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on Payment Systems and Financial Technology |
| By: | Dongping Liu; Aoyu Zhang; Luyao Zhang |
| Abstract: | Advances in quantum computing introduce long-term security challenges for widely deployed public-key cryptographic systems used across blockchain platforms and decentralized applications. Although post-quantum cryptography (PQC) standards are emerging, understanding quantum risk remains fragmented across research, engineering, governance, and investment communities. This demo presents Quantum Futures Interactive, a live interdisciplinary demonstration platform combining educational visualization, participatory interaction, and cryptographic artifact generation to illustrate the transition from classical to quantum-resilient blockchain systems. Participants engage in a structured interaction flow including quantum threat education, sentiment capture, technology prioritization, infrastructure tradeoff exploration, and generation of post-quantum cryptographic outputs. The system integrates distributed trust concepts, sustainability-aware infrastructure considerations, and responsible innovation within an interactive decision framework. The demonstration supports interdisciplinary dialogue on blockchain resilience while aligning with United Nations Sustainable Development Goals (SDGs). |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.15991 |
| By: | Cave, Martin |
| Abstract: | This paper gives a short overview of the impact which digitalisation has had over recent decades on selected cases of economic regulation, and of the changes it has brought and might bring, noting the need for the continuous adaptation of regulation in the public interest. It begins with an account of the role of digitalisation in the two most widely discussed sectors in recent decades: first, how incentive regulation using price controls in traditional utility sectors has recently incorporated piecemeal elements of digitalisation within a broadly unchanged framework; second, in the case of the more recently emerged digital platform sector, how a major fissure is observed between the EU's severe regulation of the largest platforms under the 2002 Digital Markets and Digital Services Acts, and USA's continuing reliance on competition law. It then considers the ongoing economy-wide pervasive spread of digitalisation via the use of Artificial Intelligence, the likelihood of its competitive supply and the nature of the case for its economic regulation. Finally, we note the likely use of AI in the very process of regulating both the two above-noted and other sectors and markets, and the implications of a possible ‘arms race’ between regulators and regulated firms in its use. |
| Keywords: | AI in the regulatory process; anti-monopoly regulation; digitalisation; regulation of platforms; role of artificial intelligence |
| JEL: | L51 L86 L43 |
| Date: | 2026–06–30 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:138010 |
| By: | Sirui Li; Jing Su |
| Abstract: | This paper studies how consumers’ concerns about fairness interact with third-degreeprice discrimination of a two-sided monopoly platform. We show that the presenceof fairness concerns creates a negative demand externality from low-willingness-to-payto high-willingness-to-pay consumers, that is, charging less to the former reduces thelatter’s demand. With this novel externality, price-discriminating among consumerstriggers fairness concerns, which lowers consumer-side demand and ultimately restrictsthe platform’s profit exploitation from the seller side. Hence, a platform whose profitpotential from sellers is larger would take consumers’ fairness concerns more seriouslyand price-discriminate less. The results can explain why some major online platforms—despite the huge profit potential of targeting prices—shy away from price discriminationin response to consumers’ fairness concerns, while others care little about unfairnesscomplaints when price-discriminating among consumers. |
| Keywords: | fairness concerns; price descrimination; two-sided markets |
| JEL: | D42 D91 L11 L86 |
| Date: | 2026–05–11 |
| URL: | https://d.repec.org/n?u=RePEc:eca:wpaper:2013/406859 |
| By: | Maxim Bichuch; Zachary Feinstein |
| Abstract: | Financial options are fundamental to traditional markets, enabling strategies ranging from hedging to speculating. Yet, while the Automated Market Maker paradigm has revolutionized decentralized spot markets, no equivalent standard has emerged for on-chain options. Typical designs attempt to replicate centralized exchange mechanics, requiring high-frequency oracles and robust liquidation engines which may fail during stress events. This paper presents a design for amortizing perpetual options tailored to the operational and adversarial constraints of blockchain environments. Leveraging this primitive, we introduce a decentralized market framework with minimal consistency requirements. We demonstrate that this contract functions as a foundational risk primitive for DeFi, enabling applications such as endogenous collateralization and explicitly priced de-peg insurance, thereby showing that this design provides a layer for mutualizing tail risk across protocols without reliance on centralized clearing institutions. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.19146 |
