Crypto Exchanges Research Articles

Liability Mechanisms and Dispute Resolution in Crypto Exchange Contracts: Balancing Code-Based Execution and Legal Enforceability

This paper examines the tension between code-based execution and legal enforceability in smart contracts used by cryptocurrency exchanges. As decentralized finance grows in prominence, there is an increasing need to balance the immutability and automation of blockchain-based agreements with traditional legal protections and dispute resolution mechanisms. We analyze current approaches to liability allocation and conflict resolution in major crypto exchanges, identifying key challenges in harmonizing algorithmic governance with existing contract law. Case studies of recent exchange hacks and failures are used to illustrate the limitations of purely code-based systems. We then propose a hybrid model that preserves the efficiency of automated execution while incorporating safeguards for human intervention in exceptional circumstances. This framework aims to enhance user protections, regulatory compliance, and overall trust in decentralized financial infrastructure. Our findings have implications for exchange operators, regulators, and contract law as it evolves to address blockchain-enabled agreements.

Legal Nature and Classification of Smart Contracts in Crypto Exchanges: Challenges to Traditional Contract Law

This paper examines the legal nature and classification of smart contracts within the context of cryptocurrency exchanges, exploring the challenges they pose to traditional contract law. As blockchain technology continues to evolve, smart contracts have emerged as a novel form of agreement execution, blurring the lines between code and legal obligations. This study analyzes the unique characteristics of smart contracts, including their self-executing nature, immutability, and decentralized structure, and how these features interact with established legal principles. The research investigates the potential gaps in current legal frameworks and the difficulties in applying traditional contract law concepts such as offer, acceptance, consideration, and breach to smart contracts. Furthermore, it explores the jurisdictional and enforcement issues that arise in the decentralized and borderless realm of crypto exchanges. By synthesizing legal theory, technological understanding, and practical implications, this paper aims to contribute to the ongoing dialogue on how to effectively regulate and integrate smart contracts into existing legal systems, while addressing the specific challenges they present in the dynamic landscape of cryptocurrency exchanges.

Investigation of Fluctuations in Cryptocurrency Transactions with Sentiment Analysis

This study investigates public sentiment about popular cryptocurrencies listed on crypto exchanges in Turkey, using comments shared on social media platforms and online forums. The research seeks to enhance the existing body of knowledge by overcoming the shortcomings of sentiment analysis studies focused on Turkish texts. Data collected from social media and online forums were examined with sentiment analysis techniques. A total of 607,592 comments were analyzed, of which 89,986 were classified as negative, 72,655 as positive, and 444,951 as neutral. For binary classification, 89,986 negative and 72,655 positive examples were selected and machine-learning models were trained and tested on 162,641 examples. The study's methodology includes an in-depth examination of sentiment analysis results obtained using machine learning classifiers. The findings show how various cryptocurrencies are perceived on different social media platforms. For instance, BTC (Bitcoin) is generally perceived negatively on Investing.com and Telegram, while ETH (Ethereum) generally displays more negative views. These results help investors understand their perceptions and market expectations towards cryptocurrencies. This study deepens the role of social media sentiment analysis in cryptocurrency markets, contributing to the development of new methods and approaches for future research.

Установление владельца адреса криптокошелька в практике правоохранительных органов

The author analyzes the law enforcement experience (operational and investigative) in the disclosure and investigation of crimes related to the use of cryptocurrency. The article highlights the difficulties associated with establishing the owner of the crypto wallet address in the practical activities of operatives and investigators. The article describes the operational and investigative experience in establishing the owner of the crypto wallet address by sending a request to the crypto exchange. The article proposes to send a request to the crypto exchange for these purposes within the framework of the relevant operational search event “Making inquiries” and the investigative action “Investigative experiment”. The author suggests that the reader familiarize himself with the standard plan for carrying out the specified operational search event. The same plan has been developed for the production of the investigative action “Investigative experiment”. The author concluded that the formation of evidence at the preliminary investigation takes place through the production of an investigative action “Investigative experiment”, and to present the results of operational investigative activities, operatives conduct the above-mentioned operational investigative event. In conclusion, the author proposes a descriptive part of the protocol of the investigative experiment to facilitate the introduction of new methods and techniques in proving criminal cases.

