Financial Paradigm Research Articles

Artificial Intelligence as a driver of Fintech: Interesting Applications

This paper explores the transformative impact of artificial intelligence (AI) on financial technology (Fintech). With the rapid evolution of digital technologies, AI has become an important driver in reshaping financial services; where its effect is manifesting as increased net revenues of Fintech organizations. This short article examines various applications of AI in Fintech, including extraordinary payment systems, super-fast lending mechanisms and an example of a near real time insurance settlement system. This paper uses examples from industry to highlight how AI-driven innovations are not only enhancing efficiency and customer experience but also introducing new challenges, issues and considerations. The integration of AI in Fintech is altering traditional financial paradigms, prompting a discussion on the future of financial services, as well as organizational decision making, in an AI-dominated landscape.

KosmosCoin: A New Paradigm in Global Finance – Exploring the Potential of a Global Reserve Currency

KosmosCoin: A New Paradigm in Global Finance – Exploring the Potential of a Global Reserve Currency

Investor Perception of Corporate Social Irresponsibility (CSiR) and Investing Decisions

The study examines a behavioral finance paradigm, where investors incorporate emotional/expressive and financial factors. The impact of emotional ties to the firm’s products and an expressive factor such as corporate social irresponsibility (CSiR) are examined to determine whether their investment decisions are based on them. We find that investors make decisions that are wealth maximizing as well as emotional/expressive. Moreover, we find that our respondents believe corporate profits should not come from using the cheapest labor nor from engaging in CSiR behavior, and they would be less likely to invest in such a firm.

Metaversal Real Estate Dynamics: The MRED Framework for Informed Decision-making in Virtual Space

Venturing into the digital frontier, the metaverse challenges our traditional understanding of real estate, beckoning a deep dive into its virtual realms and the complexities they harbour. This research seeks to provide an integrative framework for comprehending the intricacies of virtual real estate within the metaverse, emphasising its valuation, governance and sustainability. Utilising an exploratory design, the study amalgamates insights from existing metaverse literature and stakeholder perspectives to fashion a robust framework, which is further augmented by derived theoretical propositions. The findings shed light on the multifarious challenges inherent to the metaverse’s virtual real estate. There is a spotlight on the substantial energy demands of the metaverse and the consequent ecological imperative for sustainable digital practices. It underscores the need for malleable governance mechanisms in a decentralised metaverse and champions the harmonisation of age-old ownership philosophies with avant-garde technological solutions such as blockchain. The research also postulates a collaborative ethos for virtual space creation and propounds innovative financial paradigms tailored to the unique economic rhythm of the metaverse. Future research vectors could span the cultural and psychological facets of virtual domains and the ripple effects on conventional real estate frameworks.

The Impact of Green Finance on Agricultural Pollution and Carbon Reduction: The Case of China

Based on the double-carbon target, the agricultural sector has implemented the concept of being green and synergistically promoted pollution and carbon reduction. Positioned as a novel financial paradigm, green finance places greater emphasis on environmental stewardship compared to its traditional counterparts. This focus enhances resource allocation efficiency, thereby achieving the goal of reducing pollution and carbon emissions. To research the influence of green finance on agricultural pollution and carbon reduction, this study leverages panel data spanning 2011 to 2021 from 31 provinces, autonomous regions, and municipalities across China. It employs the fixed-effect model and mediating-effect model. The findings reveal that: (1) Green finance exerts a notable influence on reducing both pollution and carbon emissions in agriculture, with the latter showing a more pronounced effect. (2) Regional disparities exist in green finance, affecting agricultural pollution and carbon reduction. (3) By fostering technological innovation and optimizing industrial frameworks, green finance emerges as a catalyst for curbing surface pollution and carbon dioxide emissions in agriculture. On this basis, relevant suggestions are put forward to provide policy insights for improving the green financial system, which will help further promote carbon and pollution reduction.

