Legal Risks and Challenges Related to Virtual Currencies

The appearance of the virtual currencies provokes several legal questions beyond their economic-monetary nature. The chapter focuses primarily from a legal point of view on the emergence of virtual currencies after a brief analysis of the concept and development of money, and analyses the related possible and probable legal risks and challenges in comparison to the operation of traditional (fiat) currencies either. The author provides a brief background of the technology of virtual currencies. The chapter considers specific issues that virtual currencies raise concerning the legal regulation in several fields, for example, exchange services, taxation, salaries, lending and borrowing in virtual currencies, law enforcement, money laundering, etc. Before the author assesses the impacts and probable functions of virtual currencies, it is indispensable to have also a look at the relations between state and money through the concept of monetary sovereignty and the related compatibility issues.

The Digital Economy in the Context of Foreign Direct Investment Flows

The main objective of the chapter is to provide a comprehensive overview of the development of the digital economy in the context of foreign direct investment flows, especially from the European Union member states point of view. First, the term and conceptualization of the digital economy is introduced, followed by an overview of theoretical background and empirical findings related to the role of foreign direct investment in the digital transformation of the economy. In this regard, the nature, position, and international footprint of digital multinational enterprises are also analyzed. The level of the digital economy and society development in the context of foreign direct investment flows is evaluated specifically in the conditions of the European Union member states. The conclusion summarizes the main partial findings, evaluates them in a mutual context, and brings implications for future research.

Non-Technological and Technological (SupTech) Innovations in Strengthening the Financial Supervision

The application of non-technological and technological innovations provides support to supervisory institutions in the digitization of reporting and regulatory processes. This chapter deals with international applications of innovations in financial supervision (SupTech). The aim of the chapter is to present the most popular technological and non-technological solutions along with an evaluation of their usefulness in exercising supervision over the financial market. The authors discuss the types of innovations and the reasons for implementing them by supervisory institutions. Furthermore, they describe the most important non-technological supervisory solutions and technologies that supervisors can apply in creating SupTech tools. The study utilizes, among other things, data from reports and elaborations by central banks, supervisory institutions, and consulting companies. The authors' main focus is on the analysis of the solutions utilized by European Union member states.

Finding Solutions to Cybersecurity Challenges in the Digital Economy

New technological innovation has incorporated frontier technologies in transforming the way we access and use existing products and services. The economy is becoming increasingly disrupted by revolutionary enterprises using technologies such as cloud computing, extensive use of artificial intelligence and data analytics, integration of interoperable internet of things (IoT) devices and the blockchained decentralization, including advanced materials. At the same time, regulatory and legal systems need to be strengthened in order for the ecosystem be protected from cyber risks and threats to allow for the market actors to flourish. In order to enjoy the benefits brought on by digital technologies, there are regulatory issues that come with technological adoption along with financial stability implications and consumer protection, with suggestions that regulators themselves adopt advanced technologies (RegTech) to embark on the new era of market supervision and monitoring to enhance cybersecurity.

EU FinTech Index

The chapter focuses on the innovative financial technology called FinTech and explores its prospects for becoming a catalyst for financial inclusion. The novelty of the research approach resides in being the first study computing an EU FinTech index for the EU member countries. The index gathers four dimensions and provides insights on whether the FinTech environment in one country is better or worse compared to other countries in the sample. Countries' ranking based on index scores computed for two different years show that Sweden, Finland, Luxembourg, and Germany are always placed on the top of the hierarchy. Therefore, they exhibit real development opportunities in this regard. At the opposite are some countries in South-Eastern Europe that persistently record the lowest FinTech index scores; thus, there is still room for improvements in terms of market players' presence, existing regulation, access to digital financial inclusion.

Leadership in FinTech

This chapter discusses the intricacies of innovation and competitive advantage, the current leadership gap within FinTech firms, and how these occurrences are enabled and improved through the utilization of authentic leadership practices within the context of the FinTech industry. Following this discussion, the authors observe the future research directions and potential areas of exploration in which other scholars may divulge. Through the exploration of our research question, “How can authentic leadership behaviors enable innovation and competitive advantage in FinTech firms?” they found the importance of authentic leadership within any industry or organization may be enhanced and explored further, as it appears to have a positive impact on innovation within organizations which in turn has the potential to provide a variety of opportunities for growth and competitive advantage.

The Future of Audit in Light of Technological Changes

External audit of financial statements plays a key role in achieving transparent financial reporting, since its purpose is to provide reasonable assurance that the presented financial statements are free of material misstatements due to fraud or error. In the process of fulfilling this role, auditors must be adaptable, especially when it comes to technological advancements. This chapter explains the effect that new technologies have on audit of financial statements. In addition to summarizing the technological changes that impacted the audit profession in the past and therefore introduced new generations of audit, the authors have identified issues and challenges in the way the audit is currently performed. Some of the new technologies that are discussed in this chapter have the potential to mitigate these issues. However, new challenges and risks may be introduced with accepting these technologies in the process of financial reporting and auditing.

Digital Transformation in Banks of Different Sizes

Technological advances in data transmission and processing are an important structural factor influencing the banking sector. As they have an important impact on the cost base of banks and are characterized by large one-off costs, it is argued that investments in digital technologies enhance the positive returns to scale in the banking system. This in turn further improves the competitive position of the largest market players, creating a positive feedback loop. In the longer run, this leads to a polarization of the banking sector, between large universal banks and small specialized banks. These processes are important from the point of view of macroprudential policy, notably in the dimension of reducing the risks connected with the emergence of “too big to fail” institutions. The chapter illustrates these issues using the results of a survey on the investments of banks in digital transformation in Poland, focusing on the relationships between market structure, financial position, and investments in digital technologies.

Blockchain-Based Tokens as Financing Instruments

Blockchain technology represents a technological basis with which existing corporate financing processes can be supplemented. The issuance of digital tokens offers several potential advantages such as tradability, efficiency, automation, and cost benefits compared to traditional financial products. This transformation of financing processes and capital markets can allow small and medium-sized enterprises (SMEs) to access capital markets and at the same time close existing retail investment gaps. In this chapter, the challenges of SME financing are described and blockchain-based financing (initial coin offerings [ICOs] and security token offerings [STOs]) is introduced. The blockchain-based financing mechanisms are compared with conventional forms of financing and potentials and challenges are discussed. In conclusion, it is stated that potential clearly outweighs risk and that the majority of all existing challenges can be tackled through sensible and coordinated regulation.

Accelerating Financial Innovation Through RegTech

The buzz word ‘RegTech' is on the rise. A financial service regulation has inflated at an astounding rate since the financial crisis and, therefore, has the price tag of regulatory compliance. Many start-ups have begun to apply digital technological knowledge including APIs, AI, RPAs, and many more to these immediate, numerous, and burdensome tasks to meet the terms and regulations, hence the emergence of RegTech. This study examines the implications for financial institutions and regulation particularly when technology poses a confront to the global banking and regulatory system. It attempts to examine the characteristics and applications of RegTech in the world of regulatory compliance. It also illustrates a model to define the transformation of present workload to proposed workload of regulatory compliance with an application of RegTech.