Economic and Legal Analysis of Cryptocurrency: Scientific Views from Russia and the Muslim World

Abstract

The article is devoted to the analysis of cryptocurrency as a new phenomenon in the modern global economic processes and legal institutions. The relevance of the study is predetermined by the very specifics of such a phenomenon as cryptocurrency consisting of a distributed ledger technology, which determines the peculiarities of issuing, storing and performing operations with cryptocurrency. Moreover, the cryptocurrency turnover directly correlates with the national legislation of individual countries, which are the subject of domestic regulation with currency, tax legislation and legislation on the securities market. Sometimes, in this regard, there is a clash of public interests and the interests of entities involved in the circulation of cryptocurrencies. Cryptocurrency, as an unconventional, trendy phenomenon of the recent times, has become the object of research and discussions on all the world platforms, starting with academia, continuing with the business community and ending with state institutions. There are many reasons for explaining such interest and they can all be reduced to two main blocks: the advantages and the disadvantages of cryptocurrency circulation. The problem of cryptocurrency turnover, on the one hand, is that until now none of the national economies have regulated the cost-effective mechanism for the cryptocurrency turnover and, on the other hand, the leading countries have not yet set up an effective system of legal regulation of cryptocurrency. Many countries are in the active process of working to adequately address the above problem. Separately, it is worth highlighting the interest of Muslim countries in this issue, where discussions are still underway about the permissibility of cryptocurrency in Islamic law. As for the Russian realities in the context of the issue under study, the Federal Law “On Digital Financial Assets, Digital Currency and on Amendments to Certain Legislative Acts of the Russian Federation“, which came into effect on 1 January 2021, was supposed to streamline relations of subjects including cryptocurrencies, but, according to the experts in this field, this law is far from impeccable and this sphere of relations cannot be quickly and effectively regulated. This article describes the characteristics of cryptocurrency, its essence, disadvantages and advantages as an object of economic and civil law relations. The purpose of the research is to analyze the economic and legal phenomenon of cryptocurrency, as well as its characteristics in the Muslim legal system. The complexity of the work should be emphasized as a novelty. Based on the designated goal and the logic of construction, the study consists of three interrelated parts. The first part outlines the characteristics of cryptocurrency as an economic category, the second part is devoted to its legal analysis and the last part of the study demonstrates the Islamic perception (Sharia analysis) of this phenomenon. As a conclusion on the scientific research, we will highlight the following provisions. First, economically, nowadays, cryptocurrency is a rather controversial financial instrument: on the one hand, it has great investment attractiveness, but on the other hand, it is subject to great volatility and seems to be a rather risky financial asset. Secondly, from a legal standpoint, cryptocurrencies have not yet found their consistent consolidation and further legal regulation in the Russian legislation. It seems that the legal regulation of this institution will systematically develop depending on what application and results of its turnover the cryptocurrency will have in the future. Finally, the Islamic interpretation of the cryptocurrency phenomenon boils down to the absence of a single, consistent explanation of it from the perspective of Islam and Sharia as an object of permissibility (or prohibition) of transactions with it. It is necessary to further analyze the practice of using cryptocurrency and its impact on the economy and legal institutions in order to make a final decision on its permissibility or prohibition in correlation with the types of activity and the upcoming consequences associated with it.

The Extended TRA Model for the Assessment of Factors Driving Individuals’ Behavioral Intention to Use Cryptocurrency

“…• People are more likely to engage in cryptocurrency use if they consider it useful (H6) in terms of enabling easy, fast, and low-cost transactions or a high yield on investment (Arias-Oliva et al, 2019;Baur et al, 2018;Jankeeparsad and Tewari, 2018;Mendoza-Tello et al, 2018;Nuryyev et al, 2018), providing a person with joy and comfort in its use (H8) (Abramova and Böhme, 2016;Alharbi & Sohaib, 2021;Nadeem et al, 2020), and enhancing their personal innovativeness (H10) (Sohaib et al, 2019;Sun et al, 2020), but at the same time not bearing a high risk of privacy data leaking (H4a) or financial losses (H4c) (Nofer et al, 2017). • Potential users do not consider security risk as relevant for their attitude toward cryptocurrency (H3b) or their intention to use cryptocurrency (H4b), as they do not perceive cryptocurrency use as risky in terms of technology failure, which is partially consistent with prior literature that argues that the use of cryptocurrencies is usually considered safe due to their cryptographic security (Hileman & Rauchs, 2017;Nadeem et al, 2021;Nuryyev et al, 2018), but also that the impact of security risk depends on a person's knowledge and information about cryptocurrencies (Noreen et al, 2021;Shovkhalov & Idrisov, 2021).…”

“…Yet, cryptocurrencies have also raised concerns regarding their security and impact on society (Al-Amri et al, 2019). As there is no central authority that monitors this system, users cannot recover their funds in case of theft of cryptocurrencies by malware attacks or their accidental loss (Shovkhalov & Idrisov, 2021). There were also several scams, e.g.…”

Cryptocurrency and Global Practices: Lessons for Nigeria

“…Studies have shown that the rise in unrestricted flow in capital market comes with increased financial and aggregate economic volatility [98]. Notwithstanding, some other studies have shown that given the right policy environment, it is possible to permit cryptocurrency usage and adoption without undue negative impact on the economies of the permitting countries [99][100][101] and in some cases, digital token transactions have developed into significant capital market hubs (Dewey 2019). This view is further underscored by the fact that although several monetary authorities have issued cautions about its use, they are yet to outrightly ban its usage.…”

Risks to the National Security Generated By the Widespread Use of Cryptocurrency

“…As for the Russian Federation, the beginning of 2021 was a starting point in the process of regulating the cryptocurrencies domain, by adopting a law to address various issues regarding the issuance, accounting and use of virtual financial assets. In this sense, Russian specialists (Shovkhalov & Idrisov, 2021) appreciate that the level of consolidation of the Russian regulatory framework on cryptocurrencies is not enough, possible developments in the legislative spectrum may arise simultaneously with the development of the virtual currency domain.…”