The Impact Of Economic Contraction On The Financing Collectability Of Islamic Banking In Indonesia

The COVID-19 pandemic affected Indonesia's economic growth, which experienced a contraction in the first and second quarters of 2020. This study examines how economic contraction affects the collectability of Islamic banking in Indonesia, period for 2019: IV - 2020: II. The measurement of financial collectability is based on non-performing financing (NPF). The research data source comes from secondary data in publications from the Central Statistics Agency (CSA) and the Financial Services Authority (FSA). Data analysis uses descriptive statistics with the help of percentages, growth, and graphs. The results indicated that the economic contraction significantly impacted the decline in Islamic banking performance, as evidenced by an increase in NPF. The NPF increase occurs in all debtor groups: MSMEs, non-MSMEs, and households (consumption financing). The collectability of financing is separate from the area where COVID-19 spreads; where DKI Jakarta, East Java, and West Java are in the top five highest COVID-19 cases, they have better financing collectability than other provinces. Based on economic sectors, only mining and quarrying did not experience an increase in the NPF during the economic contraction period. These findings show differences with the growth-led finance paradigm. Regions that experience high cases of COVID-19 infection have better financing collectability. The practical implication of these findings is the importance of coordinating macro prudential policies with others, such as fiscal and actual sector policy, in encouraging the resilience of MSMEs, including managing the collectability of financing during economic contraction periods.

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.

Sustainability and the sunlight of disclosure: ESG disclosure in three Asian financial centres

AbstractThe prevailing paradigm of sustainable finance places great importance on environmental, social and governance (ESG) information and, therefore, on the mechanism of reporting and disclosure. This article presents, analyses and compares the approaches to ESG disclosure in three Asian financial centres: Singapore, Hong Kong and Shanghai. The article uncovers commonalities and divergences in the drivers, dynamics, content and trends of ESG disclosure in the selected jurisdictions. In doing so, it looks forwards, seeking to anticipate and shape the development of ESG disclosure in Asia. At the same time, it looks beyond ESG disclosure, remaining mindful that the mechanism itself is only a means toward, and should not constrain, the pursuit of the ultimate goal of sustainable development in Asia.

THE IMPACT OF CRYPTOCURRENCY ADOPTION ON TRADITIONAL BANKING SYSTEMS: A THEORETICAL STUDY

This comprehensive analysis delves into the intricate impact of cryptocurrency adoption on traditional banking systems. As cryptocurrencies achieve widespread acceptance, they challenge established norms of centralized control in financial transactions, necessitating a reconsideration of the resilience and adaptability of traditional banking models. The disruptive potential, particularly embodied in blockchain technology, prompts a critical evaluation of the ongoing transformation. The article scrutinizes the positive influence of cryptocurrencies on financial inclusion and accessibility, unlocking banking services for previously underserved populations. However, the decentralized and pseudonymous nature of cryptocurrencies introduces regulatory challenges, demanding a nuanced equilibrium between fostering innovation and ensuring compliance with anti-money laundering and know your customer regulations. Traditional banks respond by embracing blockchain technology, entering collaborative endeavors with cryptocurrency projects to augment operational efficiency and transparency. Nevertheless, the inherent volatility of cryptocurrencies poses systemic risks, necessitating adept navigation by traditional banking systems. The imperative for a delicate equilibrium between innovation and regulation emerges as pivotal for the harmonious coexistence of traditional banking and the ever-evolving cryptocurrency ecosystem. As the financial landscape undergoes profound changes, this analysis underscores the necessity for adaptability and a strategic alignment between traditional and innovative financial paradigms.

