Blockchain Technology and Applications III 1685076297, 9781685076290

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Computer Science, Technology and Applications

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Computer Science, Technology and Applications Green Computing and Its Applications Sanjay Kumar, PhD Rohit Raja, PhD Alok Kumar Singh Kushwaha, PhD Raj Kumar Patra, PhD Saurabh Kumar, PhD (Editors) 2021. ISBN: 978-1-68507-357-2 (Hardcover) 2021. ISBN: 978-1-68507-363-3 (eBook) Artificial Intelligence: Work, Machines and Human Interaction Tonya Randolph 2021. ISBN: 978-1-68507-313-8 (Hardcover) 2021. ISBN: 978-1-68507-353-4 (eBook) Advanced Decision Sciences Based on Deep Learning and Ensemble Learning Algorithms: A Practical Approach Using Python S. Sumathi, PhD Suresh Rajappa, PhD L. Ashok Kumar, PhD Surekha Paneerselvam, PhD 2021. ISBN: 978-1-68507-061-8 (Hardcover) 2021. ISBN: 978-1-68507-207-0 (eBook) Deep Learning and Its Applications Arvind Kumar Tiwari, PhD (Editor) 2021. ISBN: 978-1-68507-185-1 (Hardcover) 2021. ISBN: 978-1-68507-246-9 (eBook)

More information about this series can be found at https://novapublishers.com/product-category/series/computer-sciencetechnology-and-applications/

Jan Veuger, PhD Editor

Blockchain Technology and Applications III

Copyright © 2022 by Nova Science Publishers, Inc. DOI: https://doi.org/10.52305/JDEF4870

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NOTICE TO THE READER The Publisher has taken reasonable care in the preparation of this book, but makes no expressed or implied warranty of any kind and assumes no responsibility for any errors or omissions. No liability is assumed for incidental or consequential damages in connection with or arising out of information contained in this book. The Publisher shall not be liable for any special, consequential, or exemplary damages resulting, in whole or in part, from the readers’ use of, or reliance upon, this material. Any parts of this book based on government reports are so indicated and copyright is claimed for those parts to the extent applicable to compilations of such works. Independent verification should be sought for any data, advice or recommendations contained in this book. In addition, no responsibility is assumed by the Publisher for any injury and/or damage to persons or property arising from any methods, products, instructions, ideas or otherwise contained in this publication. This publication is designed to provide accurate and authoritative information with regard to the subject matter covered herein. It is sold with the clear understanding that the Publisher is not engaged in rendering legal or any other professional services. If legal or any other expert assistance is required, the services of a competent person should be sought. FROM A DECLARATION OF PARTICIPANTS JOINTLY ADOPTED BY A COMMITTEE OF THE AMERICAN BAR ASSOCIATION AND A COMMITTEE OF PUBLISHERS. Additional color graphics may be available in the e-book version of this book.

Library of Congress Cataloging-in-Publication Data ISBN: H%RRN

Published by Nova Science Publishers, Inc. † New York

Contents

Introduction

........................................................................................... ix

Part 1

Finance and Economy .......................................................1

Chapter 1

Digitization and Blockchain in Finance, The Netherlands in 2021 ...................................................3 Jan Veuger

Chapter 2

Libra and Diem: Fear to Be Eaten (An Update in 2022) ...........................43 Jan Veuger

Chapter 3

The Economic Relevance of Decentralized Finance for Future Financial Systems ...........................55 Benedikt Eikmanns, Isabell Welpe, Philipp Sandner and Jan Veuger

Chapter 4

The Effects of Blockchain Technology on University Students’ Start-Up Intention in Fintech - Implications for Developing High Quality Young Human Resources in Vietnam ..............69 Giang T. Q. Nguyen, Duong T. Phan and Anh N. Tran

Chapter 5

Factors Influencing Consumers’ Adoption of Fintech Payment Services in Vietnam .......................95 Dao My Hang

vi

Contents

Chapter 6

Blockchain in the Digital Transformation of the Vietnam Banking Sector.....................................111 Phan Thanh Duc, Dinh Trong Hieu and Vu Duy Hien

Chapter 7

Blockchain Adoption Challenges in the Commercial Banking Industry ..........................127 Mert Şenyüz and Christa Barkel

Chapter 8

The Financial Technologies 4.0 in the Exchange and Post-Trading Infrastructure ................139 Zhanna V. Ivanovskaya

Part 2

Applications....................................................................151

Chapter 9

An Empirical Analysis with International Data of E-Government Transformation and Anti-Corruption Issues ..........................................153 Hang Thu Pham and Thu Thi Hoai Nguyen

Chapter 10

Applications of Blockchain Technology for Building the E-Government in Vietnam ................171 Tuan Huy Ha

Chapter 11

Cybersecurity and the Impact of Blockchain ..............185 Jan Veuger and Remco van Spithoven

Chapter 12

Blockchain and Deep Learning Applications: Predictions on Cryptocurrency Price Using Long-Short Term Memory ...........................................209 Arum Handini Primandari, Tuti Purwaningsih, Ayundyah Kesumawati, Ryan Reza Fadillah and Fajriya Hakim

Chapter 13

Security Basics on Blockchain ......................................233 Ari Moesriami Barmawi

Contents

vii

Part 3

Research .........................................................................255

Chapter 14

Blockchain and European Higher Education Systems. A Snapshot on the Diffusion Process of Blockchain Innovations in European Academia. A Comparative Study of Blockchain in Higher Education Systems of Estonia, Germany, Greece, the Netherlands and Spain ............257 Rainer Lenz, Christa Barkel, Jan Veuger, Paraskevas Tsangaratos, Marija Klõga and Juana Llorente

Chapter 15

Identifying Suspicious Transactions on the Bitcoin Network with Supervised Learning: Case Studies ...................................................................319 L. A. Garin and V. B. Gisin

Editor’s Contact Information ..................................................................331 Index

.........................................................................................333

Introduction

This book is among others a result of many international collaborations and research on Blockchain technology and application possibilities. In 2021 we as Research Group Blockchain of Saxion University in the Netherlands have conducted many webinars, conferences, masterclasses and research. Examples are (from January 2021 until August 2021): •

•

•

•

•

Webinar Blockchain for Defi & Cryptocurrency: Blockchain in Current and Future Economy. Host: ISCM-University of Economics Ho Chi Minh City Vietnam and Saxion UAS. In collaboration with: UEH-UII, Fintech In, Fam Central, Telkom University and University of Bristol. 8 presentations and over 300 participants in 15 countries (Vietnam, USA, Indonesia, Australia, UK and Netherlands). June 21st and June 22nd. Science Curio Series. Nuffic Nesos India. Saxion UAS in cooperation with Ministry of Foreign Affairs with 6 presentations and 323 participants in 8 countries. June 16th, 2021. Conference on Blockchain and Financial Applications. A collaboration between Saxion UAS, Financial University under the Government of the Russian Federation and Banking Academy of Vietnam. 41 presentations and 89 participants in 7 countries. May 1213, 2021. Webinar Series: Blockchain Technology and Applications. A collaboration between Saxion UAS and Telkom University Indonesia. 8 presentations and 117 participants in 6 countries. March 10th and 17th, 2021. Sciences Corio Series. Saxion – NEU Draw-Down Project. A collaboration between Saxion UAS and National Economics University National Economics University Vietnam. 17 presentations and over 300 participants in 6 countries. March 22nd, 2021.

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Collogium Blockchain Experience 2021. Saxion UAS with Universitas Islam Indonesia (UII) organized “A Colloquium on Blockchain” with topics as follows: 1. Blockchain and Ethic and Blockchain System 2. Blockchain and Finance and Economy 3. Blockchain and Deep Learning and E-Portfolio. 7 presentations with 600 participants in 6 countries. February 23rd, 2021.

Whereas the first two volumes of Blockchain Technology and Applications dealt with the technology of Blockchain and applications for real estate, e-government, cybersecurity, energy, philosophy, business models, legal and auditing, we will now focus on three themes: finance & economy, applications and research, which will provide the necessary progressive insights into the impact of Blockchain on the financial world and economy and new application possibilities, and a very extensive study of Blockchain and European Higher Education Systems. With this book, I would like to contribute to raising the level of knowledge of students, researchers and the work field on an international level in order to enter the next phase of Blockchain developments. For the coming years, I expect a further acceleration of the development of applications in Blockchain with other emerging technologies. Curiosity remains with me for research and dissemination. There always remains doubt whether observations have been correct. It is time to investigate further: we don’t know what we have not seen. Jan Veuger, 2021

Part 1. Finance and Economy

Chapter 1

Digitization and Blockchain in Finance, The Netherlands in 2021 Jan Veuger*, PhD Saxion University of Applied Sciences; School of Finance and Accounting, School of Creative Technology, School of Governance, Law and Urban Development; Hospitality Business School, School of Commerce and Entrepeneurship, School of People and Society, Enschede-Deventer-Apeldoorn, The Netherlands

Abstract The exploratory research in 2020 received a lot of attention in trade journals in the Netherlands and in the international context of academic journals, webinars and conferences. This led to this research in 2021, including a reorientation on the structure of the research. Due to the further development of the faculty in 2020 and 2021, the questions from the research were further professionalized, peer reviewed by experts and supplemented. In addition, it is interesting and scientifically important to place the research more in both a national and international perspective, both with regard to professional groups and with regard to other studies, such as that of Controllers Magazine, After various inventorying discussions at the end of 2020, whether or not at the request of the stakeholders, this led to a reorientation on the conducting of the research. At the beginning of 2021, the study was therefore extended almost simultaneously to: (a) all members of the Werkveldcommissie (Werkveldcommissie; WVC) of the Accountancy (AC), Finance, Tax and Advice (FTA, formerly Fiscal Law and Economics) and Finance & Control (FC) programmes of the Academy of Finance, Economics and Management (FEM) at Saxion University of Applied Sciences, (b) all *

Corresponding Author’s Email: [email protected].

In: Blockchain Technology and Applications III Editor: Jan Veuger ISBN: 978-1-68507-629-0 © 2022 Nova Science Publishers, Inc.

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Jan Veuger members of the Samenwerkende Register Accountants en Accountants Administratieconsulenten (SRA), a network organization of 375 independent audit firms with 900 branches in the Netherlands, and (c) international sister universities of Saxion University of Applied Sciences.

Keywords: digitization, Blockchain, financial, professional, Bitcoin

1. Introduction Nakamoto (2008) states that one must have faith in the current financial system and that institutions must not devalue the money. History teaches that this could not always be realized. There must be confidence in sufficient reserves and no creation of credit bubbles. However: The reserves of banks are limited to very limited, even after the economic crisis of 2008, and the question is whether the conviction of the International Monetary Fund (IMF) (Adrian and Macini-Griffoli 2019) that cryptocoins such as Bitcoin, Ethereum and Libra should be linked to the central banks, given their reputation in recent decades, is justified. Nakamoto (2008) asserts the following statement in this regard: The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to ebase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve.

This sentiment was also shared by Friedrich Hayek, Nobel Prize winner in Economics in 1974. In his essay (Hayek 1976), he argues for the abolition of: A free market competition in the currency industry, a means of combating inflation and adverse economic consequences through the exclusive right for institutions to be allowed to produce money and the exclusive right for governments to force people to accept the money (Hayek 1976: 22).

Blockchain is therefore a social, political and economic revolution and stems from Libertarian Anarchism, Crypto-Anarchism and Cyperpunk. This

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is a philosophy that seeks to protect privacy and political freedom through the use of cryptography. Where the internet is about information transfer, Blockchain is about value transfer and can therefore be interpreted as the fourth technical revolution (Veuger 2020).