Valuation and hedging of cryptocurrency inverse options

Currently, the most liquidly traded options on the crypto underlying are the so-called inverse options. An inverse option contract is quoted and traded in the units of the underlying cryptocurrency. The main economic reason for the popularity of inverse contracts in the crypto exchanges (such as Deribit) is that inverse contracts enable traders to operate without maintaining fiat cash accounts. For the theoretical part, we show that inverse options are just regular vanilla options considered under the martingale measure using the forward of the underlying as the numéraire. This measure requires an adjustment to option delta. For the empirical part, we use Deribit options data of past five years to backtest delta-hedged option strategies. We introduce USD and Coin accounting of trading Profit&Loss (P&L) which is important for designing strategies in crypto options. We show empirically that USD and Coin accounting rules are equivalent when performance is measured is Coin and USD units, respectively. We establish that the risk-premia observed in options on Deribit is negative and significant so that strategies selling volatility are expected to generate positive risk-adjusted performance in the long-term.

Security tokens, ecosystems and financial inclusion: Islamic perspectives

PurposeShariah-compliant security tokens can play an important role in developing innovative solutions to resolve voluntary and involuntary financial exclusion in Muslim societies. This paper aims to present features of Shariah-compliant security tokens and supporting ecosystems that can provide additional sources of financing for small and medium enterprises (SMEs) and create alternative investment opportunities for retail investors.Design/methodology/approachThis conceptual paper presents the building blocks of security tokens, their ecosystem and key functions and activities and then examines these features from Islamic perspectives. This is done by reviewing the contemporary literature on cryptoassets and their ecosystems and analysing these in light of Islamic legal and ethical values and principles.FindingsThe paper provides a framework of how Shariah-compliant asset- and equity-based security tokens can be used by SMEs to raise funds quickly and efficiently on crypto exchanges. Given the novelty and complexity of the technology involved and the lack of understanding and skills to develop blockchain-based systems among SMEs, this paper suggests developing security tokens and exchanges in a controlled manner under the supervision of a nation’s stock markets.Originality/valueAlthough several studies examine cryptocurrencies from Islamic perspectives, literature on other cryptoassets and their role in financial inclusion is scant. This paper identifies Shariah-compliant asset- and equity-based security tokens and supporting ecosystems that can contribute to the development of digital capital markets where SMEs can raise funds efficiently and retail investors can invest in alternative asset classes.

Financial contagion in cryptocurrency exchanges: Evidence from the FTT collapse

To what extent does the collapse of a digital token spread contagion across cryptocurrency markets? How do markets incorporate information in this turbulent setting? We examine contagion effects across major digital exchanges during the collapse of the FTX exchange and its token, FTT. We find evidence of contagion across crypto exchanges. We also examine the information cascade effects of other crypto assets on FTX when nearly all withdrawals were prohibited. We find abnormal returns for major assets, indicating a flight to safety from less to more authoritative digital assets. The implications for traders, exchanges, and policymakers are discussed.

Tax Regulations On Cryptocurrency Transactions In Indonesia

This study explores the evolving landscape of cryptocurrency taxation in Indonesia, focusing on regulatory developments and challenges. Tracing the trajectory from the introduction of Bitcoin in 2009 to the establishment of a formal crypto exchange in 2023, this research emphasizes the government's commitment to regulate and facilitate crypto asset trading. Despite this progress, challenges such as regulatory uncertainties, security concerns, necessitating a profound understanding of cryptocurrency dynamics to navigate the global financial landscape. This research focuses on exploring Indonesia's regulatory response, particularly in taxation, employing a qualitative descriptive methodology that integrates primary data from legal frameworks and secondary data through literature reviews, document analyses, and interviews with cryptocurrency traders and tax officials. This study contributes not only to academic discourse but also provides insights for fostering the growth of the cryptocurrency ecosystem while managing potential tax-related risks.

