurrency worldwide and its legal application in specific countries.
 Keywords: cryptocurrency, currency, investment

Is digital gold a hedge, safe haven, or diversifier? An analysis of cryptocurrencies, DeFi tokens, and NFTs

ABSTRACT The crypto assets market is growing rapidly, exposing investors to new risks. As a result, finding viable candidates to hedge and diversify crypto portfolios is a critical and timely topic. In this paper, we explore the potential of gold-backed cryptocurrencies as safe haven assets in the context of building a diversified digital assets portfolio. Empirically, we investigate the financial properties (diversification, safe haven, and hedging capabilities) of two gold-backed cryptocurrencies against the three main digital assets categories, i.e. traditional cryptocurrencies, Non-Fungible Tokens (NFTs), and Decentralized Finance (DeFi) tokens, considering major external and internal crises. We also estimate the hedge ratios and the hedging effectiveness of the considered pairs. Overall, our findings indicate that the examined gold-backed cryptocurrencies are good diversifiers, with varying hedging, and safe haven properties depending on the nature of the crises, such as the COVID-19 pandemic and the Russia–Ukraine War, as well as the digital asset category considered. Several financial implications for investors and policymakers are proposed and discussed.

CAR(F)efully Navigating the Framework in the United Kingdom: Cryptically Crypto and Criminally Crypto

In November 2023, 48 countries pledged to adopt the OECD’s crypto asset reporting framework (CARF), designed to address the use of crypto assets to avoid taxation. In this Talking Points, Claire Shelemay describes how the United Kingdom will use the CARF to attack tax avoidance through crypto. She cautions, however, that the CARF may only be as good as the data collected, noting that countries that have not adopted the CARF may be facilitating not only tax avoidance, but also the financing of organized crime and terrorist activities.

Assessment and Issues in the Taxation of Crypto Assets

The paper provides a detailed assessment of the current tax treatment of crypto assets in Lithuania, the European Union and international law. It draws attention to and assesses the problematic aspects related to crypto tax regulation. The study starts by providing statistics on the development of the cryptocurrency market in Lithuania and discusses the current taxation model. The second part of the paper describes the current model of taxation of crypto-assets and presents problematic aspects of taxation of crypto-assets, such as the regulation of individual activity, the timing of taxation, and the extraction of cryptoassets. The third part of the paper describes the European Union law relating to the taxation of cryptoassets and discusses the guidelines of the Organisation for Economic Co-operation and Development. The growing popularity of crypto assets as a form of investment instrument has forced the state authorities to react: the State Tax Inspectorate of the Republic of Lithuania clearly states the criteria for taxation and the tax obligations, and the decision of the European Court of Justice puts cryptocurrencies on an equal footing with ordinary currencies, which are subject to the same taxes. The taxation of crypto-assets also raises some problematic aspects regarding the concept of individual activity and occasional crypto-transactions, the proper collection of data, and there are certain aspects that could lead to additional measures by the authorities at the Lithuanian or EU level.

КРИПТОВАЛЮТА КАК ФЕНОМЕН ЦИФРОВОЙ ЭКОНОМИКИ

The purpose of the article is to study crypto currency as a product of development and a phenomenon of the digital economy. The article determines that the most common definition of this as a means of payment, crypto currency is digital money that does not have physical expression and exists in the digital environment. They are based on block chain technology, which serves to ensure transactions and their security. In a certain sense, we can consider that crypto currency is a modern analogue of the physical money that we use in everyday life. In the modern world, digital assets carry hidden capabilities in terms of circumventing existing sanctions, combating inflation and devaluation within many countries. Although crypto currency has not yet been fully integrated into the international financial sector, it is already having a significant impact on financial markets, which could play a significant role in the future of the international economy. It is concluded that crypto currency, as a product of the digital economy, is a complex mechanism in its structure, which is aimed not only at understanding the very technological base of the crypto currency industry in terms of the versatility of the tools and concepts included in it, but also in attempts to establish a unified international partnership in terms of discussing possible concepts and common opinions. One way or another, while creating great opportunities for financial transformation and adaptation of new technologies, crypto currency also carries great risks and difficulties associated with legal regulation.