1.1. Currencies and Payment Systems When we look at global developments in the area of the use of currencies, China is at the forefront. In China, many people pay via WeChat, a social media app released by the Chinese company Tencent in 2011, comparable to a combination of Twitter, Facebook and WhatsApp. This makes it possible to arrange financial changes or, for example, to order a taxi. They are years ahead with digital payment systems (NRC 2019), and in the Netherlands, for example, the question is asked of whether banks still have a future. ABN AMRO, ING and Rabobank are increasingly disappearing from the streets (Elsevier 2021), the number of bank branches has decreased from approximately 3,500 in 2015 to approximately 1,000 in September 2020 (Elsevier 2021), and the number of ATMs has decreased from almost 10,000 in 2015 to approximately 4,000 in September 2020 (Elsevier 2021). Alipay is a comparable digital payment system to a mobile and online payment platform of third parties, founded in 2004 by the Alibaba Group and its founder Jack Ma. Payments are made with the national currency yuan and within WhatsApp now with Libras. Facebook’s Libra (Laan 2019) is linked to a basket of different safe currencies, moves with those rates and is used for worldwide payments. The Libra does not look like the Bitcoin because it is not a cryptocoin (Veuger 2019). With a cryptocoin, anyone can contribute to the processing of transactions by mining. The first block of the Bitcoin blockchain (Lim and Janse 2019) was mined on January 3, 2009. It includes a reference to The Times’ article entitled ‘Chancellor Alistair Darling on brink of second bailout for banks’, which was published on the same day. The article reminds us of the uncertain times of the economic crisis in which governments and central banks tried to save the financial system. The then Chancellor of England, Alistair Darling, faced the difficult choice of spending billions of extra money buying toxic assets from banks and providing banks with cheaper state-guaranteed loans at low interest rates. With Libra, mining is done by the Libra association based in Switzerland, which initially included Visa, Vodafone, eBay, MasterCard, Spotify and Uber, but from which, for example, MasterCard, Visa and eBay already withdrew in 2019. The Libra is intended

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as a form of banking in line with Bill Gates’s 1994 statement that ‘Banking is necessary. Banks are not’. Supervisors view these developments with suspicion (Elsevier 2019, Het Financieele Dagblad 2019b). The criticism of Libra also has an effect on the value of other crypto currencies (Het Financieele Dagblad 2019a-2019h), but the real value of the Bitcoin, for example, in the current norms and standards of the institutionalized economy, is difficult to determine because it is traded on different exchanges. The established order – including the American and British central banks – therefore have a great deal of criticism of Libra, with the G7 in 2019 also considering a vision of cryptocurrencies and digital security. There is no global body that can control the Libra, and it is questionable whether an AFM or Financial Stability Board in England can coordinate policy on this (Het Financieele Dagblad 2019b). The Libra experienced a restart in January 2021 with Diem. The Diem Association has lost several participants almost two years after its launch. Visa, Mastercard and Stripe were some of the first companies to pull out of Libra, followed by PayPal, eBay and Vodafone. Meanwhile, the project has also suffered some notable departures, from Kevin Weil, the head of Facebook’s planned digital wallet Novi, to Dante Disparte, Diem’s head of public affairs (CNBC 2021). Diem entered talks with Swiss financial regulators in 2021 to secure a payments licence. ‘A key step in our dialogue with the regulators was a phased approach to launch’, Christian Catalini, Diem’s chief economist, told CNBC 2021, ‘We are going to phase in different functionalities and usage scenarios, applications in different areas’. The aim would be to ensure that the technology and the reserve system work as expected. Nevertheless, Diem has reached a global race among central banks to figure out their own strategy for digital money. The People’s Bank of China is leading the way, testing a digital version of the yuan in a number of cities, while the British central bank is considering whether or not to issue its own digital currency. We should not exclude Diem either, given its developments and impact, but also relate it to other currencies.

1.2. Parliamentary Bill 2018 In the Netherlands in 2018, only one parliamentary bill (Tweede Kamer 2018) reached the Chamber of Ministries of Finance and Justice, whereby companies are subject to a licence according to the standards of the Dutch Bank regarding digital currencies. In addition, the Minister of Justice and Security has set out

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a research assignment, which is the result of the ‘Blockchain en Recht’ (‘Blockchain and Law’) report (Schellekens, Tjon Tjing Tai, Kaufmann, Schemkes and Leenes 2019). The Blockchain faculty (Maten, Barkel and Veuger 2019) subsequently issued unsolicited advice to the minister and a reflection to the authors to ensure that the right discussion took place in the Lower House. It can be concluded that (Maten, Barkel and Veuger 2019) the authors of the report demonstrably do not understand the technology and have a limited scope. Their focus is mainly on permissionless Blockchains, while it can be argued that innovation is coming mainly from the permissioned Blockchains. In this context, it is important to recognize the entire ecosystem and the transformation thereof. The privacy legislation and the discussions in this report are a non-problem. The report only looks at the Blockchain system, while it should be viewed in the combination of Machine Learning (ML) and Artificial Intelligence (AI) (Veuger 2020). These are important developments that will eliminate a great deal of work in society in the near future. This is without prejudice to the need to look for the legal context in which the new technologies can develop. The same applies to the development of the governance and its models around Blockchain, ML and AI. Both are essential points for further research: we do not know what we have not seen.

1.3. International Monetary Fund The International Monetary Fund (IMF) indicates that central banks play an important role in controlling the risks of virtual currencies such as Bitcoin, Ethereum and Libra (Adrian and Macini-Griffoli 2019). The IMF, which strives for financial stability, expects new rules for digital monetary transactions to have a major impact on the future of commercial banks. In addition to the positive consequences of cryptocurrency, they also expect substantial risks that can be reduced by central banks. The critical comment that can be made here is: ‘How risky are the current banks if they do not keep pace with the rapidly changing social developments and digitization?’. Cooperation between central banks and providers of money is already taking place in India, Hong Kong and Switzerland, with the national central bank in China already collaborating in national reserves with Alipay and WeChat. Ant Financial is also affiliated with the Chinese Alibaba Group, the highest-rated TechFin company in the world with a value of 150 billion US dollars in 2019. In November 2020, the possibly largest IPO ever, of the Chinese Ant Group, was cancelled. Founder Jack Ma and his empire of webshops and payment

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services would have become too powerful. The Chinese government therefore launched a financial investigation after Jack Ma gave a controversial speech on October 24, 2020 (AppleDaily 2020). He is alleged to have made statements critical of the Chinese financial system and the state banks and advocating reforms in the regulatory system to promote innovation. Jack Ma’s critical speech was a few days before Ant Group’s major IPO. On the Shanghai and Hong Kong stock exchanges, the company was expected to raise over $30 billion, but that ultimately did not happen. The IMF is therefore clear in its view that the role of retail banks could change completely and that they should prepare for disruption in the banking sector. The IMF is considering three scenarios for the future: (1) the coexistence of bank money and cryptocurrency, (2) both forms of money complementing each other and (3) commercial banks losing control of deposits. A debate about the necessity of a public digital currency is therefore desirable in this exploration (NRC 2019).

2. Central Banks Central banks (World Economic Forum 2019) from dozens of countries around the world are actively investigating how Blockchain and distributed ledger technology can be applied to solve long-term challenges. However, their activities are not always known or communicated, whether or not for competitive reasons. The purpose of the report Central banks and distributed ledger technology: How are central banks today exploring the Blockchain of central banks (World Economic Forum 2019) is to introduce and to illuminate key issues and areas of research, experimentation and implementation for central banks with respect to Blockchain technology. It provides an overview of the most important literature in this area at that time. It is important that DLT is an active research and exploration area and that many central banks have not yet drawn definitive conclusions about the possibilities this offers for weighing risks. GitHub (2019) already gives an idea of scientific research in this area. The President of the European Central Bank, Christine Lagarde, prompted the global regulation of Bitcoin in January 2021. She indicated that in some cases the digital currency has been used for money laundering and that any loopholes in the law should be closed. This in itself represents unusual reasoning because money laundering practices are possible with every (digital) currency. The largely anonymous nature of Bitcoin has led to an institutional concern. Lagarde said about this (Reuters 2021): ‘(Bitcoin) is a

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very speculative asset, which has done a number of funny things and some interesting and totally reprehensible money laundering activities.’ What is unique is that she did not give specific examples of money laundering practices but said that she understood that there had been criminal investigations into illegal activities. That is remarkable, because such investigations also take place routinely for flows of money from, for example, the USD or Euro.

3. Developments in Perspective and Blockchain in Particular To put the above issues in perspective, it is important to look at market capitalization and the total growth of money since 2015. The question that can be asked is whether current physical money has been a decades-long or ageold hype and whether crypto currencies are the legitimate substitute. Blockchain technology is hardly a priority on the agenda of Chief Information Officers (CIO). To help CIOs understand the current Blockchain and future evolution, David Furlonger, Vice President, Distinguished Analyst and Research Fellow Gartner Inc. outlined how the Blockchain could develop through 2030. Furlonger noted that in the Gartner 2019 CIO survey, only 5% of the CIOs assessed Blockchain in the Gartner 2019 as a game changer for their organizations, far below the themes of artificial intelligence, cloud, data and analytics. In the top, typical and lagging categories of CIO respondents, 11% of the CIO respondents used Blockchain or were planning to do so in 2020. Although Blockchain offers a range of options, private ledgers will have difficulty reaching a positive Total Cost of Ownership (TCO) within four years. There is therefore a need according to Furlonger for a good cost/benefit analysis in this area. The Blockchain perspective alongside technology offers new paradigms for the way in which organizations (Bessems and Glasses 2017) can interact, act or how assets are represented in practice (Pomp 2018, Pomp and Verhaert 2018). It is quite possible that current business and technology will be unable to make optimal use of the possibilities of Blockchain technologies. Gartner’s Blockchain Spectrum offers a model for investigating the evolution of Blockchain solutions and indicates how their phases are consistent with the value that companies can derive from them (Gartner 2018).

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Table 1. Gartner’s Blockchain phases Time Table 2009-2020

2016-2023

2020

After 2025

Phase

Explanation

Accessibility technologies for the Blockchain Blockchaininspired solutions

This early phase of Blockchain experiments is being built on top of existing systems to reduce costs and friction in private activities. They only have limited distribution options to a small number of nodes within or between companies. The current phase of Blockchain-inspired solutions is primarily designed to address a specific operational problem - usually in terms of inter-organizational processes or inefficiency of administration. These solutions have symbolization or decentralized decision making. Blockchain Complete offer, starting in the 2020s, will implement smart contracts and deliver the full value proposition of the Blockchain, including decentralization and tokenization. In this future situation, smart contracts will be truly autonomous, and advanced technologies will allow exchanges and transactions that are not yet possible. At that time, we will see Decentralized Autonomous Organizations (DAO) and micro-transactions by machines.

Blockchain complete solutions Improved solutions with Blockchain

3.1. Blockchain and Cryptocoin Developments in 2020 Whereas in 2015 the Gartner Hype Cycle indicated that Blockchain was in the first phase of development and was mainly seen as a hype, the picture looks significantly different in 2020. Based on her research in 2020 (Gartner 2020), Gartner states the following about Blockchain developments in 2020: Blockchain technology has developed slowly, with most business projects remaining in experimental mode, without clear targets and measurements. Organizations are reluctant to transfer authority to consortia of multiple parties. Most Blockchains, in which stakeholders have given permission, are hardly distributed and work on only a few nodes that are managed by a single party. Unlike public Blockchains, Blockchains with permissions do not eliminate centralized authority. Nevertheless, they uniquely support a single version of unchangeable data, which is shared and trusted by network participants. Many central banks are currently investigating or testing digital currencies on Blockchains. Together with a number of other central banks, the European Central Bank (ECB) will study the possibility of setting up its own cryptocurrencies. To this end, they have set up a research team and are cooperating in this initiative with the Bank of England, the Swedish Riksbank, the Swiss National Bank SNB, the Bank of Canada and the Bank of Japan.

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The Bank for International Settlements (BIS), which is also described as the central bank for central banks, is also participating in the initiative. Notable absences are the People’s Bank of China, which is already working on its own cryptocurrency, and the US Federal Reserve. The latter has so far stayed far away from digital coins. The research group will examine in which situations cryptocoins offer an advantage. It also examines which functional and technical design choices can be made and how the different digital currencies can work together. The banks involved also want to share knowledge about emerging technologies. The research team coordinates its work with supervisors. China has already launched its digital currency and is testing consumer payments. At the start of the COVID-19 pandemic, the need for transparent, reliable, end-to-end supply chain data pointed for many to Blockchains. Necessary standards for tokenized processes and supply chain information (GS1, EPCIS) are evolving further. These events will place Blockchain’s progress in the fourth phase of the Gartner Hype Cycle.

Figure 1. Interactive hype cycle blockchain (Gartner 2020).

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Gartner (2020) indicates that innovative solutions supported by Blockchain are mainly in an experimental phase or in production on a limited scale. Nevertheless, early adopters and application leaders use Blockchain to transform their digital businesses in a unique way, especially with supplychain-related and payment-related use cases. More than 50 central banks are investigating or testing digital currencies on Blockchains with permissions. China has already launched its digital currency and is testing consumer payments. At the start of the COVID-19 pandemic, the need for transparent, reliable, end-to-end supply chain data clearly pointed for many to Blockchains. Necessary standards for tokenized processes (e.g., of InterWork Alliance) and supply chain information (GS1, EPCIS) are evolving further. These events will bring Blockchain’s progress to the slope of enlightenment.