Non-Traditional Finance and the Infrastructural Imagination of Geoeconomic Hegemony: The Case of Russia’s War in Ukraine

Abstract Against the background of the war waged by Russia against Ukraine, this paper addresses the role of non-traditional financial infrastructures in geopolitical struggles that are conducted by geoeconomic means. Non-traditional finance (in the following: NTF),1 like cryptocurrencies, crypto exchanges, and related services, promises to provide financial security—for instance, in terms of payments—outside of traditional financial infrastructures. NTF gains geopolitical significance in the wake of the US and EU-led financial sanctions against Russian institutions and individuals. The paper investigates this potentially new role of NTF through a theoretical and conceptual architecture that views hegemony, including geopolitical hegemony, from a social-theoretical standpoint: Hegemony is conceptualized as the result of “articulations”—that is, contingent interrelations encompassing both linkages and distinctions—between heterogeneous elements in which the respective role and function of those elements is re-defined through the articulation. With regard to the emerging role of NTF in geopolitical conflicts, the question is how political perceptions of geopolitical conflict and agency are iterated in terms of non-traditional financial infrastructures, and how, in turn, those infrastructures are articulated with respect to their political weight. The paper empirically analyzes the ways in which NTF agents and organizations have been addressed as geopolitical factors in the war confrontation between Russia and Ukraine by political institutions (focusing on the United States, the EU, Russia, and Ukraine), and how they understand their role themselves. Findings show that NTF, in spite of its rising prominence, use, and promise of autonomy, has effectively been articulated as an infrastructure whose concerns with financial and payment security must be subordinated to considerations of political security and international supremacy. In that articulation, Western, Russian, and Ukrainian governments significantly differ with respect to the ways they deploy an infrastructural imagination to define their interests and their views on NTF in the conflict.

Athena: Smart order routing on centralized crypto exchanges using a unified order book

SummaryMost cryptocurrency spot trading occurs on centralized crypto exchanges, where offers for buying and selling are organized via an order book. In liquid markets, the price achieved for buying and selling deviates only slightly from the assumed reference price, that is, trading is associated with low implicit costs. However, compared to traditional finance, crypto markets are still illiquid, and consequently, the reduction of implicit costs is crucial for any trading strategy and of high interest, especially for institutional investors. This paper describes the design and implementation of Athena, a system that automatically splits orders across multiple exchanges to minimize implicit costs. For this purpose, order books are collected from several centralized crypto exchanges and merged into an internal unified order book. In addition to price and quantity, the entries in the unified order book are enriched with information about the exchange. This enables a smart order routing algorithm to split an order into several slices and execute these on several exchanges to reduce implicit costs and achieve a better price. An extensive evaluation shows the savings of using the smart order routing algorithm.

An optimized neural network with AdaHessian for cryptojacking attack prediction for Securing Crypto Exchange Operations of MEC applications

Bitcoin exchange security is crucial because of MEC's widespread use. Cryptojacking has compromised MEC app security and bitcoin exchange ecosystem functionality. This paper propose a cutting-edge neural network and AdaHessian optimization technique for cryptojacking prediction and defense. We provide a cutting-edge deep neural network (DNN) cryptojacking attack prediction approach employing pruning, post-training quantization, and AdaHessian optimization. To solve these problems, this paper apply pruning, post-training quantization, and AdaHessian optimization. A new framework for quick DNN training utilizing AdaHessian optimization can detect cryptojacking attempts with reduced computational cost. Pruning and post-training quantization improve the model for low-CPU on-edge devices. The proposed approach drastically decreases model parameters without affecting Cryptojacking attack prediction. The model has Recall 98.72%, Precision 98.91%, F1-Score 99.09%, MSE 0.0140, RMSE 0.0137, and MAE 0.0139. Our solution beats state-of-the-art approaches in precision, computational efficiency, and resource consumption, allowing more realistic, trustworthy, and cost-effective machine learning models. We address increasing cybersecurity issues holistically by completing the DNN optimization-security loop. Securing Crypto Exchange Operations delivers scalable and efficient Cryptojacking protection, improving machine learning, cybersecurity, and network management.

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.

Optimal Single-Valued Neutrosophic Sine Trigonometric Aggregation Operators for Accurate Financial Fraud Detection Model

