Digital Currency Research Articles

Oil shocks and currency behavior: A dual approach to digital and traditional currencies

Given the financial markets' growing preference for examining digital platforms, this study explores the dynamic relationship of oil shocks with both conventional and digital currencies. It provides a novel approach for evaluating the relationship between aggregate oil, demand, and supply shocks using three conventional currencies (Japanese Yen, Chinese Yuan, and Euro), cryptocurrencies (Bitcoin, Ethereum, Tether), and DeFi tokens (Maker, Chainlink, and Basic Attention Token). We use wavelet analysis to test the asymmetric association among variables from June 22, 2018, to July 11, 2023. The outcomes of continuous wavelet confirm the volatile behavior of oil shocks and studied currencies. In particular, a nonlinear wavelet coherence is observed between oil shocks and DeFi tokens, cryptocurrencies, and traditional currency in the short, medium, and long term. Moreover, crypto and conventional currencies are found to respond more strongly to external events than DeFi tokens. Given the empirical findings and the rapid transformation of digitalized finance with ongoing currency restructuring, this study plays a critical role by actively influencing the adaptation of regulatory frameworks to align with dynamic changes in associations, serving as a strategic guide for regulatory bodies to navigate the complexities of emerging financial paradigms.

Probabilistic deep learning and transfer learning for robust cryptocurrency price prediction

Forecasting the price of Bitcoin (BTC) with precision is a complex endeavor, given the market’s inherent uncertainty and volatility, influenced by a diverse range of parameters. This research is driven by the central goal of introducing a specialized deep learning model tailored to predict digital currency prices, with a specific emphasis on BTC. To address this challenge, a pioneering strategy has been established, leveraging probabilistic gated recurrent units (P-GRU). This approach integrates probabilistic attributes into the model, facilitating the generation of probability distributions for projected values. The effectiveness of this method is assessed using one year of BTC price history, sampled at a five-minute interval. In parallel, a comparative analysis is conducted against alternative models, including GRU, long short-term memory (LSTM), and variants thereof (time-distributed, bidirectional, and simple models). In pursuit of optimizing model efficacy, a bespoke callback mechanism is deployed. This callback, driven by R2-score tracking, captures optimal model weights based on validation data. Moreover, a transfer learning paradigm is adopted to broaden the study’s horizons. A pre-trained model on BTC data is harnessed to predict prices for six other prominent cryptocurrencies: Ethereum, Litecoin, Tron, Polkadot, Cardano, and Stellar. Consequently, a distinct model is tailored for each cryptocurrency. The outcomes of this investigation conclusively underscore the superior performance of the proposed methodology. In the midst of a volatile and uncertain market landscape, the proposed approach outshines its counterparts, showcasing an enhanced ability for cryptocurrency price forecasting.

The Impact of Digital Currency Policies on International Trade and Investment

This paper examines the multifaceted impact of digital currencies on regulatory frameworks, cross-border transaction efficiency, and their integration into mainstream financial systems. Through an in-depth analysis of global policy landscapes, compliance challenges, market stability implications, and the burgeoning role of Central Bank Digital Currencies (CBDCs), we uncover the dynamics shaping the future of digital finance. Employing statistical analysis, econometric models, and case studies, we explore the reduction in transaction costs, increased speed and accessibility, and the security concerns associated with digital currencies. Furthermore, we analyze the trends in digital currency adoption and the potential for their integration with traditional financial systems. Our findings highlight the complex interplay between technological advancements and regulatory strategies, offering insights into the opportunities and challenges digital currencies present for the global economy.

The Impact of Digital Currency Policies on International Trade and Investment

This paper examines the multifaceted impact of digital currencies on regulatory frameworks, cross-border transaction efficiency, and their integration into mainstream financial systems. Through an in-depth analysis of global policy landscapes, compliance challenges, market stability implications, and the burgeoning role of Central Bank Digital Currencies (CBDCs), we uncover the dynamics shaping the future of digital finance. Employing statistical analysis, econometric models, and case studies, we explore the reduction in transaction costs, increased speed and accessibility, and the security concerns associated with digital currencies. Furthermore, we analyze the trends in digital currency adoption and the potential for their integration with traditional financial systems. Our findings highlight the complex interplay between technological advancements and regulatory strategies, offering insights into the opportunities and challenges digital currencies present for the global economy.

