̽��ֱ�� of Cambridge - Cambridge Centre for Alternative Finance

New industry collaboration to study cryptocurrencies and other digital assets

Anonymous — Tue, 01 Mar 2022 15:07:17 +0000

̽��ֱ��Cambridge Centre for Alternative Finance (CCAF) at Cambridge Judge Business School has announced the launch of the Cambridge Digital Assets Programme (CDAP), a research initiative in collaboration with 16 leading banks, public sector agencies and private organisations to study the rapid digitisation of assets and value transfer systems.

Over an initial period of two years, the CCAF will work with public and private organisations to create the data, tools, and insights necessary to facilitate an evidence-based public dialogue about the opportunities and risks presented by the growing digital asset ecosystem.

̽��ֱ��CDAP’s institutional research collaborators are: Accenture, Bank for International Settlements (BIS) Innovation Hub, British International Investment (BII), Dubai International Financial Centre (DIFC), EY, Fidelity, UK Foreign, Commonwealth & Development Office (FCDO), Goldman Sachs, Inter-American Development Bank (IDB), International Monetary Fund (IMF), Invesco, London Stock Exchange Group (LSEG), Mastercard, MSCI, Visa, and the World Bank.

̽��ֱ��programme builds on the CCAF’s work in creating digital tools such as the Cambridge Bitcoin Electricity Consumption Index (CBECI) and the Global Cryptoasset Benchmarking Study series. It is designed to address the broader ecosystem trends and issues through research that can help guide public opinion, inform regulation and policy discussion, as well as support evidence-based decision making by individuals and institutions.

Supporters of the programme include prominent public and private stakeholders from a variety of sectors to promote diversity in views and facilitate exchange of insight. These supporters will also provide input and guidance to ensure practical and meaningful research output.

“ ̽��ֱ��growing adoption of digital assets increasingly blurs the lines between roles, responsibilities and applicable rules, stretching the boundaries of long-term institutional arrangements,” said Bryan Zhang, Executive Director, CCAF. “ ̽��ֱ��Cambridge Digital Assets Programme aims to meet the resulting need for greater clarity by providing data-driven insights through collaborative research involving public and private sector stakeholders.”

̽��ֱ��programme's research will be centred around three distinct but related areas. The first is the environmental implications and broader ESG (environmental, social and governance) considerations of digital assets and their associated services. The second area will look at the processes and configurations of Distributed Financial Market Infrastructure (dFMI), including the evolving constellation of networks, platforms, applications, and services. ̽��ֱ��third research stream will focus on emergent money systems – the “asset” side of the ecosystem – comprising crypto-assets, stable-coins, Central Bank Digital Currencies (CBDCs), as well as enterprise and consumer tokens.

“We've spent a lot of time developing a consistent framework that consolidates our efforts in the digital assets space and ensuring that we have the right collaborations in place to deliver insight and clarity,” said Michel Rauchs, Digital Assets Lead, CCAF. “We believe this programme will provide decision-makers with the objective analysis and empirical evidence that they need to navigate the digital assets maze.”

Each research stream will convene a dedicated working group of CCAF researchers, domain experts, and representatives from supporting institutions of the programme.

Originally published on the Cambridge Judge Business School website.

Multi-year Cambridge Digital Assets Programme launched with 16 institutional research collaborators to create open-access datasets and tools to inform digital public dialogue and decision-making in such areas as the environment, infrastructure and cryptocurrencies.

̽��ֱ��growing adoption of digital assets increasingly blurs the lines between roles, responsibilities and applicable rules, stretching the boundaries of long-term institutional arrangements

Bryan Zhang

Teradat Santivivut

Business fund investor planning for investment

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Cambridge launches Regulatory Genome Project

Anonymous — Mon, 21 Dec 2020 10:22:21 +0000

̽��ֱ�� ̽��ֱ�� of Cambridge has launched the Regulatory Genome Project, a transformational initiative to sequence the world’s vast amount of regulatory text to create a comprehensive open repository of machine-readable regulatory information for use by regulatory agencies and businesses around the world.

This multi-year project – which includes an expanding collaboration network of regulatory agencies, companies, and academic researchers – has been inspired by the scientific and commercial innovation that followed the collective effort to code the human genome.

̽��ֱ��project aims to provide an open-source infrastructure for all countries, particularly in developing regions, to have the same digital capabilities as advanced economies to identify regulatory obligations around the world. This is particularly important as consumers have increasingly adopted digital financial services, which has opened up new areas of risk that require regulation.