Financial fraud may be regarded as any fraud targeting financial organisations including crypto exchanges, banks, fintech, and lending organizations, or any criminal activity associated with the payment process. Financial fraud detection cites protocol set prepared to circumvent the destruction produced by fraudulent activities happening in financial service suppliers. Ecological financial fraud detection (FD) includes the usage of ethical and sustainable performs within fraud actions recognition from the financial area. In recent times, DL and ML techniques have been used in CCF recognition owing to their ability to construct a robust mechanism to discover fraud businesses. Therefore, this study develops an Optimal Single Valued Neutrosophic Sine Trigonometric Aggregation Operator (O-SVNSTAO) for Accurate Financial Fraud Detection Model. The genetic-inspired particle swarm optimization (GIPSO) feature selection model efficiently discerns the relevant attribute from sophisticated financial databases, improving the model's discriminative power while alleviating dimensionality problems. Consequently, the SVNSTAO classifier leverages the features selected to discern complicated features inherent in fraudulent actions, which facilitates accurate diagnosis. Moreover, the COA parameter tuning mechanism enhances the SVNSTAO model's parameter, which ensures adaptability and optimum performance to varied fraud settings. Empirical analysis of real-time financial datasets demonstrates the superiority of O-SVNSTAO technique over classical methods, underlining its effectiveness in discovering financial fraud with exceptional efficiency and reliability

Digital Currency and Financial Markets in Nigeria: Impact and Policy Implications

<p class="MsoNormal" style="margin-top: 12pt; text-align: justify;"><span lang="EN-US" style="font-family: arial, helvetica, sans-serif;">The rise of privately issued digital currencies, which primarily serve as alternative investment assets poses a challenge to the traditional financial instruments traded in the financial market. This study examines the dynamic relationship between the major privately issued digital currency (Bitcoin) and two financial market securities in Nigeria. The paper employed Vector Autoregressive (VAR) model and presents three relevant findings. First, the impulse response function indicates the absence of a significant response of the Nigerian financial market to shocks emanating from the Bitcoin market, implying lower connectedness between the two markets. Secondly, the outcome of the variance decomposition reveals a lower contribution of Bitcoin to changes in stock prices and treasury bills, however, stock prices and treasury bills contributed higher impact to each other compared to the contribution of Bitcoin. Thirdly, a weak bi-directional causality between the Bitcoin and treasury bills was observed and a uni-directional causality running from treasury bills and stocks, implying the existence of portfolio rebalancing from the fixed income to the equities market. Despite the weak connection between digital currency and the financial market, the paper recommends that the Central Bank of Nigeria and the Securities and Exchange Commission should maintain monitoring the development of crypto exchanges and continue reviewing the existing policy restricting cryptocurrency transactions through banks to avoid its unsavoury effects.</span></p>

THE RISE OF CRYPTOCURRENCY ADOPTION IN PAKISTAN: THE LEGAL LANDSCAPE

This article explores the rise of cryptocurrency adoption in Pakistan and examines the promising future that lies ahead for this emerging digital asset class in the country. Pakistan, with its cash-centric economy and limited access to formal financial services for a significant portion of its population, has witnessed a remarkable shift in attitudes toward cryptocurrencies. Factors such as financial inclusion efforts, economic instability, and supportive government policies have contributed to this growing interest. The younger generation, in particular, is embracing digital currencies as a means of participating in the global economy and preserving their wealth in the face of inflation. The establishment of crypto exchanges and supporting infrastructure, along with educational initiatives and awareness programs, has further facilitated cryptocurrency adoption. The government's positive approach and efforts to develop a comprehensive regulatory framework have instilled confidence and encouraged individuals and businesses to explore the opportunities presented by cryptocurrencies. Moreover, partnerships with global crypto projects and the potential applications of blockchain technology in various sectors have contributed to Pakistan's promising future in the cryptocurrency space. As more individuals and businesses embrace cryptocurrencies, Pakistan is poised to leverage the benefits of this transformative technology, fostering financial inclusion, economic growth, and technological innovation in the years to come. Cryptocurrencies have garnered significant attention and adoption worldwide, and Pakistan is no exception. In recent years, Pakistan has witnessed a growing interest in cryptocurrencies, with an increasing number of individuals and businesses embracing this digital financial revolution. This article explores the factors contributing to the rise of cryptocurrency adoption in Pakistan and examines the promising future that lies ahead.

How can run risk in digital asset markets be reduced?

This paper reviews the proof of reserve methodologies employed by crypto exchanges that attempt to demonstrate cryptographically that assets exceed liabilities so that there is no reason for participants to run on the exchange. The paper suggests a number of enhancements to these methodologies using a cryptographic statistical proof, proof of knowledge methods and other techniques. Although this paper reviews the proof of reserve methodologies of crypto-native institutions, its goal is not to address the risk management challenges of crypto exchanges alone, but, rather, to illustrate how enhanced versions of these methods might be used to mitigate run risk of digital assets on the nascent regulated crypto platforms being developed by banks and other financial institutions. A simplified version of the techniques that could be used to reduce the run risk of stablecoins is presented as an example.