A Review of Central Bank Digital Currency: Current Status and Changing Trends

Since the emergence of the Central Bank Digital Currency (CBDC), which digitally represents the legal currency of the country in which it is created, significant developments have been experienced in the global financial environment as a result of the changes brought about by the innovations. Although CBDCs offer various advantages, such as cost reduction, financial inclusion, and increasing the efficiency of payment systems, they may create some disadvantages, such as the risk of dysfunctionalization of the banking sector or decreasing the level of security. At this point, it is necessary to be aware of the possible risks it may create and to develop an optimum strategy in case such risks arise to establish a successful CBDC system and benefit from its advantages. In this context, the aim of this study is to analyze all aspects (emergence process, positive/negative sides, projects, use cases, and technical infrastructure to be used) of this digital currency and to make a comprehensive evaluation of CBDC applications around the world. The evaluations show that many countries are not indifferent to this new digital currency, which has a very high development potential, and continue their research intensively in order not to fall behind the steps taken in CBDC.

An interpretable model for large-scale smart contract vulnerability detection

Smart contracts hold billions of dollars in digital currency, and their security vulnerabilities have drawn a lot of attention in recent years. Traditional methods for detecting smart contract vulnerabilities rely primarily on symbol execution, which makes them time-consuming with high false positive rates. Recently, deep learning approaches have alleviated these issues but still face several major limitations, such as lack of interpretability and susceptibility to evasion techniques. In this paper, we propose a feature selection method for uplifting modeling. The fundamental concept of this method is a feature selection algorithm, utilizing interpretation outcomes to select critical features, thereby reducing the scales of features. The learning process could be accelerated significantly because of the reduction of the feature size. The experiment shows that our proposed model performs well in six types of vulnerability detection. The accuracy of each type is higher than 93% and the average detection time of each smart contract is less than 1 ms. Notably, through our proposed feature selection algorithm, the training time of each type of vulnerability is reduced by nearly 80% compared with that of its original.

DIGITAL CURRENCY: RUSSIAN AND CHINESE EXPERIENCE

The rapid development of new technologies, such as big data, blockchain, and artificial intelligence, has propelled the digital economy to the forefront of history, necessitating the ability to adapt, keep up with the times, and improve legal regulations. In 2023, the Russian Federation took significant steps towards the introduction of the digital ruble. Specifically, transactions with the digital ruble were tested for the first time with the participation of real customers, and the State Duma adopted several important legal acts that amend the current legislation and regulate the introduction of the digital ruble in Russia. However, the swift evolution of digital currencies is not exclusive to Russia, many countries are grappling with the development and implementation of a new form of money. This form aims to simultaneously enhance the transparency and reliability of transactions while contributing to the stability of the national currency. In this article, we propose to examine the features of legal regulation and the conduct of transactions with digital currency, using the experiences of both the Russian Federation and the People's Republic of China as examples

The Story of De- dollarization and Internationalization of the Chinese Renminbi

In recent times, numerous commentaries have written about de- dollarization. We analyse the factors which are contributing to de- dollarization. On the economic front, there is reduced fiscal and financial capacity of the US economy that can strain economic trust in the dollar. The internationalization of the Chinese currency is another factor. Additionally, a lower forecast for the world economic growth outlook, a higher debt financing in the United States, and a war in Europe are also leading to central banks around the world buying more gold and reducing investment in the US treasury bonds. While these factors may lead to reduced demand for dollars and increase the use of alternate international currencies, including digital currencies, we argue that dislodging the dollar as a global anchor currency is at best going to be restricted by economic and geopolitical reasons. JEL Codes: E42, F33, F34

Money and Banking with Reserves and CBDC

ABSTRACTWe analyze the role of retail central bank digital currency (CBDC) and reserves when banks exert deposit market power and liquidity transformation entails externalities. Optimal monetary architecture minimizes the social costs of liquidity provision, and optimal monetary policy follows modified Friedman rules. Interest rates on reserves and CBDC should differ. Calibrations robustly suggest that CBDC provides liquidity more efficiently than deposits unless the central bank must refinance banks and this is very costly. Accordingly, the optimal share of CBDC in payments tends to exceed that of deposits.

The decision to use ShopeePay as a substitute for cash in the cashless era

The aim of this study is to evaluate the convenience, promotion, and security factors associated with the use of Shopee Pay electronic currency by visitors in malls in the Central Jakarta region. The study sample comprises persons who frequent shopping malls in the Central Jakarta Region. This survey includes a group of 103 persons who use Shopee Pay electronic money in the mall area of Centra Jakarta. The sample selection was carried out using the method of incidental sampling. The data used in this study include primary data, especially questionnaires that were distributed to respondents. The study results suggest that the convenience and promotional activities have a positive influence on the decision to use Shopee Pay digital currency. This suggests that the choice to utilise electronic currency is impacted by factors such as convenience and promotional offers. Before proceeding, consumers will evaluate whether a system would streamline their activities, considering the wide array of attractive offers offered by the shopeepay site, as well as compelling marketing about available specials on the platform. Furthermore, security concerns negatively affect the willingness to use Shopee Pay as a digital payment option. This text explores the relationship between security and the choice to use electronic money. Before choosing the Electronic Money platform, customers must ensure that the funds saved in the electronic wallet will be protected and resistant to unauthorised access, therefore reducing the likelihood of unwanted events.