Drawing on research from the Cambridge Centre for Alternative Finance (CCAF) at Cambridge Judge Business School and the Department of Computer Science and Technology, the project uses machine learning and natural language processing to ‘sequence’ huge amounts of regulatory text, starting with financial regulation. This offers regulators and firms the opportunity to acquire unprecedented capabilities in the development, processing and analysis of regulation.

“ ̽��ֱ��Regulatory Genome Project combines the ̽��ֱ��’s research with its convening influence to deliver societal and economic impact with the potential to be global, transformational and enduring,” said Professor Eilís Ferran, Pro-Vice-Chancellor for Institutional and International Relations at the ̽��ֱ�� of Cambridge.

As part of the project’s structure, a new ̽��ֱ��-affiliated company called Regulatory Genome Development Ltd has been formed to provide support to third parties building applications using the code and data in the Regulatory Genome.

̽��ֱ��Regulatory Genome originated out of a research project led by the CCAF with initial funding provided by the Omidyar Network to create a solution – named RegSimple – that simplifies the comparison of regulations across different jurisdictions. Additional funding has been provided by the UK’s Foreign, Commonwealth & Development Office to expand the scope and functionality of RegSimple to serve the needs of regulators in developing and emerging economies. Regulators from more than 20 jurisdictions are already contributing to the project.

“We are excited about the vast potential of this project to benefit both public and private sector interests,” said Dr Robert Wardrop, Director of the Cambridge Centre for Alternative Finance. “An open access repository of regulatory information will serve to level the regulatory playing field for those who develop and comply with regulation, particularly in emerging markets, and serve as a key resource for researchers in deepening their understanding how the regulatory landscape for digital financial services is evolving.”

Originally published on the Cambridge Judge Business School website.

̽��ֱ��project will use machine learning to sequence the world’s regulatory text and create an open-source repository of machine-readable regulatory information.

An open access repository of regulatory information will serve to level the regulatory playing field for those who develop and comply with regulation, particularly in emerging markets

Robert Wardrop

Tanner Boriack on Unsplash

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Study highlights growing significance of cryptocurrencies

cjb250 — Thu, 04 May 2017 17:07:30 +0000

While many members of the general public may have heard of “bitcoin”, the first decentralised cryptocurrency launched in 2009, a new report from the Cambridge Centre for Alternative Finance (CCAF) paints a broader picture of “cryptocurrencies”.

̽��ֱ��report shows that cryptocurrencies – broadly defined as digital assets using cryptography to secure transactions between peers without the need for a central bank or other authority performing that role – are increasingly being used, stored, transacted and mined around the globe.

̽��ֱ��Global Cryptocurrency Benchmarking Study gathered data from more than 100 cryptocurrency companies in 38 countries, capturing an estimated 75 per cent of the cryptocurrency industry.

Prior to this research, little hard data existed on how many people around the world actively use cryptocurrencies. ̽��ֱ��conventional wisdom has been that the number of people using bitcoin and other cryptocurrencies was around 1 million people; however, based on newly collected data, including the percentage of the estimated 35 million cryptocurrency “wallets” (software applications that store cryptocurrencies) that are in active use, the CCAF research team estimates that there at least 3 million people actively using cryptocurrency today.

While bitcoin remains the dominant cryptocurrency both in terms of market capitalisation and usage, it has conceded market cap share to other cryptocurrencies – declining from 86 per cent to 72 per cent in the past two years.

̽��ֱ��study by the CCAF at Cambridge Judge Business School breaks down the cryptocurrency industry into four key sectors – exchanges, wallets, payments, and mining. Highlights of the findings are:

Exchanges

Cryptocurrency exchanges provide on-off ramps to cryptocurrency systems by offering services to users wishing to buy or sell cryptocurrency. This sector was the first to emerge in the cryptocurrency industry, and has the most operating entities and employs the most people. Currently, about 52 per cent of small exchanges hold a formal government license, compared to only 35 per cent of large exchanges.

Wallets

Wallets have evolved from simple software programs to sophisticated applications that offer a variety of technical features and services. As a result, the lines between wallets and exchanges are increasingly blurred, with 52 per cent of wallets providing an integrated currency exchange feature.