4. Technological Developments for Financial When we look at technological developments that influence the financial professional, we arrive at the following developments based on discussions with the participating organizations. A number of technological developments, which are included in the survey, are explained in alphabetical order below. This is to further clarify their specific impact on the financial professional, assuming that the other elements of the survey such as accounting software, big data, currency, cybersecurity, data analytics, Regtech and ethics are generally known.

4.1. Artificial Intelligence Creativity is a fundamental feature of human intelligence, and a challenge for Artificial Intelligence (AI) (Boden 1998). AI technology can be used in three ways to create new ideas: by producing new combinations of known ideas; by exploring the potential of conceptual spaces; and by carrying out transformations that enable the generation of previously impossible ideas. AI will have less difficulty modelling the generation of new ideas than automating their evaluation. Technical progress in the field of artificial intelligence (AI) leads to the development of human-like machines, which are able to work autonomously and mimic our cognitive behaviour. The progress and interest of managers, academics and the public has created an interest in AI in many industries. Many companies are therefore investing heavily to take

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advantage of AI through business model innovation. However, managers receive little support from the academic world when they want to implement AI in their company’s activities, which leads to an increased risk of project failure and undesirable results. Reim, Amstrom and Erikson (2020) aim to provide a deeper insight into AI and how it can be used as a catalyst for business model innovation. Due to the increasing range and variety of available published material, a literature study has been conducted to collect the current knowledge within AI business model innovation. The results are presented in a step-by-step plan to guide the implementation of AI in business operations. Their findings suggest four steps in implementing AI: (1) understand AI and the organizational capabilities needed for digital transformation; (2) understand current BMI, potential for BMI, and the role of the business ecosystem; (3) develop and refine capabilities needed to implement AI; and (4) reach organizational acceptance and develop internal competencies.

4.2. Bitcoin Bitcoin has essentially become successful. The most interesting thing about the Bitcoin is that it encourages people to participate through a positive feedback loop curve of economic incentives (Lim and Janse 2019). In a post on the P2PFoundation forum on February 18, 2019, Satoshi Nakamoto states that Bitcoin also resembles precious metals such as gold and silver. Instead of there being a central institute that changes the offer in order to keep the value somewhat equal, the offer has already been determined in advance in the Bitcoin software, and the value of Bitcoin thus changes. The limited offer creates potential for a positive feedback loop where the greater use of Bitcoin leads to a higher value, and this higher value in turn attracts more users wishing to benefit from an increasing price (Lim and Janse 2019). This loop ensures that the Bitcoin network has become an organic system that sustains itself without a party enforcing participation. It looks like this: (a) there is greater confidence in the Bitcoin network, causing a greater demand for Bitcoin; (b) this increases the Bitcoin price; (c) Bitcoin’s higher price makes it more cost-effective to mine Bitcoin. Because of this, more people will try to mine Bitcoin; (d) because more is mined, the total computer power supplied to the network increases; and (e) this leads to the Bitcoin network becoming more secure. Performing a 51% attack on the network becomes more difficult. In addition, the difficulty of mining is also increased when more total

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computer power is used to mine. Due to the higher level of difficulty, a block will still be created on average every 10 minutes, with an additional 12.5 Bitcoin currently in circulation. Bitcoin inflation also remains limited because Bitcoin is halved every four years; so there cannot be more than about 21 million Bitcoin in total. Better security and the limited inflation of Bitcoin lead to more confidence in the Bitcoin network (Lin and Janse 2019).

4.3. Bitcoin SV Bitcoin SV (BSV) is the result of a vision interpretation within Bitcoin. In 2017, Bitcoin implemented a fork, or split, which created Bitcoin Cash. A year later, Bitcoin Cash has developed a new vision interpretation, and a new division has emerged, namely Bitcoin SV. The SV stands for ‘Satoshi Vision’, and they call themselves the Bitcoin as it was originally intended. The team behind Bitcoin SV is developing plenty of new innovations, which is very positive for the future. The Bitcoin SV future price will further depend on how the developments within Bitcoin SV and in the market will proceed. In any case, the plans and expectations for 2021 – 2025 look good. Many are therefore already choosing to step up to the expectations for 2021. Following this, Bitcoin SV has developed a Bitcoin SC Massive Open Online Course in four parts (https://mooc.saxion.nl/courses/course-v1:SAXION+BC1), which was launched on February 5, 2021 (Veuger and Bitcoin SV 2021) in the Closing Ceremony of Blockchain Week 2021 (Veuger, Kos and Nguyen 2021). Making a forecast of Bitcoin SV’s price expectation is comparable to the equity market, as it is largely influenceable by the market. However, by looking at developments that have already been realized over the past two years, new plans, new partnerships and other important issues that have an impact on the price, an indication can be given. An exact Bitcoin SV forecast in terms of price cannot be indicated, but it is certain that a price increase of 100% – 300% is realistic within a period of 1 to 2 years. Investors also look at a longer timeframe of around 5 years when investing. This is a consideration for a longer term than, for example, the price expectation in 2025.

4.4. Decentralized Finance Decentralized Finance (DeFi) dissolves outdated financial services, combining the resulting components into applications that operate

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transparently without intermediaries. The rapid expansion of DeFi has led many application leaders to wonder whether it justifies the hype. Gartner (2020) has investigated this count and arrived at three findings: (1) DeFi applications include digital assets, smart contracts and open-source protocols that are used to exchange value in a reliable, trustworthy manner between anonymous parties, (2) DeFi implements Packaged Business Capabilities (PBCs) in an architectural manner, building blocks that can be dynamically assembled into applications, using various pre-built components and functions, and (3) the DeFi market is embryonic and the technology immature. Ethereum 2.0 is still not ready for deployment, and user interfaces are complex and difficult to navigate. Nevertheless, innovation in this area is very fast, and developments follow each other quickly. For example, DeFi-supported stablecoins grew from $2 billion in 2019 to well above $10 billion in July 2020. Stakeholders interested in benefiting from decentralized Blockchain applications should think about the following (Gartner 2020): Prepare to integrate DeFi into application portfolios if there are PBCs that uniquely solve an existing problem or create a new business opportunity. By the end of 2021, DeFi technology will be ready for early corporate adoption, provided that the regulations are clear. Integrate DeFi PBCs with existing centralized financial (CeFi) operations to support efficient, transparent, peer-to-peer versions of traditional financial products and all-new products that support new media of exchange and value. By 2022, DeFi technology will be ready for early business adoption as long as regulatory guidelines are clear (Gartner 2020a).

4.5. Anti-Money Laundering Anti-money laundering (AML) (Kenton and Anderson 2020) refers to laws, regulations and procedures designed to prevent criminals from concealing illegally obtained money as legitimate income. Although the anti-money laundering laws cover a limited number of transactions and criminal conduct, their implications are far-reaching. For example, banks and other financial institutions that lend or accept deposits from customers must comply with rules under the AML regulation that ensure that they do not cooperate in money laundering. Kenton and Anderson (2020) draw three conclusions: (1) anti-money laundering (AML) practices should deter criminals by making it harder for them to hide illegally obtained money, (2) criminals use money laundering to hide their crimes and the money they earn from them, and

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(3) the AML regulation requires financial institutions to monitor their customers’ transactions and to report suspicious financial activities.

4.6. Enterprise Resource Planning Enterprise Resource Planning (ERP) refers to a type of software that organizations use to manage day-to-day business activities such as accounting, purchasing, project and risk management, compliance and supply chain activities. A complete ERP system also includes Enterprise Performance Management (EPM) software to support planning, budgeting and reporting on the financial results of the organization. ERP systems connect business processes through data exchange. By collecting the organization’s shared transaction data from multiple sources, ERP systems eliminate data duplication and provide data integrity with one source of truth. Often, ERP systems are critical for the organization. Blockchain pushes the existing benefits of an ERP system to a different level: centralized business processes become accessible across multiple organizations. Integration enables optimization of all operations of multiple, different organizations, as well as trusted sharing of data. This is particularly beneficial when we think of financial transactions. Financial institutions and banks can enjoy more control over internal data processing, giving them a stronger grip on security. Given how financial institutions handle sensitive information, they can be sure with Blockchain that they provide their services with a minimum of risk.

4.7. Initial Coin Offering Initial Coin Offering (ICO) is a form of crowdfunding to raise capital with cryptocoins. In recent years, ICOs have become attractive. The purpose of an ICO is to raise capital to get the project of a starting company (a start-up) off the ground. With an ICO, a quantity of the crowdfunded cryptocoins is sold to investors in the form of tokens – series of numbers or characters – in exchange for legal tender or other cryptocoins. These tokens will be promoted as future functional currency units if the ICO financing objective is met and the project is launched.

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4.8. Internet of Things Can financial services benefit from Internet of Things (IoT) technology? Yes, and not only from more and better data about the customers’ assets. IoT applications are intended to transform finances and data along with every other sector. But according to the Deloitte Center for Financial Services survey (2021), there are short-term and long-term opportunities for the financial services sector to see the benefits of IoT. Deloitte (2015) already issued in 2015 an overview of where IoT works well, bottlenecks that companies may encounter when using IoT data and possible use cases for future adoption. Within the Saxion minor ‘Digital Business Models and Blockchain’, students regularly conduct surveys in collaboration with the professional field and offer solutions (Haaker and Veuger 2021).

4.9. Payment Services Directive 2 Payment Services Directive 2 (PSD2) was implemented in Europe with the aim of creating safer payments and offering better financial services to customers. The Directive entered into force on January 13, 2018 and simplified the rules and regulations for payment services across the European Union. Since then, numerous articles and e-books on PSD2 have been published explaining the concept to the general public. The Payment Services Directive is an EU directive managed by the European Commission to regulate payment services. The objective of PSD2 is to increase pan-European participation in the payment industry and to harmonize the rights and protection of consumers. PSD2 aims for (a) simplifying banking rules to regulate payment services across the European Union, (b) enhancing customer safety and providing them with a better banking experience, and (c) promoting competition and innovation in financial services.

4.10. Purchase to Pay Purchase-to-pay (P2P), i.e., the Purchase-to-Pay process, is understood to mean the entire process of ordering, purchasing and purchasing up to and including automatic payment of the invoice. A synonym for this concept is also ‘procure to pay’ or ‘procurement’.

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4.11. Robot Process Automation Robotic Process Automation (RPA) occurs when basic tasks are automated via software or hardware systems operating in different applications. The software or robot can be taught a workflow with multiple steps and applications, such as accepting received forms, sending a receipt message, checking the form for completeness, submitting the form in a folder and updating a spreadsheet with the name of the form, the date submitted, and so on. RPA software is designed to reduce the burden on employees in the area of repetitive, simple tasks.

5. Financial Professional The financial professional of the future fulfils various roles in the acquisition, operation and disposition process(es) (NBA 2017, 2016, 2019), whereby certain specific and general competencies are more or less relevant. A competence is the ability to perform adequate tasks that are an important component of a function, role or responsibility. Four professional-specific competencies apply for the real estate manager: financial management and financial operation, financial mediation and financial services, financial innovation and redevelopment, financial investment and financial consulting. Two general competencies apply for the financial professional of the future: (1) Social and communicative competence and (2) Self-management competence. The following roles will be fulfilled by the financial professional of the future as a service provider, contract manager, representative of interests, mediator, network hub and as a consultant to the organization. A follow-up study (NBA 2019) took place at the beginning of 2019. This 2019 study does not follow up on the conclusions of the 2018 report, which means it can be asserted that the developments of Blockchain are identified but not (yet) recognized. A worrying observation. In 2018, the new NBA knowledge group mapped the technology landscape for the auditing profession based on McKinsey’s ‘3 horizons of innovation’ model. The result reveals that several large offices are already working extensively on technologies from horizon two (analytics and process mining) and that a number of digital developments are already common, while the SME auditor does not (yet) notice this to any great degree.

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6. First Exploratory Study in 2020 The first exploratory study on technological developments of the financial professional took place in 2020 (Veuger 2020a, 2020b, 2020c, 2020d, 2020e, 2020f), among all members of the Werkveldcommissie (‘Work Field Committee’; WVC) of the Accountancy (AC), Finance, Tax and Advice (FTA, formerly Fiscal Law and Economics) and Finance & Control (FC) programmes of the Academy of Finance, Economics and Management (FEM) at Saxion University of Applied Sciences. In the study, the WVCs consisted of 31 regional and nationally represented offices according to the overview below. Table 2. Participating offices survey Training Accountancy (AC)

Offices Jong & Laan, BDO, KroeseWevers, Mazars, De Kok, EY, A&L, Koers!, Eshuis, KPMG, Baker Tilly and 2assure.