Russia's transition to settlements in national currencies in the context of changes in the world monetary and financial system

Aim. To determine the background and prospects of the Russian Federation's (RF) transition to settlements in national currencies in the context of changes in the world monetary and financial system.Objectives. To analyze the current state of the currency market of the Russian Federation in terms of currency structure and main instruments; to identify the reasons for the transformation of the currency market of the Russian Federation; to characterize the prerequisites for the transition to settlements in national currencies in foreign trade; to assess the prospects of such a transition and its impact on the currency market of the Russian Federation in the context of the latest trends in the development of the global monetary and financial system.Methods. With the help of general methods of scientific cognition, graphical analysis the current state, dynamics and structure of the currency market of the Russian Federation in the conditions of sanctions are considered. In addition, the article assesses the background and prospects of the Russian Federation's transition to settlements in national currencies in view of the new trends in the development of the world monetary and financial system.Results. In 2022, after the economic sanctions against Russia were imposed, the state was forced to accelerate the process of transition to settlements in national currencies with major trading partners, and the domestic currency market underwent a significant transformation. In the conditions of digitalization of the financial sphere and the development of central bank digital currencies (CBDCs) , the introduction of international settlements using the digital ruble seems to be a promising direction.Conclusions. The period after the sanctions against the Russian Federation were imposed (2022) is marked by significant changes in the domestic foreign exchange market, primarily associated with the gradual displacement of world currencies (primarily the dollar) and their replacement by the ruble and renminbi. In general, this trend reflects the state of the RF foreign trade. With the reduction in the volume of the local foreign exchange market and the withdrawal of Western players, the government is taking measures aimed at preserving the potential of the foreign exchange market. A promising direction for international settlements under sanctions is through CBDC. However, the implementation of such a system will take years, during which the financial system of the Russian Federation will have to preserve its potential in isolation from Western financial markets.

Authenticated digital currency redaction with stronger privacy and usability

Authenticated digital currency redaction with stronger privacy and usability

Unsupervised Anomaly Detection in Digital Currency Trading: A Clustering and Density-Based Approach Using Bitcoin Data

Unsupervised Anomaly Detection in Digital Currency Trading: A Clustering and Density-Based Approach Using Bitcoin Data

Explainability and operational resilience in the design of central bank digital currencies: A new generation of money-laundering deterrence software

It has been argued that technologies such as blockchain could provide financial systems and societies with a better infrastructural solution to process information and identify illegal transactions. Building on this idea, this paper argues that if payment systems are to take advantage of the properties that define distributed ledger technologies, they must build on those models that have delivered improved trust in our economies. Accordingly, the model presented in this paper is based on a universal digital ID that could be interoperable among different jurisdictions. Such a digital ID would rely on an explainable framework structured around an understanding of the role played by central banks, intellectual property rights and personal data protection in the processing of information. Understanding the interaction between these elements may be the first step towards a better understanding of the infrastructures employed to tackle illegal activities, which could in turn contribute to the successful development of the standards on which the next generation of suspicious transaction or order reports will be based.

U.S. Central Bank Digital Currency: Benefits and Challenges to Policy Implementation

The next technological disruption in the banking and financial services sector involves the introduction of a central bank digital currency - or a CBDC. What is a CBDC? In the U.S., a CDBC is defined as a digital liability of the U.S. Federal Reserve System that is widely available to the general public. In this article, the benefits of instituting a CBDC in the U.S. will be assessed, followed by the public and private sector challenges of such technology adoption identified and discussed along economic, political, privacy, and security parameters. The final section of the article develops the research agenda, i.e., the questions that need to be addressed in the development of a potential policy framework, charged with ensuring that, if a CBDC is adopted by the U.S. Federal Reserve, there will be an effective public regulation regime implemented that effectively addresses the identified economic, political, privacy, and security concerns.

The Indo–Russian payments corridor : Exploring and evaluating cross-border payment alternatives

In response to the Russian invasion of Ukraine, western countries have imposed a number of economic sanctions on Russia, including freezing its foreign currency reserves, restricting the flow of trade and cutting off its access to SWIFT. The sharp fall in euro and US dollar denominated transactions has in turn impacted Russia’s trade with India, as it is now harder for the two countries to exchange payments. In this context, this paper explores the messaging, clearing and settlement alternatives available for making/receiving payments between India and Russia. Specifically, the paper examines a rupee–ruble trade arrangement, central bank digital currency, the linkage of faster payment systems and card infrastructures, the Russian System for Transfer of Financial Messages, and bilateral messaging systems. In addition, the authors evaluate various considerations pertaining to these options, as well as the implications, from the perspective of central banks, banks and merchants/customers.