Payments

Cryptocurrency payment companies generally act as gateways between cryptocurrency users and the broader economy, bridging national currencies and cryptocurrencies. They can fit into two broad categories: firms that use cryptocurrency primarily as a “payment rail” for fast and efficient cross-border transactions, and firms that facilitate the use of cryptocurrency for both users and merchants. ̽��ֱ��study found that the size of the average business-to-business cryptocurrency payment ($1,878) dwarfs peer-to-peer and consumer-to-business cryptocurrency payments.

Mining

In the absence of a central authority, cryptocurrencies are created by a process called “mining” – usually the performance of a large number of computations to solve a cryptographic “puzzle”. ̽��ֱ��study shows how cryptocurrency mining has evolved from a hobby activity into a professional, capital-intensive industry in which bitcoin miners earned more than $2 billion in mining revenues since 2009. ̽��ֱ��cryptocurrency mining map indicates that a significant proportion of publicly known mining facilities are concentrated in certain Chinese provinces.

̽��ֱ��study found that more than 1,800 people are now working full time in the cryptocurrency industry, as more companies are engaged across various cryptocurrency sectors.

“Cryptocurrencies such as bitcoin have been seen by some as merely a passing fad or insignificant, but that view is increasingly at odds with the data we are observing,” says Dr Garrick Hileman, Visiting Research Fellow at the Cambridge Centre for Alternative Finance (CCAF) at Cambridge Judge Business School, who co-authored the study with Michel Rauchs, Research Assistant at CCAF.

“Currently, the combined market value of all cryptocurrencies is nearly $40 billion, which represents a level of value creation on the order of Silicon Valley success stories like Airbnb,” Dr Hileman says in a foreword to the study. “ ̽��ֱ��advent of cryptocurrency has also sparked many new business platforms with sizable valuations of their own, along with new forms of peer-to-peer economic activity.”

More than 3 million people (three times previous estimates) are estimated to be actively using cryptocurrencies like bitcoin, finds the first global cryptocurrency benchmarking study by the Cambridge Centre for Alternative Finance.

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bitcoin

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Could cryptocurrency help the ‘bottom billion’?

lw355 — Mon, 17 Oct 2016 12:02:53 +0000

‘Cryptocurrency’ is a form of finance that exists only online. Unlike national currencies like the British pound, it isn’t forged as coins or printed as notes and no central authority governs it.

Most often it’s associated with an eclectic mix of individuals: gamers, hackers and the tech-savvy; anti-authority libertarians who believe in a global currency; gamblers happy to speculate on ‘digital gold’; shady dealers, money launderers, users of adult content services and the dark web; forward-thinking members of the financial sector.

But it has also been looked at as one possible solution to help a very different demographic – the world’s poorest poor, the so-called bottom billion. Many in this demographic lack bank accounts, have difficulty in proving they own their own land or business, and frequently depend on sending or receiving money across borders to poorer relatives.

In fact only one in five adults living on less than $2 per day has a bank account, and nearly 80% of poor adults, or two billion people, are excluded from the formal financial system. Meanwhile, the World Bank estimates that 75% of the $581.6 billion global remittances in 2015 were sent to developing countries.

But how can cryptocurrencies help? Since its launch in 2009, bitcoin, the most well known of digital currencies, has had a chequered history. Issues with market volatility, security and regulation, together with its association with online black markets like the now defunct Silk Road, have created suspicion among citizens and policymakers alike.

And yet, a recent headline in Wired stated: “Thought bitcoin was dead? 2016 is the year it goes big”; the reason, they explained, is it can “provide a much cheaper and simpler way of moving money from place to place, particularly when you’re a consumer or business moving it across international borders or a retailer accepting payments from online buyers.”

Dr Garrick Hileman, who researches the impact of cryptocurrency on world finance at the Cambridge Centre for Alternative Finance, adds: “And it’s not just transfer fees. Conventional financial systems can suffer from slow transfer times, inconvenient hours for completion of transfers, limited access to transfers, and the failure of approximately 2% of all international transfers to be successfully completed. These all negatively impact remittances.”

He and colleagues have been looking at which markets and countries are the most likely to adopt cryptocurrencies based on 40 different factors, ranging from degree of technology penetration to cross-border transactions fees to history of financial crises and inflation. ̽��ֱ��results indicate that Sub-Saharan Africa, Latin America and former-Soviet Union countries have the greatest potential for adopting cryptocurrency.