Detecting Pump-and-Dumps with Crypto-Assets: Dealing with Imbalanced Datasets and Insiders’ Anticipated Purchases

Detecting pump-and-dump schemes involving cryptoassets with high-frequency data is challenging due to imbalanced datasets and the early occurrence of unusual trading volumes. To address these issues, we propose constructing synthetic balanced datasets using resampling methods and flagging a pump-and-dump from the moment of public announcement up to 60 min beforehand. We validated our proposals using data from Pumpolymp and the CryptoCurrency eXchange Trading Library to identify 351 pump signals relative to the Binance crypto exchange in 2021 and 2022. We found that the most effective approach was using the original imbalanced dataset with pump-and-dumps flagged 60 min in advance, together with a random forest model with data segmented into 30-s chunks and regressors computed with a moving window of 1 h. Our analysis revealed that a better balance between sensitivity and specificity could be achieved by simply selecting an appropriate probability threshold, such as setting the threshold close to the observed prevalence in the original dataset. Resampling methods were useful in some cases, but threshold-independent measures were not affected. Moreover, detecting pump-and-dumps in real-time involves high-dimensional data, and the use of resampling methods to build synthetic datasets can be time-consuming, making them less practical.

The Impact of Cryptocurrency on the Investment Market

The development of cryptocurrencies by banking institutions operating in the online environment provides for the purchase and sale of cryptocurrencies on stock exchanges, not on crypto exchanges, allowing the use of cryptocurrencies as a means of payment and investment. The aim of the article is to determine the impact of cryptocurrency on the investment market based on the analysis of key environmental factors that affect the correlation of these variables. The issue of cryptocurrency by banking institutions also ensures its stability, thus expanding the investment potential of this financial instrument. The above contributes to the formation of the cryptocurrency investment market in the structure of the stock market.The development of cryptocurrencies of banking institutions operating in the online environment, provides the purchase and sale of cryptocurrencies on stock exchanges, and not on crypto exchanges, allowing the use of cryptocurrencies as a means of payment and investment. Among the factors that indicate the negative impact of cryptocurrency on the investment market are the following: the lack of a stable value of cryptocurrency and its volatility, dependence on fluctuations in the world economy and macroeconomic factors, in particular demand; as a result of the first factor, cryptocurrency as an object of investment activity is quite risky. Further research should be devoted to the issues of central bank digital currencies and their potential impact on competition in the market of private digital currencies based on blockchain technology.

Crypto quanto and inverse options

AbstractOver 90% of exchange trading on crypto options has always been on the Deribit platform. This centralized crypto exchange only lists inverse products because they do not accept fiat currency. Likewise, other major crypto options platforms only list crypto–stablecoin trading pairs in so‐called direct options, which are similar to the standard crypto options listed by the CME except the US dollar is replaced by a stablecoin version. Until now a clear mathematical exposition of these products has been lacking. We discuss the sources of market incompleteness in direct and inverse options and compare their pricing and hedging characteristics. Then we discuss the useful applications of currency protected “quanto” direct and inverse options for fiat‐based traders and describe their pricing and hedging characteristics, all in the Black–Scholes setting.

On the performance of blockchain-based token offerings

Initial coin offerings (ICOs) and initial exchange offerings (IEOs) are distinct blockchain-based token offerings. Following multiple frauds associated with decentralized and unregulated ICOs, IEOs are emerging as a novel pathway that relies on centralized crypto exchange platforms acting as intermediaries. However, the question as to how this shift affects fundraising processes in what has traditionally been a decentralized environment remains unresolved. We here address this issue by empirically comparing the performance of ICOs and IEOs through the lens of signaling theory, focusing specifically on the impact of social media information across 305 token offerings (ICOs and IEOs). Our work introduces IEOs and explains how and why the volume and sentiment of social media signals may serve as predictors of fundraising performance. We furthermore find that the impact of these electronic word-of-mouth (eWOM) media signals is reduced in the case of IEOs—in the presence of a central cryptocurrency exchange platform mediator. We delineate implications for investors, ventures, platform providers, and regulators alike.