Crypto Trend Prediction Based on Wavelet Transform and Deep Learning Algorithm

Crypto currency price prediction is one of the biggest challenges for any prediction system owing to its volatility and dependence on many factors. Artificial intelligence powered by the development of sophisticated computing technology and developments in research has opened up a wide variety of applications and new possibilities to solve complicated problems. Extraction of appropriate features and input with features affecting the output is equally important in time series prediction problems. Wavelet transform is considered an effective method to split a non-stationary signal into uncorrelated components. This work attempts to extract the advantage of wavelets to extract features from an available data set and to predict the trend of the crypto price for next 16 days using the Bi-LSTM network. Historic data of crypto currencies available in Yahoo finance through the yFinance API with the python code is used as the primary data for this work. Due to the gaining importance of SHIB crypto due to its multiplication of value from its start, we have taken SHIB trend analysis as a case study with the use of a data set provided by Yahoo Finance API. The novelty of the proposed system lies largely on the combination of wavelet and deep learning system to improve the performance measures. The proposed systems evaluates the wavelet transform coefficients of the historic data available from the Yahoo Finance API and feed the wavelet transform values to the input of Bi-LSTM network to predict the wavelet transform coefficients for the next 16 days. Finally an inverse wavelet transform is used to get the price of the crypto currency for next 16 days. The results obtained shows that the model was able to estimate the trend in crypto price. The trend analysis shows whether there is an increase or decrease of prices in upcoming days and this could be useful to invest or to withdraw the funds to improve the returns. The proposed scheme resulted in lower Mean Square Error (MSE), Mean Average Error (MAE) and Root Mean Square Error (RMSE) compared with the currently available methods. The method could be useful for trend analysis of other crypto currencies as well. Though it is practically impossible to get the trend analysis from the price and volume history alone, the proposed scheme gives a reasonable estimate of the trend of the crypto price. The work may be extended in future to applications like prediction of agricultural product price, variation in climatic conditions, and availability of certain agricultural products like Onion in the market.

Dynamic Connectedness between Crypto and Conventional Financial Assets: Novel Findings from Russian Financial Market

In the dynamic landscape of the Russian digital economy and increasing financial openness, crypto assets have emerged as influential players in the financial market. The geopolitical and economic developments after a conflict with Ukraine have presented formidable challenges in the shape of financial and trade sanctions, coupled with the suspension from the SWIFT banking system, has plunged the Russian economy into a precarious situation. The current study delves into the network spillover effects between a prominent crypto asset and various financial assets including equity, exchange rates, crude oil, gold, and commodity futures using daily data from January 01, 2018, to August 31, 2023. The purpose of the study is to provide empirical and theoretical insights into countering the impact of sanctions on Russia, proposing a pragmatic solution for the Russian financial market. The research methodology involves the application of network spillover estimation and value-at-risk analysis. Notably, the findings expose a robust association between crypto and financial assets, where crypto assets play a pivotal role in transmitting risk within the financial landscape. While their impact on other financial assets remains relatively subdued, short-term correlations exhibit volatile fluctuations, often marked by sharp increases in downside risk. Theoretical implications follow the portfolio theory of asset pricing, with extreme risk spillover originating from long-run fluctuations in the crypto market, impacting market sentiment and elevating risk propagation in the Russian financial market. These results carry practical significance for payment and receipt processes, as well as trading activities with foreign countries, presenting essential insights for policymakers and investment decision-makers.

Crypto Currency and Economic Growth in Nigeria

Crypto Currency and Economic Growth in Nigeria

Crypto Currency and Illegal Deposit Taking: Recent Judicial Practice Overview

Crypto Currency and Illegal Deposit Taking: Recent Judicial Practice Overview