Finance, Tax and Advice (FTA) Finance & Control (FC)

Mazars, Jong & Laan, Saxion, KPMG, PWC, EY, Verhoeven Ruesink Daniel, Jongbloed and the Tax Department. Sutfene, Ten Hag, Aebi Schmidt, Municipality of Lochem, Achmea, Municipality of Hengelo, Theaterhotel Almelo and the Municipality of Enschede.

In total from the three programmes, the 31 WVC members were enrolled with a response of 41.9% (n = 1331), although it should be noted that the response varied per programme: AC 50.0% (n = 612), FTA 18.1% (n = 211) and FC 62.5% (n = 58). All responses received at that time were 100% usable. When we look at the size of the respondents’ organizations, the number of branches and the number of full-time equivalents (FTEs) represented in the 2020 survey, the following picture is created in Table 2. There are differences to note in the number of branches of the represented degree programmes. In conclusion, it can be said that a good general but also a specific comparison is possible. Large offices provide a relatively strong picture of the number of FTEs for Finance, Tax and Advice. At the time of response, the respondents had different functions as can be seen in Table 3. This shows that professionals are represented at both operational, tactical and strategic levels and thus give a completely typical view of the financial organizations. A number of conclusions can be drawn from this exploratory study in 2020 (Veuger 2020a and 2021): (1) We have encountered a positive attitude of the financial professional with regard to the state of digitization and

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Blockchain, (2) Attention to soft skills was, is and remains a point of attention for both organizations and education, (3) The working environment slows down the evolution towards digitization and Blockchain, and (4) The sector runs the risk of resembling the proverbial ostrich that sticks its head in the sand when it sees danger. Table 3. Number of branches and FTEs respondents Training Number of branches respondents Accountancy (AC) 61 Finance, Tax and Advice (FTA) 4 Finance & Control (FC) 9 Total 74 For FTA, the same company responded twice and was therefore included order not to give a distorted picture.

FTEs 9,432 5,000 2,607 17,039 once in this overview in

Table 4. Represented functions respondents Training Accountancy (AC) Finance, Tax and Advice (FTA) Finance & Control (FC)

Represented functions respondents Accountant, senior manager Audit & Assurance, junior IT auditor, register accountant, partner and professional accountant director. Partner TAX-BTA and Senior Manager Tax. Manager Financial Administration & Financial Control Investments, Project Manager Planning and Control & Planning and Physical Control, Controller (2x) and Group Manager.

In 2020, a similar study was published relative to the study described above. For the fifth consecutive year, Controllers Magazine and Executive Finance (Executive Finance CM 2020), together with their supporters, investigated what concerns them as finance professionals when it comes to technology in their work. Corona has accelerated some new controls and reports, while projects have been postponed and investments frozen. More and more companies are seeing the possibilities of automation and other technological developments. Five years ago, 60 percent of financial professional found that their employer had little or no focus on new technological developments. There really has already been a shift in that. The more than 300 respondents see developments as financial professionals fully as an opportunity and think such developments will make them a better business partner.

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7. Exploratory Studies in 2020 and 2021 The exploratory research in 2020 received a lot of attention in trade journals in the Netherlands and in the international context of academic journals, webinars and conferences (Veuger 2021, 2020a, 2020b, 2020c, 2020d, 2020e). This led to this research in 2021, including a reorientation on the structure of the research. Due to the further development of the faculty in 2020 and 2021, the questions from the research were further professionalized, peer reviewed by experts and supplemented. In addition, it is interesting and scientifically important to place the research more in both a national and international perspective, both with regard to professional groups and with regard to other studies, such as that of Controllers Magazine (Executive Finance CM 2020). After various inventorying discussions at the end of 2020, whether or not at the request of the stakeholders, this led to a reorientation on the conducting of the research. At the beginning of 2021, the study was therefore extended almost simultaneously to: (a) all members of the Werkveldcommissie (Werkveldcommissie; WVC) of the Accountancy (AC), Finance, Tax and Advice (FTA, formerly Fiscal Law and Economics) and Finance & Control (FC) programmes of the Academy of Finance, Economics and Management (FEM) at Saxion University of Applied Sciences, (b) all members of the Stichting Register Arbeidsdeskundigen (SRA), a network organization of 375 independent audit firms with 900 branches in the Netherlands, and (c) international sister universities of Saxion University of Applied Sciences. Invitees have been asked to respond to the Gartner Hype Cycles (Gartner 2020b) model, which is a graphical representation of the maturity and adoption of technologies and applications, showing how they are potentially relevant to solving real business problems and seizing new opportunities. The Gartner Hype Cycle methodology gives a picture of how a technology or application will evolve over time. In addition, the model provides a good source of insight to manage its deployment within the context of specific business objectives.

8. Exploratory Study in 2021 8.1. Response The survey took place in February to March 2021 among all members of the Werkveldcommissie (Werkveldcommissie; Werkveldcommissie; WVC) of the Accountancy (AC), Finance, Tax and Advice (FTA, formerly Fiscal Law

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and Economics) and Finance & Control (FC) programmes of the Academy of Finance, Economics and Management (FEM) at Saxion University of Applied Sciences, 15 involved strategic international universities of Saxion Finance & Control and the SRA, a network organization of 375 independent audit firms with 900 branches in the Netherlands. A reminder was sent once. Table 5. Response Organizations SRA Q accountants and tax consultants Boonzaaijer & Merkus Accountants & Advisors Company Steens & Partners Accountants en Adviseurs Vermetten Accountants Accountants voor de Gezondheidszorg BV Louer Accountancy Steens IT Audit & Consultancy FAIRnumbers Hols de Man accountants | tax & business consultants Van der Laan Groep Alfa Accountants De Jong & Laan BDO Accountants & Adviseurs Baker Tilly Jongbloed Fiscaal Juristen NV Eshuis Accountants en Adviseurs Linden Accountants BV JAN© Accountants en Adviseurs BV Numlock ANB Accountants Crowe Peak Qwintess NV de Jong & Laan AccountXperts Smink Kok Lentink accountants en belastingadviseurs Boesveld van der Burg Accountancy en Belastingadviezen Westerveld en Vossers SRL accountants Van Velzen accountants & adviseurs Ozlo Accountants TweeDee accountants & belastingadviseurs SNP Adviseurs

Universities BINUS UNIVERSITY University of Rijeka UCLL Pusan National University Bern University of Applied Sciences, BFH National Economics University Sheridan College - Pilon School of Business IUT GEA Fontainebleau (PARIS 12) Henallux University College National Economics University UAS Upper Austria, School of Business and Management Thomas More University of Applied Sciences Petra Christian University Università Politecnica delle Marche Banking Academy of Vietnam

Digitization and Blockchain in Finance, The Netherlands in 2021 Organizations Cooster Mazars Enschede Municipality of Lochem Stichting Sensire Mazars EY Belastingadviseurs

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Universities

Figure 2. Functions of respondents.

The response (n = 54) and represented offices and universities is included in the overview below. This overall response of n = 541 is 74% higher than in the study in 2020 with n = 31.2 In total, the response in 2021 is 12.8% of a

1

2

The number of responses n compared to the response (for example 54 or 57) may differ for different questions in view of the questioning. In total from the three programmes, the 31 WVC members were enrolled with a response of 41.9% (n = 1331), although it should be noted that the response varied per programme: AC

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total number of potential responses: 31 WVC, 375 SRA and 15 strategically involved universities, a total of 421. All the responses received were 100% usable.3

Figure 3. Educational level of respondents.

When we look at the respondents’ functions, the following picture is created in Table 2. The group of Director/Owner/Partner/CEO and Accountant (RA/AA) represents 50.1% (n = 2954) of the total number of respondents. In addition, the Otherwise group represents 35.1% (n = 2054) as a third large group consisting of, among others, tax advisor, lecturer researcher, international coordinator, international office partner management, officer, tax advisor, teacher, lecture in finance, coordinator EU, head of international office, full professor, IT management assistant-accountant (AA), partner and system administrator. A representative group. At the time of response, the respondents had different training levels according to Table 3. This shows that the level is high: university, postgraduate, higher professional education and MBA with 94.7% (n = 5457).

50.0% (n = 612), FTA 18.1% (n = 211) and FC 62.5% (n = 58). All the responses received were 100% usable. 3 An explanation for a lower response rate of 12.8% in 2020 compared to 41.9% in 2021 can be explained by the high number of SRAs in which members were asked to participate in the research without obligation via a newsletter and the WVC and universities were specifically approached in the name of a professional.

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The size of the respondents’ organizations are evenly distributed over the 2-10 employees up to and including more than 1,000 employees, with the group of 11-25 and 501-1,000 employees being relatively more represented. This does not in itself produce any particular conclusions other than that there is a balanced representation in terms of the size of organizations.

Figure 4. Size of organizations.

Looking further at which industry the organizations represent, this is for the vast majority Business Services 66.7% (n = 3854) followed by Education 26.3% (n = 1557).

8.2. Current Situation Respondents have been asked – as in the comparable study in 2020 – to respond to the Gartner Hype Cycles4 model, which is a graphical representation of the maturity and adoption of technologies and applications, how they are potentially relevant to solving real business problems and 4

https://www.gartner.com/en/research/methodologies/gartner-hype-cycle.

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utilization of new opportunities. The Gartner Hype Cycle methodology gives a picture of how a technology or application will evolve over time. In addition, the model provides a good source of insight to manage its deployment within the context of specific business objectives. The model taps into the five most important phases of a technology’s life cycle. •

•

•

•

•

Innovation Trigger: A potential breakthrough in technology begins. Early proof-of-concept stories and the interest of the media lead to considerable publicity. Often, there are no usable products and commercial viability has not been proven. Peak of Inflated Expectations: Early publicity yields a number of success stories - often accompanied by dozens of failures. Some companies take action; many companies do not. Trough of Disillusion: Interest decreases as the experiments and implementations do not lead to results. Producers of the technology shake up or fail. Investments will only continue if the surviving providers improve their products to the satisfaction of the early adopters. Slope of Enlightenment: More examples of how the technology can benefit the company are beginning to crystallize and are more commonly understood. The second- and third-generation products appear from technology providers. More companies finance pilots; conservative companies remain cautious. Plateau of Productivity: Mainstream adoption gets underway. The criteria for assessing the viability of suppliers are more clearly defined. The broad applicability and relevance of the technology on the market is clearly bearing fruit.

8.2.1. Society with Digitization and Blockchain Respondents were asked to indicate where they think society stands in 2021 with regard to digitization. The following figure represents all responses from all respondents. The majority of 55.1% (n = 2749) indicate that digital developments in society are mainly in the last two phases: Slope of Enlightenment and Plateau of Productivity. A not-insignificant proportion of respondents still see a considerable proportion of 24.5% in the Peak of Inflated Expectations (n = 1249), which may indicate media attention with or without clear source references and/or general expectations. If we compare this

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conclusion with the research from 2020, we see a significant shift to the last two phases, which indicates a more adoption of technological developments.

Figure 2. Hype Cycle maturity, adoption of digital technologies and applications in society with the number of respondents per phase.

Figure 3. Hype Cycle maturity, adoption of Blockchain technologies and applications in society with the number of respondents per phase.

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Specifically looking at the maturity and adoption of Blockchain technologies and applications in society with the number of respondents per phase, compared to the general developments of technologies and applications in society, we see that Blockchain is predominantly in the first three phases of developments: 48.6% (n = 4049). Compared to the same research in 2020 (Veuger 2020), we see in 2021 a clear shift to phases 2, 3 and 4 instead of primarily an interpretation in phase 1, which indicates a greater adoption of Blockchain in society.

8.2.2. Organization with Digitization and Blockchain Respondents were asked to indicate where they think their organization stands in 2021 with regard to digitization. The following figure represents all responses from all respondents. This picture shows that the majority of respondents (n = 2446) finance more company pilot projects and that conservative companies remain cautious. Compared to the same research in 2020 (Veuger 2020), we see a much heavier emphasis on the fourth phase. A considerable shift in 2021.

Figure 4. Hype Cycle maturity, adoption of digital technologies and applications in the organization with the number of respondents per phase.

Specifically looking at the maturity and adoption of Blockchain technologies and applications in the organization with the number of respondents per phase, compared to the general developments of technologies and applications in the organization, we see that Blockchain is predominantly

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in the first three phases of developments: 53.3% (n = 2445). Compared to the same research in 2020 (Veuger 2020), we see a comparable picture in which a clear shift to phases 3 and 4 can now be seen. This indicates more adoption of Blockchain in the organization compared to the research in 2021.