| By: | Jay A. Soled (Rutgers Business School); James Alm (Tulane University) |
| Abstract: | “Cash is king” is a long-standing mantra among many businesspeople. It has a less favorable aura in the tax compliance world, where cash is often used to circumvent one’s tax reporting obligations. This analysis explores the current role of cash in today’s economy and suggests reasons why Congress should curtail its use or, at the very least, promote other forms of payment. |
| Keywords: | Tax compliance; tax gap; credit cards; cash; cryptocurrencies; third-party information; nudges |
| JEL: | H2 H26 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:tul:wpaper:2607 |
| By: | Jiheum Yeon (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Xiaohan Zhang (University of International Business and Economics (UIBE)) |
| Abstract: | Digital platforms have become central to modern economies, as consumers increasingly spend leisure time online and platform firms transform user engagement into economic value. This study develops a multi-country, multi-industry open economy general equilibrium model to analyze how web traffic—measured as visits to platform domains—can be converted into “data capital” through big data and AI algorithms and then used as a non-rival input for production and innovation.<p> To ground the analysis, we construct a new dataset that links domain-level web traffic to corporate ownership across countries. The evidence reveals sharp cross country differences in the geographic origin of users. U.S. platforms attract a strongly international audience, with domestic users accounting for less than one-third of visits on average. Chinese platforms are more domestically concentrated, though TikTok stands out as a global exception with a highly international user base. Korean platforms, by contrast, rely overwhelmingly on domestic users, with less than ten percent of traffic originating abroad. Comparing these patterns with international service trade statistics, we find that countries with higher shares of foreign users are systematically more active in exporting online services.<p> Qualitative analysis provides further insight into user behavior. Consumers allocate more time to a platform when they experience greater content satisfaction, which depends on both technological quality and country-specific content preferences. When the quality of foreign platform content improves, consumers reallocate time away from domestic platforms toward foreign ones. The extent of this shift is influenced by the elasticity of leisure demand, the substitutability across platforms, and the share of time already devoted to foreign platforms.<p> The general equilibrium model allows us to simulate counterfactual scenarios and evaluate policy-relevant outcomes. Reducing cross-border frictions to foreign content raises welfare in all countries, primarily through the expansion of content variety and the reallocation of consumer time, while leaving the broader industrial structure largely unchanged. Lowering barriers faced by foreign platforms, such as discriminatory digital services taxes, increases platform revenues, encourages consumers to spend more leisure time online, and strengthens investment incentives for domestic platforms. Although the immediate welfare gains are modest, the longer-run effects on intangible investment and innovation are more significant. Enhancing the productivity of platform R&D generates asymmetric effects by expanding platform activity in the innovating country and reducing it in the non innovating country, yet global welfare increases because users everywhere benefit from improved content quality and diversity.<p> Taken together, the findings highlight that the accumulation of web-traffic-based data capital is a central driver of platform growth. Policies that improve access to foreign content, the taxation of digital services, and foster innovation in platform R&D directly influence how consumer time is allocated and how platform firms invest in data-driven growth. For policymakers, the results suggest that lowering barriers to cross-border online activity can deliver substantial welfare gains, that digital taxation should be carefully designed to balance fiscal and innovation objectives, and that investment in platform R&D is essential for competitiveness in the global digital economy.<p> In sum, this study demonstrates that digital platforms thrive not only on technological progress but also on the ability to accumulate and deploy data capital derived from web traffic. Recognizing the economic role of data capital is crucial for designing effective policies in the digital era, where market access, taxation, and innovation shape the international competitiveness of platform industries. |