“Cryptocurrency is an immature technology and is not without flaws. However, as with any new technology, it’s the applications that have ignited interest – it’s raised important questions about how cross-border payments can be improved and, wider still, whether the very special type of ledger system that underpins cryptocurrency can be used for any number of other areas.”

At the heart of bitcoin is the ‘blockchain’, a database that records all transactions chronologically through a unique series of numbers arranged in ‘blocks’, which are then ‘chained’ to the next block cryptographically, so as to be both secure and accurate. This linking of information makes them like a financial ledger, but unlike centralised banking systems, the blockchain is a database that can be stored and shared worldwide by anyone with a computing device and internet connection – hence its description as a distributed ledger technology (DLT).

Part of the promise of cryptocurrency lies in the absence of a gatekeeper in its set-up, as Hileman explains: “Transactions occur person to person, or machine to machine, without the need for third party institutions – and that means lower or no transaction fees.”

“For the seven years bitcoin has been operating, there hasn’t been a single minute of downtime, unlike traditional IT networks employed by banks and other institutions. This resiliency has people’s attention,” says Hileman. “And currency is not the only thing that DLT can be used for. It can be used to exchange anything that has value – stocks, houses, airline miles, notarisations, votes.”

This year, the Government Office of Science published a report in which Chief Scientific Advisor Professor Sir Mark Walport described distributed ledgers as “powerful, disruptive innovations that could transform the delivery of public and private services” and “provide new ways of assuring ownership and provenance for goods and intellectual property.”

One of the recommendations was for the UK research community to ensure that distributed ledgers are scalable and secure. ̽��ֱ��report added that the Alan Turing Institute – a joint venture by the universities of Cambridge, Edinburgh, Oxford, ̽��ֱ�� College London, Warwick and the Engineering and Physical Sciences Research Council – would help to support these endeavours.

“We probably have yet to see the full extent of future uses of distributed ledgers,” adds Hileman. “However, our research has shown that cross-border transactions are viewed as one of the most promising applications of distributed ledger tech, due to the high transaction fees, technical interoperability issues, complex and conflicting regulatory frameworks, and legacy equipment and processes associated with existing systems.”

To realise this potential, he says, there are problems that need to be solved for customers in developing countries: “people know they are being stung by transaction fees but are still reluctant to switch for a wide range of reasons.”

“It could even be that banks themselves adopt the technology, and yet still enable its distributed peer-to-peer set-up, offering it as a separate service to their traditional monetary services. In other words, customers may never know their transactions are happening on a blockchain,” he adds.

Bitcoin has had a volatile exchange rate and Hileman concedes that it’s too early to know whether regulatory measures will help shield customers from this and other risks, or reduce money laundering and financial crimes committed with bitcoin. In the meantime, the Centre’s work on benchmarking cryptocurrency and blockchain activity will provide useful data for policymakers and other stakeholders keeping an eye on the technology.

“More than $430 billion was sent in remittances to developing countries in 2015, mostly to India, but also China, Mexico and Nigeria,” says Hileman. “ ̽��ֱ��costs of these transactions – which can average as high as 12% in Sub-Saharan Africa – hit the poor the hardest. Technological advances like cryptocurrency and distributed ledgers may offer a solution.

“It would be surprising to me if in 30 years from now we aren’t looking back and saying yes this was a watershed moment for financial inclusion, and that cryptocurrency and distributed ledgers played a significant role in opening up access to the financial system in developing economies.”

Many of the world’s poorest poor don’t have access to a bank account and yet depend on being able to transfer money across borders. Could digital currency help, ask researchers at the Cambridge Centre for Alternative Finance.

More than $430 billion was sent in remittances to developing countries in 2015, mostly to India, but also China, Mexico and Nigeria. ̽��ֱ��costs of these transactions hit the poor the hardest

Garrick Hileman

FamZoo Staff

From cash to digital

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UK online alternative finance market grows to £3.2 billion in 2015

sc604 — Wed, 17 Feb 2016 11:01:36 +0000

This is a significant increase in volume, but growth of the online alternative finance market is slowing down, with the annual growth in 2014/2015 being nearly half the 161% growth from 2013/14. Although the absolute year-on-year growth rate is slowing down, the report said, the alternative finance industry still recorded substantive expansion across almost all models.

̽��ֱ��report also highlights the rapid expansion of donations-based crowdfunding, the perceived risk of fraud and malpractice by the industry, and increasing institutionalisation – as around a quarter of P2P (peer-to-peer) loans are now funded by institutional investors, including traditional banks and government through organisations such as the British Business Bank.