Figure 5. Hype Cycle maturity, adoption of Blockchain technologies and applications in the organization with the number of respondents per phase.

8.2.3. Professional with Digitization and Blockchain Respondents were asked to indicate where they stand as a professional in 2021 with regard to digitization. The following figure represents all responses from all respondents. This picture shows that the majority of respondents (n = 2740) finance more company pilot projects and that conservative companies remain cautious and that the broad applicability and relevance of the technology on the market is clearly bearing fruit (phases 4 and 5). Based on their position, respondents were particularly positive about where they stand compared to digital developments. Compared to the same research in 2020 (Veuger 2020), we see an image in which now more is a clear shift to phases 4 and 5. This indicates clear adoption of digital technologies compared to the research in 2021. Looking more specifically at the maturity and adoption of Blockchain technologies and applications of the professional with the number of respondents per phase, we see that this is balanced over phases 2, 3, 4 and 5 with a striking response in phase 1. Compared to the same research in 2020 (Veuger 2020), a shifting picture to phases 2, 3 and 4 can be seen. This

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indicates more adoption of Blockchain in the organization compared to the research in 2020.

Figure 6. Hype Cycle maturity, adoption of digital technologies and applications as a professional with the number of respondents per phase.

Figure 7. Hype Cycle maturity, adoption of Blockchain technologies and applications as a professional with the number of respondents per phase.

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8.3. Terms Affecting the Financial Professional and Opportunities Also investigated is when people expect that digitization will have an effect on the new professional, i.e., the recent graduate from a university of applied sciences (HBO) and in particular Blockchain. Clear developments can be seen mainly in 2021 on the broad scope of digitization in general and to a lesser extent in the years thereafter, which may indicate that the trends are expected to be deployed in 2021. Blockchain developments are expected especially in the next four years.

Figure 8. Effects of digitization and Blockchain on the new professional.

Also investigated in further detail is which different forms of digitization will have an impact on the new and existing financial professional and in what time frame. A time horizon for the next five years has been maintained for this. For each item, the number of responses for when one would expect what in a particular year is shown in the figure below. Cybersecurity (28), ethics (24), data analytics (23), accounting software (23), ERP (21) and big data (20) are expected to play a major role for 2021. For 2021, this is mainly Payment

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Services Directive (P2P) (9), Purchase to pay process (8) and Robot Process Automation (8) and in 2022 Blockchain (11) and the Internet of Things (11). Looking at Blockchain, we see that expectations in 2021, 2022 and 2023 affect the financial professional faster than all other digital developments on all fronts. The scores for 2021 are shown in detail in the overview below, as well as in detail over the coming years.

Figure 9. Scores for 2021 in detail.

18 19 20

16 17

12 13 14 15

# 1 2 3 4 5 6 7 8 9 10 11

Question Artificial Intelligence (AI) Anti-money laundering (AML) Accounting software Big Data Blockchain Internet of Things Currency Cybersecurity Data Analytics Decentralized Finance (DeFi) Enterprise Resource Planning (ERP) Fintech Initial Coin Offerings (ICO) Know Your Customer (KYC) Payment Services Directive (P2P) lending Purchase to pay process RegTech (information technology used to improve regulatory processes) Robotic Process Automation (RPA) Ethics (application) Bitcoin SV (Satoshi Vision) 12 5 20 9

8 14 23 20 1 11 9 28 23 5 21

24.32% 9 61.54% 24 13.51% 5

37.84% 14 18.42% 7

33.33% 13.16% 52.63% 23.68%

2021 20.51% 36.84% 60.53% 51.28% 2.56% 28.21% 23.68% 71.79% 58.97% 13.16% 55.26% 4 0 3 9

5 5 7 4 5 4 5 4 7 4 2

21.62% 8 12.82% 5 10.81% 4

21.62% 8 5.26% 2

11.11% 0.00% 7.89% 23.68%

2022 12.82% 13.16% 18.42% 10.26% 12.82% 10.26% 13.16% 10.26% 17.95% 10.53% 5.26%

2 2

3 3 5 3

8 5 3 8 11 11 4 1 7 4 2

10.81% 4 5.13% 2 8.11% 3

5.41% 5.26%

8.33% 7.89% 13.16% 7.89%

2023 20.51% 13.16% 7.89% 20.51% 28.21% 28.21% 10.53% 2.56% 17.95% 10.53% 5.26% 2 1 1 3

6 2 3 3 6 3 1 2 0 0 3

10.81% 4 5.13% 2 16.22% 6

5.41% 2 10.53% 4

5.56% 2.63% 2.63% 7.89%

2024 15.38% 5.26% 7.89% 7.69% 15.38% 7.69% 2.63% 5.13% 0.00% 0.00% 7.89%

Table 6. Scores for 2021-2025 in detail

4 11 2 2

11 7 1 3 15 4 5 3 1 6 1

13.51% 5 2.56% 1 27.03% 10

5.41% 2 15.79% 6

11.11% 28.95% 5.26% 5.26%

2025 28.21% 18.42% 2.63% 7.69% 38.46% 10.26% 13.16% 7.69% 2.56% 15.79% 2.63% 11 18 7 12

1 5 1 1 1 6 14 1 1 19 9

18.92% 7 12.82% 5 24.32% 9

24.32% 9 44.74% 17

30.56% 47.37% 18.42% 31.58%

N/A 2.56% 13.16% 2.63% 2.56% 2.56% 15.38% 36.84% 2.56% 2.56% 50.00% 23.68%

37 39 37

37 38

36 38 38 38

Total 39 38 38 39 39 39 38 39 39 38 38

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Figure 10. Influence of different digitizations on the new and existing financial professional for the next five years.

8.4. Investments in Digitization Based on the many different digitizations as shown in the previous table, the question has been asked of what the respondents’ organization invests most in. It is noteworthy that most investments take place in accounting software (25%, n = 2957) followed by data analytics (18.1%, n = 2157) and cybersecurity (10.3%, n = 1257). The current attention to ethics and the lack of attention to investments in Blockchain, currency, Initial Coin Offerings (ICO), Payment

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Services Directive (P2P), Bitcoin and Bitcoin SV are also striking. This noninvestment, which is mainly related to digital currencies, may indicate that the organizations surveyed do not deal with this as an organization or as a professional.

Figure 11. Most investments in digitization.

It is also interesting to see what obstacles there are for professionals in relation to automation. In particular, adoption of digital technologies (29.0%, n = 2057) followed by insufficiently equipped staff (23.2%, n = 1657), insufficient time (18.8%, n = 1357) and insufficient knowledge (17.4%, 1257). In conclusion, it can be stated that in particular the combination of capacity and insufficient knowledge and equipped personnel (49.3%) is more decisive than adoption (29.0%).

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Figure 12. Obstacles in automation.

When investing in new technological developments, it is mainly the management team (42.0%, n = 2169), the CEO (28%, n = 1469) and the CFO (12.0%, n = 669) who decide. When the implementations of the new technologies are mainly done jointly (69.2%, n = 2750) or by the ICT department (28.2%, n = 1150).

Conclusion Five conclusions can be drawn from the study from the current situation in (1) society, (2) organizations, (3) as a professional with digitization and in particular Blockchain, (4) terms affecting the financial professional and (5) investments in digitization. (1) Current Situation in Society with Digitization and Blockchain: Relevance of the Technology on the Market Is Clearly Bearing Fruit Majority indicate that digital developments in society are mainly in the last two phases of the Gartner Hype Cycle: Slope of Enlightenment and Plateau of Productivity. A not-insignificant proportion of respondents still see a considerable proportion in the Peak of Inflated Expectations, which may indicate media attention with or without clear source references and/or general expectations. If we compare this conclusion with the research from 2020, we see a significant shift to the last two phases, which indicates a more adoption of technological developments. Blockchain is predominantly in the first three

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phases of developments. Compared to the same research in 2020 (Veuger 2020), we see a clear shift to phases 2, 3 and 4 instead of primarily an interpretation in phase 1 in 2021. This indicates greater adoption of Blockchain in society. (2) Current Situation in the Organization with Digitization and Blockchain: Heavier Emphasis on Phases 3 and 4 The majority of respondents see more company pilot financing and that conservative companies remain cautious. Compared to the same research in 2020, we see a much heavier emphasis on the fourth phase. A considerable shift in 2021. Blockchain is predominantly in the first phase of developments. Compared to the same research in 2020, we see a comparable picture in which a clear shift to phases 3 and 4 can now be seen. This indicates more adoption of Blockchain in the organization compared to the research in 2021. (3) Current Situation as a Professional with Digitization and Blockchain: More Adoption Respondents mainly see that more companies finance pilot projects and that conservative companies remain cautious and that the broad applicability and relevance of the technology on the market is clearly bearing fruit (phases 4 and 5). Based on their position, respondents were particularly positive about where they stand compared to digital developments. Compared to the same research in 2020, we see an image in which now more is a clear shift to phases 4 and 5. This indicates clear adoption of digital technologies compared to the research in 2021. Looking more specifically at the maturity and adoption of Blockchain technologies and applications of the professional with the number of respondents per phase, we see that this is balanced over phases 2, 3, 4 and 5 with a striking response in phase 1. Compared to the same research in 2020, a shifting picture to phases 2, 3 and 4 can be seen. This indicates more adoption of Blockchain in the organization compared to the research in 2020. (4) Terms Affecting the Financial Professional and Opportunities: Already Very Large Clear developments can be seen mainly in 2021 on the broad scope of digitization in general and to a lesser extent in the years thereafter, which may indicate that the trends are expected to be deployed in 2021. Blockchain developments are expected especially in the next four years. Cybersecurity, ethics, data analytics, accounting software, ERP and big data are expected to play a major role for 2021. For 2021, this is mainly Payment Services

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Directive (P2P), Purchase to pay process and Robot Process Automation. For 2022, this will mainly be Blockchain and the Internet of Things. Looking at Blockchain, we see that expectations in 2021, 2022 and 2023 affect the financial professional faster than all other digital developments on all fronts. (5) Investments in Digitization: Insufficient Knowledge, Capacity and Qualified Personnel In conclusion, it can be stated that in particular the combination of capacity and insufficient knowledge and equipped personnel (49.3%) is more decisive than adoption (29.0%). It is noteworthy that most investments take place in accounting software followed by data analytics and cybersecurity. The current attention to ethics and the lack of attention to investments in Blockchain, currency, Initial Coin Offerings (ICO), Payment Services Directive (P2P), Bitcoin and Bitcoin SV are also striking. These non-investments, mainly related to digital currencies, may indicate that the organizations surveyed do not deal with this as an organization or as a professional. When investing in new technological developments, it is mainly the management team, CEO and CFO who decide, while the implementations of the new technologies are mainly done jointly or by the ICT department.

References Adrian, T. and T. Mancini-Griffolii (2019), The rise of Digital Money. Fintech Notes. USA: IMF. AppleDaily (2020), Jack Ma’s speech at the Bund Summit 2020 in Shanghai. Jack Ma’s speech at the Bund Summit 2020 in Shanghai ｜ Apple Daily. Bessems, P. and W. Bril (2017), Blockchain organiseren. Fundamenten voor een nieuwe socialeconomische orde [Organizing Blockchain. Foundations for a new socioeconomic order]. MijnManagementboek. Boden, M.A. (1998), Creativity and artificial intelligence. https://doi.org/10.1016/S00043702(98)00055-1. Deloitte (2021), The derivative effect. How financial services can make IoT technology pay off. The Internet of Things and Financial Services | Deloitte US. Deloitte (2015), The derivative effect: How financial services can make IoT technology pay off. The Internet of Things in the financial services industry. The Internet of Things in the financial services industry | Deloitte Insights. Elsevier (2021), Hebben banken nog toekomst? [Do banks still have a future?] Diemen: Elsevier Weekblad. Elsevier (2019), Facebook word bank. P. 22. Amsterdam: Elsevier. Executive Finance CM (2020), IT-Vision 2020. Exclusief onderzoek CM: Controllers Magazine en Executive Finance. Onderzoek naar de invloed van technologische