Save the Bank: Centralized Digital Bank — Centralization and Digitalization as Strategic Imperatives

This thesis explores the transformation of traditional banks into centralized digital banking systems as a strategic response to the burgeoning challenges posed by decentralized finance (DeFi) technologies such as blockchain and cryptocurrencies. As these technologies disrupt traditional financial paradigms, offering more direct, efficient, and transparent financial services, traditional banks face increasing pressure to adapt and evolve. This work argues for the necessity and feasibility of centralized digital banking as a comprehensive countermeasure to DeFi. Through a detailed examination of current banking challenges, including inefficiencies in customer service, transaction processing, and compliance, the thesis proposes a model of banking that leverages centralization and digitalization to address these issues. The proposed model not only enhances operational efficiency and customer engagement but also fortifies the banks’ competitive edge in a digital economy. Furthermore, the thesis discusses the long-term implications of such transformations, predicting that centralized digital banks will not only coexist with DeFi platforms but may also lead the financial services industry by adopting innovative technologies that drive customer satisfaction and operational excellence. Recommendations are provided for both banks and policymakers to foster an environment conducive to the development of robust, secure, and customer-focused digital banking services. In summary, this thesis affirms that centralized digital banking is not merely a defensive strategy against the rise of DeFi but a forward-looking approach that will define the future of banking.

Harmony in Numbers: Unifying Management and Accounting For Financial Success

Purpose: This research explores the interplay between accountancy, finance, and management, aiming to achieve financial success through integrated approaches, enhancing strategic decision-making, resource allocation, and organizational sustainability. Theoretical Framework: This research integrates traditional accounting methodologies with modern management paradigms to explore the dynamic interplay between accountancy, finance, and management. Key theoretical perspectives include Agency Theory, Stakeholder Theory, Financial Economics, Management Theory, and Systems Theory. Design/Methodology/Approach: This research uses a mixed-methods approach to explore the relationship between accountancy, finance, and management. It uses literature review, qualitative analysis, quantitative analysis, comparative analysis, framework development, and integration of qualitative and quantitative findings to provide a comprehensive understanding of the synergies between these areas for organizational success. Findings: This research highlights the importance of integrating traditional accounting practices with modern management principles for comprehensive financial management. It emphasizes the transformative potential of integrating financial and managerial approaches for organizational success, strategic decision-making, and a resilient financial paradigm. This approach enhances transparency, accountability, and performance. Implications: This research offers valuable insights for professionals, organizations, policymakers, and academia in understanding the synergies between accounting, finance, and management. It can improve decision-making, optimize resource allocation, and drive organizational performance. Policymakers can use the findings to develop policies promoting integrated financial management, while educational institutions can update curricula.

Navigating the digital frontier: a comparative examination of Central Bank Digital Currency (CBDC) and the Quantum Financial System (QFS)

In the global financial landscape, a transformational shift towards digitization is known, and a comparative analysis of two key components is of particular relevance: central bank digital currency (CBDC) and quantum financial system (QFS). This article explores the dynamic relationship between traditional monetary instruments and new digital currencies, considering the transformative impact and regional nuances of CBDC. The article provides a historical overview of the evolution of the development and implementation of CBDC in the world, analyzes the key factors affecting its implementation in different regions, identifies key technological advances that are the disruptive force of QFS, as well as their impact on the transformation of traditional financial transactions. In the context of the development of CBDC and QFS, the legal frameworks that regulate their work, facilitate or hinder their broad integration into existing financial systems, their impact on traditional monetary policy and, accordingly, on economic stability, inflation and interest rates, and the format of the technological infrastructure are determined, which must be ensured for their successful implementation and operation, as well as the main challenges related to this and ways to solve security and privacy problems in their application. The paper combines qualitative and quantitative analysis to provide a comprehensive and validated dataset for a thorough understanding of digital financial paradigms. Qualitative research was conducted based on structured interviews with experts in the development and implementation of CBDC and QFS, as well as reporting and analytical information on central banks, regulators, and other financial institutions. The empirical study is based on the built OLS model, which describes the dependence coefficient using CBDC (the share of the population that uses it) on the traditional interest rate set by the central bank (taking into account the corrections for the possibility of variation of its changes and unobservable factors). The Python programming language with R libraries and the Stata software package are used for modeling. Tests confirmed the model’s statistical significance and high R-squared value (0.756 ) to begin its ability to explain a significant portion of the variability in CBDC adoption rates. The results showed that, on average, per skin unit increase in the traditional interest rate, post-CBDC rate growth is expected to be 1.74%; when the conventional interest rate is zero, the settlement rate after CBDC is 11.14%. The results of this study can be used to predict the dynamics of public perception of digital currencies. In addition, central banks can adjust interest rates to stimulate or moderate the adoption of CBDCs based on broader strategic macroeconomic measures: 1) during economic downturns, higher interest rates can be used to stimulate the adoption of digital currencies as an alternative financial instrument; 2) during periods of economic growth, interest rates may be lowered to mitigate the intended overheating of CBDC adoption.