Pushing Boundaries - 2015 UK Alternative Finance is jointly published by the Cambridge Centre for Alternative Finance at the ̽��ֱ�� of Cambridge and UK innovation foundation Nesta, in partnership with KPMG and with the support of CME Group Foundation. It is the latest in an annual series of reports from the ̽��ֱ�� of Cambridge Judge Business School and Nesta, which track the size and development of online alternative finance, such as P2P lending and crowdfunding, in the UK.

Key findings of the report, a survey of 94 crowdfunding and P2P lending platforms, include:

Increased share of the market for business finance: in 2015 it is estimated that online alternative finance platforms provided the equivalent of over 3% of all lending to SMEs (small and medium-sized enterprises) in the UK. For small businesses - those with a turnover of less than £1 million a year - P2P platforms provided an amount lending equivalent of 13% of all new bank loans.
Institutionalisation is taking off: 2015 saw increased involvement from institutional investors in the online alternative finance market. ̽��ֱ��report shows that 32% of loans in P2P consumer lending and 26% of P2P business lending were funded by institutional investors.
Donation-based crowdfunding is the fastest growing model: although starting from a relatively small base (£2 million), donation-based crowdfunding is the fastest growing model in the 2015 study, up by 500% to £12 million.
Real estate is the single most popular sector: in 2014/2015 the most popular sector for online alternative finance investments and loans was real estate, with the combined debt and equity-based funding for this sector reaching £700m in 2015.
̽��ֱ��equity market is growing fast: the second fastest growing area of the alternative finance market is equity-based crowdfunding, up by 295% - from £84 million raised in 2014, to £332m in 2015. Excluding real estate crowdfunding, in 2014/2015 the equity-based crowdfunding sector contributed to £245 million worth of venture financing in 2015 – equivalent to over 15% of total UK seed and venture equity investment.
̽��ֱ��industry is generally satisfied with current regulation: when asked what they thought of existing regulation, more than 90% of P2P lending and equity-based crowdfunding platforms stated that they thought the current level was appropriate.
̽��ֱ��biggest risk to market growth is fraud or malpractice: when asked what they saw as the biggest risk to the future growth of the market, 57% of P2P lending and equity-based crowdfunding platforms cited the potential collapse of one or more of the well-known industry player due to fraud or malpractice.

“ ̽��ֱ��substantive growth of alternative finance in the UK last year is not surprising, given that these new channels of finance are increasingly moving mainstream,” said Robert Wardrop, Executive Director of Cambridge Centre for Alternative Finance. “One of the key drivers underpinning this development is the growing institutionalisation of the sector. ̽��ֱ��Cambridge Centre for Alternative Finance is proud to shed light on this fascinating and dynamic industry, to help inform policymakers, regulators and the general public about how these areas of finance are increasingly becoming part of our everyday economic life.”

“2015 has seen another year of remarkable growth for Alternative Finance in the UK,” said Stian Westlake, Nesta’s Executive Director of Policy & Research. “Little more than a collection of plucky startups just six years ago, the sector now does £3.2 billion of business a year. As the sector grows and matures it is sure to face challenges - investors will be keen to see returns, and another financial crisis would certainly test the robustness of P2P lending.”

Warren Mead, Global co-lead of Fintech at KPMG, said: “After years of pushing boundaries, 2016 will be the year where ‘alternative’ financial options finally join the ranks of the mainstream. But while this evolution gives the industry the platform to grow, it also brings its own set of challenges. Being part of the financial establishment doesn’t sit well with its original social purpose. Incumbents are also playing catch up with their own digital investment, and are closing in on the disrupters’ lead. Meanwhile, platform failures within these growing networks are inevitable. So the question is, will the hard won enthusiasm for these platforms start to wane?”

̽��ֱ��report was led by Bryan Zhang, a Director of the Cambridge Centre for Alternative Finance, and Peter Baeck, Principal Researcher at Nesta. It has been supported in part by funding from audit, tax and advisory service KPMG and CME Group Foundation, the foundation affiliated with CME Group.

Originally published on the Cambridge Judge Business School website.

̽��ֱ��UK online alternative finance sector grew 84% in 2015, facilitating £3.2 billion in investments, loans and donations, according to a new report published today.

These areas of finance are increasingly becoming part of our everyday economic life.

Robert Wardrop

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