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ontwikkelingen op financials [IT-Vision 2020. Exclusive research CM: Controllers Magazine and Executive Finance. Research into the influence of technological developments on financials]. Alphen aan de Rijn: CM. Gartner (2020), Hype Cycle for Blockchain Technologies, 2020 (gartner.com). Gartner (2020a), What You Need to Know About Blockchain DeFi. (gartner.com). Gartner (2020b), Gartner Hype Cycle. Hype Cycle Research Methodology (gartner.com). Gartner (2018), The Reality of Blockchain. USA: Gartner. GitHun (2019), Blockchain Papers. GitHub - decrypto-org/blockchain-papers: A curated list of academic blockchain-related papers. Haaker, T. and J. Veuger, editors (2021), Minoren 2021: Een frisse blijk van Saxion studenten op de digitale en duurzame uitdagingen van bedrijven [Minors 2021: A fresh look from Saxion students on the digital and sustainable challenges of companies]. E-book. Saxion University of Applied Sciences. Ebook Minoren2021 Saxion Hogeschool (pdf-online.nl). Hayek, F. (1976), Choice in Currency. A way to stop inflation. London: The Institute of Economic Affairs. Het Financieele Dagblad (2019a), ING stapt in blockchainbedrijf [ING enters blockchain company]. Amsterdam: Het Financieele Dagblad. Het Financieele Dagblad (2019b), De moeilijke relatie tussen bureaucraat en cryptobel [The difficult relationship between bureaucrat and cryptobel]. Amsterdam: Het Financieele Dagblad. Het Financieele Dagblad (2019c), Bitcoin heeft matige week na kritiek op Facebook libra [Bitcoin has a mediocre week after criticism of Facebook libra]. Amsterdam: Het Financieele Dagblad. Het Financieele Dagblad (2019d), Blockchain overspoelt het Europees Patentbureau [Blockchain is flooding the European Patent Office]. Amsterdam: Het Financieele Dagblad. Het Financieele Dagblad (2019e), Wie nu nog niet met tech praat, is te laat [If you don't talk to tech yet, it's too late]. Amsterdam: Het Financieele Dagblad. Het Financieele Dagblad (2019f), Google mag banktransacties Europeanen gaan bekijken [Google is allowed to view bank transactions for Europeans]. Amsterdam: Het Financieele Dagblad. Het Financieele Dagblad (2019g), Met 5G in aantocht heeft de EU nu snel een krachtiger agentschap voor cyberveiligheid nodig [With 5G on the way, the EU now needs a stronger cybersecurity agency quickly]. Amsterdam: Het Financieele Dagblad. Het Financieele Dagblad (2019h), Facebook-partners distantiëren zich van de omstreden libramunt [Facebook partners distance themselves from the controversial libramunt]. Amsterdam: Het Financieele Dagblad. Laan, S. van der Laan (2019), Straks betalen met de libra? [Pay soon with the libra?] Diemen: Elsevier Weekblad. Lim, C.L. and A. Janse (2019), Basisboek Blockchain [Blockchain Basic Book]. Enschede: Saxion Hogeschool. Maten, J. ter, C. Barkel and J. Veuger (2019), Blockchain te solitair bekeken [Blockchain viewed too solitary]. Essay. Saxion University of Applied Sciences. Nakamato, S. (2008), Bitcoin: a peer-to-peer electronic cash system. White paper.

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NBA (Nederlandse Beroepsorganisatie voor Accountants) (2019), NBA: ‘Sector kenmerkt zich door grote veranderdynamiek’ [NBA: ‘Sector is characterized by major change dynamics’]. Amsterdam: NBA. https://www.accountant.nl/nieuws/2019/4/nba-sectorkenmerkt-zich-door-grote-veranderdynamiek/. NBA (Nederlandse Beroepsorganisatie voor Accountants) (2018), Toekomstvisie op de het beroep van de Financieel Professional [Future vision of the profession of the Financial Professional]. Amsterdam: NBA. NBA (Nederlandse Beroepsorganisatie voor Accountants) (2016), Een beroep met toekomst [A profession with a future]. Amsterdam: NBA. NRC (2019), De Libra? Dat is voor de Chinezen niets bijzonders [The Libra? That's nothing special for the Chinese]. Amsterdam: NRC Handelsblad. Pomp. M. (2019), Ondernemen in het tijdperk van digitaal Darwinisme [Doing business in the age of digital Darwinism]. Bijlage bij Elsevier. Amsterdam: Elsevier. Pomp, M. and R. Verhaert (2018), Blockchain in de praktijk [Blockchain in practice]. The Hague: Sdu Uitgevers. Reim, W. J. Amstrom and O. Erikson (2020), Implementation of Artificial Intelligence (AI): A Roadmap for Business Model Innovation. AI 2020, 1(2), 180-191; https://doi.org/ 10.3390/ai1020011. Reuters (2021), ECB’s Lagarde calls for regulating Bitcoin’s “funny business”. ECB’s Lagarde calls for regulating Bitcoin’s “funny business” | Reuters. Schellekens, M., E. Tjong Tjing Tai, W. Kaufmann, F. Schemkes, R. Leenes (2019), Blockchain en het recht. Een verkenning van de reguleringsbehoefte [Blockchain and the law. An exploration of the regulatory need]. Tilburg University. Tweede Kamer (2019), Minisymposium De Tweede Kamer & Blockchain [Mini symposium The House of Representatives & Blockchain]. The Hague: Dienst Analyse en Onderzoek Tweede Kamer der Staten-Generaal. Veuger, J. 2021, Веугер Ян (2021), (Нидерланды) Блокчейн и финансы и децентрализованные финансы [(Netherlands) Blockchain & Finance and Decentralized Finance]. Moscow Russia. 5th International Scientific and Practical Conference Biennal ‘System Analysis in Economic 2020’. Veuger, J. (2020a), Added Value of Blockchain for Financial Professionals in the Netherlands. Series: Advances in Economics, Business and Management Research, volume 159. Proceedings of the Fifth International Conference on Economic and Business Management (FEBM 2020). Atlantic Press. https://doi.org/10.2991/aebmr.k. 201211.078. Veuger, J. (2020b), Added Value of Blockchain for Financial Professionals in The Netherlands. Speaker at: The Fifth International Conference on Economics and Business Management (FEBM 2020). October 18th 2020, Sanya, China. Veuger, J. (2020c), Blockchain Convergence. Keynote at: The Third International Research Conference on Business and Economics. Big Data for Social, Economic and Business Improvement: An Effort to Achieve Sustainable Development Goals in the Midst Global Turbulence. October 14th-15th 2020, Univeristas Diponegoro Fakultas Ekonomika Dan Busnis, Semarang, Indonesia. 150 participants. Letter of Appreciation: All participants appreciated and benefitted from your seminar. Certificate of Appreciation as a Keynote Speaker in The 3rd International Research

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Conference on Business and Economics (IRCBE) 2020. Prof. Suharnomo, Dean Faculty of Economics and Business Universitas Diponegoro Indonesia. Veuger, J. (2020d), Blockchain Convergence. Summer Short Course Program 2020. Achieving Sustainable Development Goals and Building Resilience in The Global Uncertainty. November 16th 2020, Univeristas Diponegoro Fakultas Ekonomika Dan Busnis, Semarang, Indonesia. 280 participants. Veuger, J. (2020e), Decentralized Finance. Short Course Program 2020. Achieving Sustainable Development Goals and Building Resilience in The Global Uncertainty. November 17th 2020, Univeristas Diponegoro Fakultas Ekonomika Dan Busnis, Semarang, Indonesia. 268 participants. Veuger, J. (2020), Added Value of Blockchain for Financial Professionals in the Netherlands. Series: Advances in Economics, Business and Management Research, volume 159. Proceedings of the Fifth International Conference on Economic and Business Management (FEBM 2020). Atlantic Press. https://doi.org/10.2991/aebmr.k. 201211.078. Veuger, J. (2020), Blockchain Convergentie. Public lecture on 17 January 2020 (84 p.). Deventer: Saxion University of Applied Sciences. https://www.saxion.nl/binaries/ content/assets/onderzoek/meer-onderzoek/blockchain/blockchain-convergentie-janveuger-2020.pdf. Veuger, J. (2019), Libra and Anxiety Rhetoric: Fear to be Eaten. Research & Development in Material Science, p. 1252-1255. Peer-reviewed. Impactfactor 3.153. RDMS. Crimson Publishers NY USA. https://crimsonpublishers.com/rdms/pdf/RDMS.000 782.pdf. Veuger, J. (2019), J. ter Maten and C. Barkel, Blockchain te solitair bekeken [Blockchain viewed too solitary]. Response to the Report Blockchain en recht (June 2019) commissioned by the Wetenschappelijk Onderzoek- en Documentatiecentrum (WODC) of the Ministry of Justice and Security. Essay. Saxion University of Applied Sciences. Veuger, J. and Bitcoin SV (2021), Bitcoin SV Massive Open Online Course. Bitcoin SV and Saxion UAS. https://youtu.be/hWrkvDLcDjM. Veuger, J., T. Kos and J. Nguyen (2021), Bitcoin SV MOOC launch. Bitcoin SV and Saxion UAS. https://youtu.be/DNX5PrElF0o. World Economic Forum (2019), Central Banks and Distributed Ledger Technology: How are Central Banks Exploring Blockchain Today. Switzerland: World Economic Forum.

Note ‘A pre review of this study was previously published under: Veuger, J. (2021), Pre-review Research Digitalization and Blockchain in Finance 2021. Finance 2021. Strategies Account Manag. 2(5). SIAM. 000547. 2021. Pre-review Research Digitalization and Blockchain in Finance 2021 (crimsonpublishers.com).

Chapter 2

Libra and Diem: Fear to Be Eaten (An Update in 2022) Jan Veuger, PhD Saxion University of Applied Sciences; School of Finance and Accounting, School of Creative Technology, School of Governance, Law and Urban Development; Hospitality Business School, School of Commerce and Entrepeneurship, School of People and Society, Enschede-Deventer-Apeldoorn, The Netherlands

Abstract The Facebook-backed digital currency, now known as diem, is expected to launch in another more limited form later in 2021. The Diem Association - based in Switzerland - plans to launch a pilot of a stablecoin pegged to the US dollar in mid-2021. The pilot will be small-scale and focus largely on transactions between individual consumers with an option for users to buy goods and purchases. Diem was received with much criticism as described above. Given Facebook’s reach - 2.8 billion monthly active users in the fourth quarter of 2020 - central banks and politicians had a strong aversion to the currency as it could affect the stability of the existing monetary system, as well as discussing privacy around Facebook. Diem’s technology has ‘changed dramatically over the last year and a half from a naive blockchain to a very sophisticated blockchain that you can see is trying to answer some of the questions that regulators had,’ said Ran Goldi, CEO of First Digital Assets Group, which is building infrastructure to allow merchants to accept diem as a payment method.

Keywords: diem, libra, currency, blockchain 

Corresponding Author’s Email: [email protected].

In: Blockchain Technology and Applications III Editor: Jan Veuger ISBN: 978-1-68507-629-0 © 2022 Nova Science Publishers, Inc.

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1. Introduction The libra-project1 is a plan for the development of a digital world-coin which should be achieved in 2020 despite some delay.2 Facebook’s idea is that everyone can get access in a simple way and can transfer money with virtually no cost and no bank account being required. The libra (Libra Association 2019) could thus become the first digital currency and is comparable to the dollar or euro and can be managed in the Calibra, the digital wallet. Libra wants her digital currency to be linked to the present monetary system, making it more stable than the Bitcoin. The libra works easily by downloading Calibra, available to download on your smartphone, identifying yourself with the libra Association and purchasing libra’s using local currencies, after which one can pay others with the libra, provided they have a libra account. The libra is linked to a basket of foreign currencies, securing its stability, which, for example, is not the case for Bitcoin because it is not linked to other currencies. Of importance for the development of the libra is that volume is needed in order to be accepted on a large scale. This can be achieved by the 2.7 billion users of Facebook. Looking only at India, for example, it can be demonstrated that in 2015 there are 155 million users, growing to 310 million users in 2019. It is expected that in 2023 there will be 440 million users and therefore Facebook will have a very large impact on the economy and possibly be a determining factor in it. Facebook, in any case, would like to reach the group of unbanked people.3 David Marcus @David Marcus4 (lead libra Facebook): ‘I would caution against reading the fate of libra into this update. Of course, it’s not great news in the short term, but in a way it’s liberating. Stay tuned for more very soon. Change of this magnitude is hard. You know you’re on to something when so much pressure builds up.’

1

https://www.rtlz.nl/cryptocurrency/artikel/4778631/libra-zeven-vragen-digitale-munt-cryp tobitcoin-Facebook. 2 Another top man behind libra - Dante Disparte - does take the delay into account in the Financial Times. Libra may technically be ready for release next year, he says, but that probably will not apply to the required permits. “This part brings a lot of uncertainty.” https://www. ft.com/content/be6a7756-eea2-11e9-ad1e-4367d8281195. 3 https://nos.nl/artikel/2293732-waarom-Facebook-zich-opeens-focust-op-mensen-zonder-bank rekening.html. 4 https://nos.nl/artikel/2306761-grote-problemen-voor-Facebooks-digitale-munt-is-de-libra-nog -levensvatbaar.html.