Towards a public sustainable finance paradigm for the green transition

AbstractSustainable finance is often discussed as a solution to the climate crisis, but its impacts are limited and its discourse focuses on mobilising private investments through public de-risking, without considering direct government action. We argue that this is due to an implicit reference to mainstream economic theory assuming that an active state leads to time inconsistency problems and crowding-out effects. However, these assumptions have been sufficiently refuted as public investments may actually crowd-in private capital. We therefore propose a paradigm shift towards what we call Public Sustainable Finance, aimed at empowering the role of the state in the green transition on the discursive, policy, and political economy levels. Studying the case of Germany, we show how Public Sustainable Finance can be introduced despite tight fiscal regimes. To this end, we propose that the Climate- and Transformation Fund be given its own borrowing powers. By borrowing an average of 23 billion euros annually from 2024 to 2030, the existing financing gap that has been exacerbated following the November 2023 constitutional court ruling can be closed, enabling a more rapid and effective green transition.

Harnessing AI and machine learning for enhanced credit risk analysis: A comprehensive exploration of computational techniques in the financial realm

Within the confluence of the banking and financial sectors, the integration of machine learning in credit risk analysis signifies a paradigm shift towards data-centric decision-making. Historically, methodologies for credit risk were limited in predictive accuracy and computational efficiency. The advent of expansive language models, exemplified by Ant Group's AntFinGLM, offers a solution. These models, underpinned by deep learning, amalgamate financial texts and transactional data, facilitating the discernment of intricate financial paradigms and market nuances. This paper conducts a rigorous exploration of machine learning methodologies, from Bayesian classifiers to k-means clustering, offering an analytical perspective on their advantages and challenges. As the industry inclines towards innovations like AntFinGLM, the imperatives of professionalism, precision, and data sanctity gain significance. Upholding standards that encompass five dimensions and 28 categories, AntFinGLM epitomises these benchmarks, championing enhanced functionalities while fostering collaborative initiatives with financial entities. Addressing challenges, particularly around data security and professional integrity, becomes crucial. Techniques encompassing intent recognition, fact verification, and robust data protection mechanisms are indispensable. In summation, the endeavours of entities like AntFinGLM underscore the transformative prowess of expansive language models, ushering the financial sector into an epoch characterised by astute, efficient, and safeguarded decision-making paradigms.

Authenticating Account Balances in the Bitcoin Ecosystem via Merkle Trees

Bitcoin, as the trailblazing cryptocurrency, has profoundly impacted global markets and stands as a formidable contender to traditional financial paradigms. Yet, even within the sophisticated framework of Bitcoin, there remains potential for enhancement. Within the Bitcoin ecosystem, lightweight nodes operate without storing all transaction details. Instead, they retain only the block headers' content and specific transactional data pertinent to their own operations. To authenticate a transaction's presence in the blockchain, these lightweight nodes seek a Merkle proof from the full nodes. However, a challenge arises when lightweight nodes aim to validate the accuracy of their account balances sourced from full nodes. The latter relies on a data structure known as the Unspent Transaction Outputs (UTXO) for streamlined balance computation. In contrast, lightweight nodes grapple with ascertaining the veracity of such balance calculations. A viable solution lies in leveraging the available space in every block's coinbase transaction, which permits arbitrary modifications. By arranging the UTXO within a Merkle tree structure and embedding its root into the coinbase transaction's available space, account balance verification for lightweight nodes can be significantly enhanced using the Merkle proof. While such modifications to the Bitcoin protocol might trigger soft forks, the risk of hard forks remains absent.