| Keywords: | Cross-country time allocation; Online leisure; Digital Platforms; Cross country services trade; Non-rivalry; Intangible Capital; Zero Prices |
| JEL: | F41 E22 J22 L86 |
| Date: | 2025–11–14 |
| URL: | https://d.repec.org/n?u=RePEc:ris:kiepwp:022488 |
| By: | Agostino Capponi; \'Alvaro Cartea; Fay\c{c}al Drissi |
| Abstract: | This paper develops a model to evaluate the viability of blockchain markets as the sole venue for price formation. Blockchains clear at discrete intervals called block time, and transactions are executed sequentially according to priority fees paid by traders who compete for queue position. We show that these features undermine the viability of markets. Paid-priority ordering induces endogenous selection, where only traders with sufficiently high valuations participate. The participation cutoff rises with competition, which intensifies with lower information costs or higher liquidity demand. This hinders price discovery and biases prices. It also impairs liquidity: the cutoff concentrates trading among aggressive traders and increases adverse selection that liquidity suppliers absorb in a single clearing round. Although longer block times enhance consensus security, they amplify these effects and can cause markets to shut down. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.17425 |
| By: | Matthew Lorig |
| Abstract: | We formulate and solve stochastic control problems that model the core yield-generating strategy of the Ethena protocol, a decentralized finance (DeFi) stablecoin that earns yield by combining a long position in staked Ethereum (stETH) with an equal-sized short position in ETH perpetual futures. The combined position is delta-neutral with respect to the ETH spot price, yet earns carry from two sources: staking rewards on the stETH leg, and funding-rate payments received from long perpetual holders when the perpetual trades at a premium to spot. A key feature of our model is that the control -- the rate of simultaneously buying stETH and shorting the perpetual -- exerts two distinct types of price impact. \textit{Permanent} impact shifts the mid-market prices of both legs, compressing the basis and permanently eroding future funding income. \textit{Temporary} impact reflects execution slippage on each leg. We study both an infinite-horizon discounted problem and a finite-horizon problem in which the protocol maximizes total wealth up to a fixed date $T$, subject to a terminal cost for liquidating any remaining position. In both cases the optimal control is obtained explicitly. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.11263 |
| By: | Hasret Ozan Sevim |
| Abstract: | On-chain lending has expanded across multiple distributed ledgers as DeFi becomes increasingly multi-chain. This environment introduces novel technical and financial mechanisms, particularly cross-blockchain communication and asset transfer protocols, yet cross-chain elements remain understudied in lending protocol risk management. To address this gap, we applied panel regression fixed effects and OLS models to empirically analyze cross-blockchain interoperability solutions, using TVL and total revenue as performance proxies from October 2022 to January 2025. Our data set covers 15 decentralized lending protocols and 53 cross-chain bridges across 9 EVM-compatible blockchains, categorized as Ethereum, alternative layer-1s, and Ethereum layer-2 networks. Results reveal that cross-chain activity impacts on protocol performance. Bridge volume emerges as a critical driver, exerts a significant effect on TVL and revenue across different categories, though the direction of this effect varies heterogeneously. Increased bridge integrations are associated with decreased TVL and protocol revenue across categories, indicating liquidity escapes from those lending ecosystems. Liquidations produce heterogeneous effects across categories. New network launches do not have as significant relationships with TVL and revenue while bridge hacks show a significant and positive relationship. High R-squared values confirm meaningful explanatory power. We further show Ethereum attracts large depositors, while layer-2s skew toward retail participation. We conclude that effective DeFi risk models should incorporate cross-chain metrics and adopt a layer-aware approach to accurately reflect the evolving multi-chain landscape. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.12508 |
| By: | Aroon Narayanan; Tavneet Suri; Prashant Bharadwaj |