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2. Great Resistance Libra started with a consortium of 28 companies and organizations and is based in Switzerland. Various parties such as PayPal, Mastercard, eBay, Booking Holdings, Priceline, Visa, and Stripe.5 Visa and Mastercard have indicated that they will continue to monitor the developments around libra with interest. The libra Association still has a number of large players as partners, such as Uber and Vodafone. But what is really going on? Countries, institutions and organizations such as China, India, UK, the European Central Bank and the FED worry about the arrival of the libra. They argue that it cannot happen that Facebook just develops financial services without any rules and that it is too dangerous, according to Benoit Coeure of the European Central Bank (ECB). The Bank of China also states that the currency is untenable without the support and supervision of central banks. This is not an unexpected response because China is a centrally managed political system. ‘You know you are on the right track if the pressure is so enormous,’6 said cofounder of the libra, David Marcus, in response to the criticism and he has a clear point. It is precisely the great potential of libra that explains the great resistance of regulators. The benefits of a digital (world-) currency will not be disputed. President Randal Quarles of the Financial Stability Board (FSB) endorses this7 in a reaction which he sent to central bankers. The vulnerability to economic shocks as experienced by the current banks can be reduced by digital currencies. The question now is whether a private company like Facebook can manage a currency or if a central bank should do that. The Bank for International Settlements of which the FSB is a subject, has the view that the need for a central bank to develop their own digital money has now become important. A test with public digital money, the E-krona, is already underway in Sweden. The think tank of economists united in the Sustainable Finance Lab,8 wants The Dutch Central Bank to give citizens direct access to money at the central bank with which the Netherlands can also follow Sweden in its developments towards a public currency. Banks appear to be wary of these developments around the libra. They run the risk of losing revenue because 5

https://www.nrc.nl/nieuws/2019/10/14/Facebookmunt-libra-verder-in-de-verdrukking-a39767 13. 6 https://www.nrc.nl/nieuws/2019/10/14/Facebookmunt-libra-verder-in-de-verdrukking-a39767 13. 7 https://www.fsb.org/wp-content/uploads/P131019.pdf. 8 https://www.nrc.nl/nieuws/2019/10/10/oproep-voor-direct-pinnen-bij-dnb-a3976388.

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the libra can take over part of the payment traffic, but what else? Underlying is an even greater fear: the growing power of Facebook which is familiar with the digital social and economic life of its users. It can know where its users reside, is familiar with the financial assets of its users and how it is spent. With this information from a commercial company, existing institutions are becoming nervous. But the question is to make a good comparison with the current banks, what they already know about us and the fact that this is not always communicated.

Figure 1. The 28 companies in libra.

3. Regulators and Banks Twart Libra Germany, France and Italy are working on measures to prohibit the coming of the libra to Europe. ‘The libra is not welcome on European territory. We are taking measures with the Italians and the Germans because our sovereignty is at stake’, said the French minister of Finance, Bruno Le Maire.9 This minister is not in favor of the digital currency:10 ‘We must refuse the development of the libra in the EU. What is at stake here is the safety of consumers, the stability of the finances within the EU and also the sovereignty of the European states’. It is not known what measures are involved. The Netherlands is more reserved than the French, Germans and Italians. Wopke Hoekstra minister of 9

https://www.rtlnieuws.nl/economie/artikel/4889736/libra-maatregelen-Facebook-innovatie-bit coin. 10 https://newsroom.consilium.europa.eu/events/20190913-eurogroup-meeting-september-2019.

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Finance has been in contact with the countries about the digital currency and according to him, the legal consequences must be properly mapped out. ‘We are all in favour of innovation in the financial sector. But you have to be very careful about the effects on financial stability’.”11 On October 7th, 2019, the BBC12 announced conclusions from a G7 report - prepared by representatives of central banks, the IMF and the Financial Stability Board (FSB), a financial stability monitoring body - on certain digital currencies that have the potential to grow very quickly. The representatives see libra as a threat to the current global financial system and, according to them, there are nine major risks to global stablecoins: inadequate protection of consumers and investors, fraud and money-laundering sensitivity and privacy issues, and the libra can affect the effectiveness of central banks and seriously affect their monetary (interest) policy. The representatives are of the opinion that Facebook must eliminate these risks while maintaining the restriction of a non-approval by the regulators. The regulators in the Netherlands watch the currency critically. ‘We look at the developments with some concerns,’13 says the supervisor of De Nederlandsche Bank (DNB). ‘Regulators and central banks should not want to thwart innovation, but here we see a number of risks. One could think of money laundering, financing of terrorism and the circumvention of sanctions legislation.’ The DNB is not yet ready to exclude the libra.14

4. Monetary Power to One Commercial Party The loss of key partners within libra does not mean the end of libra.15 ‘Of course, it is no great news in the short term, but in a way it is liberating’ writes libra-co-founder David Marcus:16 ‘The pressure is enormous (understatement). I respect the decision to wait until there is clarity on the regulation

11

https://www.rtlnieuws.nl/economie/artikel/4889736/libra-maatregelen-Facebook-innovatiebitcoin. 12 https://www.bbc.com/news/business-50037223. 13 https://nos.nl/artikel/2306761-grote-problemen-voor-Facebooks-digitale-munt-is-de-libra-no g-levensvatbaar.html. 14 https://nos.nl/artikel/2306761-grote-problemen-voor-Facebooks-digitale-munt-is-de-libra-no g-levensvatbaar.html. 15 https://www.nrc.nl/nieuws/2019/10/11/cryptomunt-libra-verliest-belangrijke-partners-a39765 43. 16 https://www.nrc.nl/nieuws/2019/10/11/cryptomunt-libra-verliest-belangrijke-partners-a39 76 543.

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of libra.’ Facebook cautions that it is still uncertain which laws and regulations apply to libra, the underlying block chain technology and other cryptocurrencies. The possible laws and regulations can therefore have a delaying effect on the project and increase the costs whereby new laws and regulations could possibly be designed. But it is not just supervisors, concerns about abuses of power and privacy and possible regulations that may stand in the way of the launch of libra and other digital currencies. The ECB17 calls for additional legislation for tech companies that want to make the step into the financial market. The U.S. Ministry states that digital currencies are used to facilitate illegal conduct and drug trafficking. However, this criticism can also be given of the current monetary system, just as in the Netherlands the DNB is extremely critical of banks and money laundering. Teunis Brosens,18 an analyst at ING, is also gloomy about the matter. . ‘I have the feeling that Facebook has taken on too much. They have underestimated how much is involved if you want to launch a global currency.’ More importantly, the obvious opposition from the politicians, regulators and monetary world: ‘The world is clearly not ready to transfer monetary power to one commercial party.’ What is remarkable about this criticism is that the libra, for example, would facilitate criminal (Catalanis et al., 2019) behavior with its currency, where apparently such behavior is also taking place at the institutional banks, to this day. In 2019, the Public Prosecutor had to prosecute the ING Bank for facilitating money laundering in addition to the most expensive settlement ever in 2018 for failing supervision regarding money laundering at the ING Bank. The banks now want to jointly check striking transactions in 2019 for money laundering. Interesting in this discussion is that ING-boss Ralph Hamers has a clear warning for Mark Zuckerberg: ‘If Facebook introduces its digital currency libra without being able to prevent the currency from being used for money laundering, banks cannot do business with Facebook.’19 And warns about this in an interview with the Financial Times.20 According to him, banks act as a gatekeeper of the financial system. A contradiction with the status of the ING Bank in the Netherlands.

17

https://www.rtlz.nl/tech/artikel/4797926/Facebook-libra-calibra-onzekerheid-cryptocurrency2020-sec-beurswaakhond. 18 https://www.volkskrant.nl/wetenschap/Facebooks-cryptomunt-libra-op-sterven-na-dood~bf1 8a90e/?utm_campaign=shared_earned&utm_medium=social&utm_source=email. 19 https://www.rtlz.nl/tech/artikel/4893111/facebook-libra-ban-banken-crypto-ing-ralph-ham ers. 20 https://www.ft.com/content/df2eb1b2-f3d1-11e9-a79c-bc9acae3b654.

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In addition to this file, around sixty percent of the banks are not sufficiently profitable.21 If the current period of growth turns into a recession, they will have problems.22 Banks which are not inventive, will be a footnote in history. McKinsey warns23 banks of all newcomers to the financial services market. They often have many customer-friendly apps and no old ICT systems. It involves newcomers like Bunq, Revolut, Facebook, Google and Apple. The Netherlands Authority for Consumers & Markets (ACM) has announced24 that it will conduct research into the entry of these companies into the Dutch payment market. ACM sees opportunities because the Dutch market has had little competition for decades, but also risks: ‘Big Techs may be able to use the strong position that they have created in one market to conquer another market.’

5. Fear to Be Eaten In conclusion, it can be said that the criticism that exists on the libra itself apart from its connection with Facebook - is no different than criticism that can be stated regarding the dollar or the euro. The dollar or euro also finance things that a government does not like. Nakamoto already stated in 2009 that one must have faith in the current financial system and institutions should not devalue currency, which throughout history has not always been realized. Confidence should also be placed in having sufficient reserves and not creating credit bubbles. The reserves of banks are (very) limited, even after the economic crisis from 2008 onwards and the question is whether the conviction of the International Monetary Fund that crypto coins such as libra 21

https://www.mckinsey.com/industries/financial-services/our-insights/global-banking-an nualreview-2019-the-last-pit-stop-time-for-bold-late-cycle-movesen. https://www.mckinsey.com/~/media/McKinsey/Industries/Financial%20Services/Our%20 Insights/Global%20Banking%20Annual%20Review%202019%20The%20last%20pit%2 0stop%20Time%20for%20bold%20late%20cycle%20moves/McKinsey-Global-BankingAnnual-Review-2019.ashx. 22 https://www.nrc.nl/nieuws/2019/10/22/ruim-helft-van-de-banken-niet-goed-voorbereid-opcrisis-a3977650. 23 https://www.mckinsey.com/industries/financial-services/our-insights/global-banking-an nualreview-2019-the-last-pit-stop-time-for-bold-late-cycle-movesen. https://www.mckinsey.com/~/media/McKinsey/Industries/Financial%20Services/Our%20 Insights/Global%20Banking%20Annual%20Review%202019%20The%20last%20pit%2 0stop%20Time%20for%20bold%20late%20cycle%20moves/McKinsey-Global-BankingAnnual-Review-2019.ashx. 24 https://www.acm.nl/nl/publicaties/marktstudie-naar-grote-techbedrijven-op-de-neder la ndsebetaalmarkt.

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should be linked to the central banks is a valid one, considering their reputation in the past decades. Nakamoto (2009) has the following statement: ‘The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full or breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve.’25.

5.1. American Congress on 23 October about Libra: Not Learned News Here At October 23rd Mark Zuckerberg respond at the House Financial Services Committee in Capitol Hill. He told the hearing that he understood the reservations about libra but was determined to persevere. ‘I get that I’m not the ideal messenger for this right now. We’ve faced a lot of issues over the past few years and I’m sure there are a lot of people who wish it were anyone but Facebook that was helping to propose this.’ he said.26 ‘But there is a reason we care about this and that’s because Facebook is about putting power into people’s hands.’ He said libra was a prime example of American innovation and could help more than a billion adults without a bank account worldwide. He added that Facebook would not control the libra Association and would instead occupy one seat on a governing board of five.27 The departure of five major financial partners from the project is partly due to political pressure.28 Zuckerberg hasn’t said anything about whether libra will have transaction fees — a key part of why people like decentralized cryptocurrencies - which don’t have them - and a key question for his project which isn’t decentralized. In his prepared remarks Zuckerberg also attempted to defuse fears about libra’s potential impact on existing currencies. Zuckerberg said libra ‘is not an attempt to create a sovereign currency.’ He also noted that libra will be backed mostly by dollars referencing the libra Reserve that will back the coin 1:1. The anticipated makeup of the reserve, beyond Facebook’s statements that it will 25

Bitcoin open source implementation of P2P currency: http://p2pfoundation.ning.com/forum/ topics/bitcoin-open-source. 26 https://www.bbc.com/news/technology-50152062. 27 https://www.bbc.com/news/technology-50152062. 28 https://fd.nl/ondernemen/1321324/zuckerberg-libra-moet-vs-beschermen-tegen-chinese-over macht.