Bitcoin as a Distinct Asset Class for Hedging and Portfolio Diversification: A DCC-GARCH Model Analysis

Purpose: Bitcoin, the most popular form of virtual currency, currently holds the highest market capitalization among cryptocurrencies and serves as a benchmark for the typical cryptocurrency. The main goal of this research is to evaluate Bitcoin’s potential as a distinct asset class. This will be achieved by building upon previous studies and investigating its utility as both a hedging instrument and a tool for portfolio diversification. Methodology: In this study, Bitcoin is compared with other asset classes, such as key stock indices of India’s Nifty-50 and Sensex, and key currency pairs with the Indian Rupee, including the US dollar ($), Euro (€), Pound sterling (£), and Japanese Yen (¥). Gold, as one of the most precise commodities, is analyzed using descriptive statistics to verify and confirm its properties as a distinct asset class. Additionally, the study employs the DCC-GARCH model to ascertain whether Bitcoin qualifies as both a hedging instrument and a tool for portfolio diversification. Findings: The findings of this study indicate that Bitcoins constitute a unique and separate category within alternative assets and investment classes. Various descriptive statistics confirm that Bitcoins exhibit characteristics of an asset class. Additionally, the study reveals and verifies the hedging and portfolio diversification capabilities of Bitcoin based on the results of the DCC-GARCH model. Practical Implications: The findings of this study will prove useful for investors considering cryptocurrency (Bitcoin) as an alternative asset class for diversifying their portfolios and hedging against volatility. Originality/Value: This study contributes to the research paradigm of Bitcoin finance by providing a perspective from a developing nation on Bitcoin as an asset class, which differs from other asset classes such as Nifty-50, Sensex, USD–INR, EUR–INR, GBP–INR, JPY–INR, and gold. While previous research has predominantly focused on developed nation contexts, this study underscores the importance of examining Bitcoin’s role in portfolio diversification and hedging strategies. To enhance our understanding, this research presents daily observations of recent economic data spanning from 2011 to 2021. Assessing whether Bitcoin qualifies as an alternative investment and a distinct asset class is crucial, as it could significantly influence investment decisions and serve as a valuable tool for risk management and diversification purposes for investors.

A secure decentralised finance framework

The Secure Decentralised Finance Framework (SDFf) presented in this research addresses the burgeoning security challenges within the realm of decentralised finance (DeFi). As DeFi continues to redefine traditional financial paradigms, it concurrently introduces vulnerabilities that demand urgent attention. This framework offers a comprehensive and integrated approach to fortify the foundations of decentralised financial ecosystems. Focused on key components such as smart contract security, decentralised identity, oracle integrity, liquidity pool protection, governance mechanisms and regulatory compliance, the framework aims to establish a resilient architecture capable of withstanding evolving threats. Through theoretical exploration and case studies, this research article provides a valuable resource for developers, researchers and industry stakeholders navigating the dynamic landscape of secure and sustainable DeFi.