Reserve-backed tokens : A money for the future?

Exactly what form the money of the future will take remains an open question. Central bank digital currencies (CBDCs), tokenised deposits and stablecoins have been discussed as potential candidates. This paper argues that reserve-backed tokens (RBTs) — backed solely and fully by central bank reserves — also represent a credible solution. RBTs pose a unique combination of benefits. Notably, they are safer than, and can crowd out, the unstable breeds of stablecoins. They can adopt a more flexible design than retail CBDCs and thus foster greater competition and innovation. Furthermore, compared with bank deposits, RBTs are immune to runs and are unencumbered by legacy features. Naturally, there are attendant risks and unknowns, but this paper argues that careful design and gradual rollout would help harness the benefits of RBT while mitigating the risks.

Digital Currencies and Macroeconomic Performance: A Global Perspective

Digital Currencies and Macroeconomic Performance: A Global Perspective

Central Bank Digital Currency in an Emerging Market Economy: Case of the Central Bank of the Republic of Türkiye

Central banks have historically been using traditional channels for communication and physical money for transactions, fulfilling the needs of previous millennia, while the evolution of technology, electronic devices, and needs in transactions necessitate the use of modern communication channels, such as X (formerly known as Twitter), as well as modern payment systems, such as central bank digital currencies (CBDC). Hence, this paper aims to unfold where the Central Bank of the Republic of Türkiye (CBRT), as an example of emerging markets, stands in informing the public about CBDC. To this end, it conducts an event study on the official X account of CBRT in English over 10.2020-12.2022 by utilizing Nvivo. The findings of the quantitative analysis of the tweets show that CBRT does not regard X as a primary communication channel and mainly shares links to publications from the official websites in X. Also, CBRT tends to adopt a ‘cold-turkey’ informative approach about CBDC with the public rather than ‘gradualism’. Consequently, CBRT should rigorously design a communication strategy that fulfills the needs of the modern economy and start addressing CBDC to raise awareness if a quick transition to digital currency is targeted.

In what way can worldwide robotics and artificial intelligence encourage development in green crypto investments? An implementation of a model-free connectedness technique

PurposeThis study aims to investigate connections between the development of robotic and artificial intelligence (AI) and green crypto investments. The author also explores the influences of global uncertainty shocks like the COVID-19 pandemic and international conflicts on the role of each channel.Design/methodology/approachIn this research, the author uses a cutting-edge model-free connectedness approach to investigate the relationships between the development of Global X Robotics and AI (BOTZ) and the volatility of green crypto investments from November 9, 2017 to March 24, 2023.FindingsIn the sample duration, the findings reveal a two-way link between AI and green/nongreen cryptocurrencies. Throughout the examined period, BOTZ has been a net receiver of shocks as determined by the net total connectedness. Among the main spillover shock carriers in the system, green cryptocurrencies are the most significant. The net pairwise directional connectivity reveals that green cryptocurrencies controlled BOTZ throughout the analyzed time, particularly during the COVID-19 era as well as the Ukraine–Russia crisis. According to the findings, the proposed system is vulnerable to a high level of indication influence.Practical implicationsThe results have important policy implications for investors and governments, as well as methods from the spillovers across the various indicators and their interconnections. Sharp information on the primary contagions among these indicators aids politicians in designing the most appropriate policies.Originality/valueTo the best of the authors’ knowledge, this paper is the first to look at the link between AI, technological advancement and green cryptocurrency investing. Second, this study developed a methodology for examining instability links between various factors that is more appropriate for investigating these linkages. This study investigates the links between AI, technical advancement and green digital currencies using a cutting-edge model-free connectivity method. This work is also the first to examine the interconnection between volatility derived from AI, technological development and green cryptocurrency investments in light of unknown events, such as the COVID-19 pandemic and the Ukrainian–Russian conflict. Finally, this study includes a daily database from the BOTZ fund, which attempts to invest in firms that stand to gain from rising robotics and AI use. Cardano (ADA), IOTA, NANO (XNO), Stellar Lumens and Tron are examples of green cryptocurrencies, whereas Bitcoin is an example of a nongreen cryptocurrency. These virtual currencies are being used to investigate the relationship between investor mood and green and nongreen digital currencies. The data set spans the period from November 9, 2017 to March 24, 2023.