| Abstract: | We study Kenya’s 2016 interest-rate regulation, which capped bank lending rates but left one digital platform, called M-Shwari, exempt on the lending side while imposing a deposit-rate floor across all lenders in the market. Using borrower-level administrative data, survey data, and an RD around the implementation date, we show three main results. First, lending on the exempt platform rose, but with the safest borrowers substituting away toward cheaper capped credit. Second, riskier borrowers increase their savings to build up their credit limits. Third, on the supply side, M-Shwari raises the limits for the safest borrowers in an attempt to retain them. We build and estimate a simple model of screening and credit limit-setting to interpret these reallocations and compute welfare. The observed carve-out for M-Shwari preserves access for high-risk borrowers but yields a slight aggregate welfare decline relative to pre-policy. However, a uniform (across all lenders) interest rate cap counterfactual generates substantially larger welfare losses by entirely eliminating credit for high-risk borrowers. |
| JEL: | G51 L13 O55 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35166 |
| By: | Yuki Nakamura |
| Abstract: | Privacy-preserving cryptocurrency exchanges (shielded AMMs, batched swap auctions, sealed-bid order-flow auctions) alter what the pricing mechanism observes about order flow. We derive the unique linear Kyle equilibrium when a committed Bayesian market maker observes order flow perturbed by independent Gaussian privacy noise. The price-impact coefficient and informed-trader strategy both rescale by a single factor in the privacy parameter, and their product is invariant. A welfare decomposition then identifies a closed-form per-period transfer from the protocol's LP pool to traders -- the "privacy subsidy", the break-even fee any privacy-aggregated exchange must charge. The result is the single-period closed-form privacy-noise analog of Loss-Versus-Rebalancing (Milionis et al. 2022). The primary application is shielded AMMs with explicit additive-noise injection (e.g., differential privacy); related designs (batched swaps, sealed-bid auctions, oracle-pegged crossings) require separate frameworks that we leave to future work. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.15746 |
| By: | Herman, Howard |
| Abstract: | The graphics processing unit (GPU) is undergoing the same structural transition that electric- ity underwent in the 1990s: a shift from a proprietary, vertically-integrated input into a fungi- ble, exchange-tradeable commodity. A growing literature—from Xing’s AI Token Futures Mar- ket (2026) to the Compute Exchange’s $5 Trillion Opportunity white paper—proposes stan- dardized compute contracts, physical-settlement procedures modeled on the CME’s WTI crude oil protocols, and Monte Carlo evidence that token futures can reduce enterprise compute-cost volatility by 62–78% in demand-explosion scenarios. That transformation is not merely an industrial story; it is a regulatory one. This Article asks whether, and on what terms, a reg- istered investment company could lawfully take GPUs—or, more precisely, the securities and derivatives derived from them—as the principal basis of its investment strategy. The thresh- old answer is negative for physical GPUs: Section 3(a)(1) of the Investment Company Act of 1940 requires principal investment in securities, and a fund that principally holds silicon is therefore not an investment company within the meaning of the statute. The viable “mutual fund of tomorrow” is a fund whose principal holdings are GPU-derivative securities (equity in compute operators, fractionalized tokens passing Howey, compute-revenue-sharing notes) or, under a parallel commodity-pool wrapper, standardized compute futures. It works through four successive regulatory gates: (i) the Investment Company Act of 1940 and its attendant custody, valuation, liquidity, and diversification requirements; (ii) the Howey/“Bitcoin test” framework for distinguishing securities from commodities in a hybrid asset class; (iii) market- manipulation law under Section 10(b) and the Commodity Exchange Act, including the seven canonical manipulation schemes most likely to arise in a thin GPU-spot market; and (iv) Bank Secrecy Act and Export Administration Regulations compliance, where a GPU fund’s assets double as controlled technology under Export Control Classification Number 3A090. The Article concludes with a proposed regulatory blueprint—a dual SEC/CFTC framework, modified custody rules, and KYC provisions tied to end-use screening—that would allow such a product to exist without repeating the crypto-era pathologies of opacity, manipulation, and sanctions evasion. |
| Keywords: | AI compute markets, GPU financialization, commodity pool operator, compute futures, Standard Inference Token, Commodity Exchange Act, digital asset classification, Loper Bright, Rule 22e-4, market manipulation, contango, Bank Secrecy Act, Foreign Direct Product Rule, ECCN 3A090. |
| JEL: | G23 K2 K22 |
| Date: | 2026–04–29 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:128949 |