Digital currency adoption in Africa: A critical review and global comparison

This study critically examines the landscape of digital currency adoption in Africa, providing a comprehensive analysis that juxtaposes the region's progress against global trends. As the world witnesses an accelerating shift towards digital currencies, Africa stands at a crucial juncture in its financial evolution. This research delves into the factors influencing the adoption of digital currencies in various African nations, exploring the socio-economic, technological, and regulatory dimensions that shape their trajectory. The study employs a comparative approach, drawing parallels between Africa's digital currency adoption and global patterns. By examining successful case studies and identifying challenges unique to the African context, the research sheds light on the diverse experiences within the continent. Factors such as financial inclusion, regulatory frameworks, technological infrastructure, and cultural perceptions are scrutinized to unravel the complexities surrounding digital currency adoption. Furthermore, the study investigates the impact of global trends and initiatives on Africa's digital currency landscape. The analysis encompasses the role of international collaborations, regulatory harmonization efforts, and the influence of major digital currencies in shaping the African narrative. By identifying both opportunities and challenges, the research aims to offer insights that can inform policymakers, financial institutions, and stakeholders in fostering a conducive environment for digital currency adoption in Africa. The findings of this study contribute to the academic discourse on digital currency adoption, providing a nuanced understanding of Africa's position in the global digital financial ecosystem. In an era where technological advancements redefine traditional financial paradigms, this research aims to inform strategic decision-making processes that can unlock the transformative potential of digital currencies in the African context.

Integration and transformation: The impact and applications of artificial intelligence in the financial sector

This paper explores the intersection of artificial intelligence (AI) and the financial sector, showcasing their transformative synergy. The integration of AI into finance has led to pioneering advancements like robo-advisors and AI-driven risk assessment methods. These innovations reshape investment strategies and risk management, ushering in a new era of financial operations. The study's focal question examines how AI recalibrates investment management, risk assessment, and fraud prevention in finance. The paper comprises sections on AI's impact on investment management, risk assessment, and fraud detection, detailing how robo-advisors provide personalized portfolio recommendations, AI aids risk identification and management, and transaction surveillance benefits from AI-powered fraud detection. Ethical, regulatory, and accountability considerations are discussed, reflecting AI's transformative influence on traditional financial paradigms. The application of AI in transaction detection and its role in enhancing portfolio recommendations, risk management, and automated trading are examined. While AI holds potential, its limitations such as data quality, model risks, and ethical concerns must be addressed. Regulatory oversight is crucial to ensure responsible AI implementation, fostering a balance between technological progress and financial stability. This paper underscores the intricate relationship between AI and finance, portraying AI's capacity to reshape the financial landscape and drive innovation

Some aspects of legal regulation of cryptocurrency circulation in Ukraine

The impact of modern information technology has led to the emergence of a new form of currency – cryptocurrency, based on blockchain technology. This study aims to analyze the existing legal framework and delve into potential ways of legal regulation of activities related to the circulation of cryptocurrencies, in particular bitcoin. To achieve this goal, the study used a comprehensive set of both general scientific and specialized cognitive methods, including the comparative legal method, the systemic and structural method, methods of generalization, analysis and synthesis.
 The study clarifies the essence of blockchain-based cryptocurrencies as an alternative to traditional fiat currencies based on the fundamental principle of decentralization. It is noteworthy that among the many cryptocurrencies, bitcoin stands out with a distinctive feature called “hardness,” which gives it the properties of “digital gold.” This quality makes bitcoin a powerful means of preserving value, like precious metals, strengthening its status in global finance.
 In addition, the study outlines the current state of legal regulation of relations related to the circulation of virtual assets. A thorough analysis of the existing legal framework and its effectiveness in addressing the unique challenges posed by decentralized currencies has also been conducted.
 The study pays considerable attention to the prospects for the development of legal regulation of cryptocurrencies, which will consider the dynamic nature of virtual assets.
 To summarize, this study contributes to the understanding of the economic intricacies inherent in blockchain-based cryptocurrencies, with a special emphasis on the “hardness” of bitcoin as a distinguishing factor. In addition, the study sheds light on the current state of legal regulation of virtual assets, paving the way for insightful predictions of the future regulatory landscape. This work not only adds to the academic discourse around cryptocurrencies, but also serves as a valuable resource for policymakers, practitioners and academics grappling with the challenges and opportunities presented by this new financial paradigm.