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be comprised of government-backed currencies and debt instruments, has been unclear, leading lawmakers to fear libra could undermine central banks’ ability to carry out monetary policy. Zuckerberg’s testimony which lasted more than six hours, may still not have been enough to address the many questions lawmakers have about libra. Near the end of the hearing the committee’s ranking member Rep. Patrick McHenry said ‘he is not sure the committee members had learned anything new here.’29

6. Diem In 2019, Boonstra already argued (2019a) that the libra is a welcome addition to the financial system based on four conclusions from his article: (1) a consortium led by Facebook recently announced the introduction of a new crypto-currency, the libra, (2) compared to most existing crypto-currencies, the libra’s design is relatively well founded economically, (3) one of the goals of the libra is to connect billions of people, who currently do not have access to financial services, to the financial system, and (4) if the libra gets off the ground, it will potentially have a much greater impact on the financial system than other crypto-currencies. The Facebook-backed digital currency, now known as diem, is expected to launch in another more limited form later in 2021. The Diem Association based in Switzerland - plans to launch a pilot of a stablecoin pegged to the US dollar in mid-2021. The pilot will be small-scale and focus largely on transactions between individual consumers with an option for users to buy goods and purchases (CNBC 2021). Diem was received with much criticism as described above. Given Facebook’s reach - 2.8 billion monthly active users in the fourth quarter of 2020 - central banks and politicians had a strong aversion to the currency as it could affect the stability of the existing monetary system, as well as discussing privacy around Facebook. Diem’s technology has ‘changed dramatically over the last year and a half from a naive blockchain to a very sophisticated blockchain that you can see is trying to answer some of the questions that regulators had,’ said Ran Goldi, CEO of First Digital Assets Group, which is building infrastructure to allow merchants to accept diem as a payment method (CNBC 2021). ‘At the same time, it’s one of several initiatives that are happening and it’s similar to Tesla buying $1.5 billion worth of crypto. This is just part of a big movement, not a new 29

https://edition.cnn.com/2019/10/23/tech/mark-zuckerberg-facebook-libra-hearing/index.html.

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movement’ Gronager indicated (CNBC 2021). Incidentally, Boonstra (2019b) already stated in 2019 that if you take the Libra Whitepaper and replace Facebook with IMF and Libra with Special Drawing Rights (SDR) it could lead to a surprising effect for adoption. The Diem Association has lost several participants almost two years after its launch. Visa, Mastercard and Stripe were some of the first companies to pull out of libra, followed by PayPal, eBay and Vodafone. Meanwhile, the project has also suffered some notable departures, from Kevin Weil, the head of Facebook’s planned digital wallet Novi, to Dante Disparte, Diem’s head of public affairs (CNBC 2021). Diem entered talks with Swiss financial regulators in 2021 to secure a payments licence. ‘A key step in our dialogue with the regulators was a phased approach to launch,’ Christian Catalini, Diem’s chief economist, told CNBC 2021, ‘We are going to phase in different functionalities and usage scenarios, applications in different areas,’ The aim would be to ensure that the technology and the reserve system work as expected. Nevertheless, diem has reached a global race among central banks to figure out their own strategy for digital money. The People’s Bank of China is leading the way, testing a digital version of the yuan in a number of cities, while the British central bank is considering whether or not to issue its own digital currency. We should not exclude diem either, given its developments and impact, but also relate it to other currencies.

Conclusion In 2019 already argued that the libra is a welcome addition to the financial system based on four conclusions from his article: (1) a consortium led by Facebook recently announced the introduction of a new cryptocurrency, the libra, (2) compared to most existing cryptocurrencies, the libra’s design is relatively well founded economically, (3) one of the goals of the libra is to connect billions of people, who currently do not have access to financial services, to the financial system, and (4) if the libra gets off the ground, it will potentially have a much greater impact on the financial system than other cryptocurrencies. The Facebook-backed digital currency, now known as diem, is expected to launch in a different, more limited form later in 2021. Given Facebook’s reach, central banks and politicians had a strong aversion to the currency because it could affect the stability of the existing monetary system, as well as the debate over privacy surrounding Facebook. Diem’s technology has changed dramatically over the past year and a half from a naive blockchain

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to a highly sophisticated blockchain that you can see is trying to answer some of the questions regulators had. If you take the Libra Whitepaper and replace Facebook with IMF and Libra with Special Drawing Rights (SDR) it could well lead to a surprising effect for adoption. There is currently a global race underway among central banks to outline their own strategy for digital money. The People’s Bank of China is leading the way, testing a digital version of the yuan in a number of cities, while the British central bank is considering whether or not to issue its own digital currency. Given its developments and impact, we shouldn’t rule it out either, but we should also associate it with other currencies.

References Boonstra (2019a), De Libra, een welkome aanvulling op het financiele stelsel. [The Libra, a welcome addition to the financial system.] De Libra, een welkome aanvulling op het financiële stelsel - RaboResearch (rabobank.com). Boonstra (2019b), Libra kan een mooie aanzet zijn voor een betere SDR. [Libra could be a good start for a better SDR.] Libra kan een mooie aanzet zijn voor een betere SDR RaboResearch (rabobank.com). Catalini, C., O. Gratry, J. M. Hou, S. Parasuraman and N. Wederfelt (2019), The Libra Reserve, Libra Association, June 2019. CNBC (2021), Facebook-backed Diem aism to launch digital pilot in 2021. Facebookbacked Diem aims to launch digital currency pilot in 2021 (cnbc.com). Libra Association (2019), An Introduction to Libra. Libra White Paper.

Note This chapter is the original article as mentioned below and has been updated in 2022 with the developments of diem. Veuger, J. (2019), Libra and Anxiety Retoric: Fear to be Eaten. Research & Development in Material Science, p. 1252-1255. Peer-reviewed. Impactfactor 3.153. RDMS. Crimson Publishers NY USA. https://crim sonpublishers.com/rdms/pdf/RDMS.000 782.pdf.

Chapter 3

The Economic Relevance of Decentralized Finance for Future Financial Systems Benedikt Eikmanns1, Isabell Welpe1, PhD, Philipp Sandner2, PhD and Jan Veuger3,, PhD 1Technical

University of Munich, Munich, Bavaria, Germany School Blockchain Center (FSBC), Frankfurt, Hesse, Germany 3Saxion University of Applied Sciences; School of Finance and Accounting, School of Creative Technology, School of Governance, Law and Urban Development; Hospitality Business School, School of Commerce and Entrepeneurship, School of People and Society, Enschede-Deventer-Apeldoorn, The Netherlands 2Frankfurt

Abstract With the advent of Blockchain, it is possible for peers to provide financial services to each other. This includes familiar applications such as payments with and investments in cryptos, but also the lending and borrowing of cryptos and other assets from one another. Decentralized Finance (DeFi) has taken off in the past few years as a number of serviceproviding Blockchain platforms have matured. DeFi in short, is an umbrella term encompassing the vision of a financial system that functions without any intermediaries, such as banks, insurances or clearinghouses, and is operated just by the power of smart contracts. DeFi applications strive to fulfill the services of traditional finance (also coined as Centralized Finance, or just CeFi but in a completely permissionless, global and transparent manner and is likely to have a significant impact on how banks operate in the future and even has the potential to shift the 

Corresponding Author’s Email: [email protected].

In: Blockchain Technology and Applications III Editor: Jan Veuger ISBN: 978-1-68507-629-0 © 2022 Nova Science Publishers, Inc.

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Benedikt Eikmanns, Isabell Welpe, Philipp Sandner et al. structure of the whole financial system at a macroeconomic level. The expectation is that the financial and economic applications surrounding DeFi will cause a major disruption in the same way that cryptocurrencies caused this and are now generally accepted in society. DeFi is one of the four lines of research of the Saxion Research Group Blockchain. The following text represents the point of departure for further research.

Keywords: blockchain, decentralize finance, financial, systems

1. Introduction DeFi is one of the four research lines of the Saxion Research Group Blockchain and is therefore on the research and education agenda as part of the redevelopment of the three program Finance and Tax (FT), Finance and Advisory (FA) and Finance & Control (FC) within the Financial Accounting program of Saxion University. In order to prepare for this, we as Blockchain professorship have written a number of coherent assignments for students in the Blockchain Minor (2020-2021) which have been carried out interdisciplinary from ten programmes within Saxion. To share the importance and knowledge about DeFi, an inspiration session was set up in 2020 involving all students, teachers and researchers involved in this assignment and research by and for students. In addition, research by the Blockchain professorship will be conducted to outline a context, as was done in the article Added Value of Blockchain for Financial Professionals in the Netherlands (Veuger 2020), to serve as source material for the further development of the curriculum. The objectives of the research are as follows.

1.1. DeFi Goal 1 As a Blockchain professorship, we are sorting out the use of DeFi for the new FEM curriculum (2021 for the first year and 2022 for the second year and 2023 for the third year) through the following tasks: (1) what is DeFi, and how do you explain it to a layman? We do this by introducing this to FEM students and all lecturers, (2) description of the place of DeFi within FinTech by means of the platforms and the practical working method of these platforms. How could we use this for education?, (3) description of the building blocks of DeFi such as crypto’s, smart contracts, decentralized governance, tokens and the use of other digital technology like Big Data, AI, IoT, internet in relation to

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for example ethics and (4) impact of disruptive power of a mature DeFi business model on current financial processes and financial services.

1.2. DeFi Goal 2 As Blockchain chair, experiment with the practical set-up of a start-up between minor students on the one hand, including Finance and Accountancy students and students from other programmes on the other, using the following - non-exhaustive - assignments: (1) find the most promising DeFi application on the basis of a digital choice model - to be determined - and fill in a business model for the minor, (2) outline the processes needed to set up this model, (3) make a Proof of Concept using a system such as BaaS or Hyperledger (4) create a set of smart contracts (Kampman 2020) for the DeFi basic process and (5) make a marketing and legal plan for a startup and execute it with the help of an AFM license and a website (minor). The following text represents the starting point for further research under the supervision of the lectorate (Arthur Janse EMFC/RC and Jan Veuger). A digital textbook and toolbox will follow in mid-2021.

2. DeFi Applications Are Going to Challenge Traditional Actors The vision of a new financial system accompanies the blockchain space since its inception. However, while it has been an aspirational dream for the blockchain community in the past, the vision of a new financial system has come some steps closer. Since 2020, DeFi is growing at an astonishing pace and billions of USD1 have been put in the ecosystem. The growth is mainly led by applications (also denominated as protocols) that are built on the Ethereum blockchain. In the following, we give an overview of the actors in the DeFi ecosystem (Eikmanns, Welpe and Sadner (2021) from an economic point of view, introduce the maturity stages of DeFi and explain the potential of DeFi to outperform the traditional finance system in the years to come.

1

DeFi - The Decentralized Finance Leaderboard at DeFi Pulse.

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3. Commercial Banks The primary business model of commercial banks is to accept deposits and to give loans to its clients. Borrowing and lending are an elementary cornerstone of an efficient financial system as holders of funds get an incentive to provide liquidity to the markets and in exchange earn a return on their otherwise unproductive assets. DeFi protocols enable for the first time to borrow or lend money on a large scale between unknown participants and without any intermediaries. Those applications bring lenders and borrowers together and set interest rates automatically in accordance with supply and demand. Moreover, those protocols are truly inclusive, as anybody can interact with them at any time, from any location, and with any amount. In fact, the recent hype around DeFi applications is largely driven by the advancement of borrowing and lending protocols, such as Compound2. In contrast to traditional finance, loans in DeFi are commonly secured by overcollateralization. However, companies such as Aave3 are currently working on enabling uncollateralized loans similarly to traditional finance. Table 1. Platforms and descriptions Platform Compound

Aave

Description Compound is a protocol on the Ethereum blockchain that creates a money market, which is a group of assets with algorithmically earned interest rates, based on supply and demand for those assets. The asset provider (and borrower) interacts directly with the protocol, earning (and paying) floating interest rates, without having to negotiate conditions such as maturity, interest rates, or collateral with peers or business partners. Aave is a decentralized non-custodial money market protocol in which users can participate as depositors(lenders) or borrowers. Depositors provide liquidity to the market to earn passive income, while borrowers can borrow in an overcollateralized or undercollateralized manner.

Source: Kiong 2020. For the total overview and composition per niche see defipulse.com. The table is only a summary.4

2

Compound. Aave – Open Source DeFi Protocol. 4 See recent update: https://defipulse.com/. 3

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4. Investment Banks and Issuers of Financial Instruments The business model of investment banks usually involves the advisory on financial transactions. Also, the creation or trading of complex financial products and the management of assets fall in the realm of investment banks. DeFi protocols are already offering similar products. For instance Synthetix5 is a derivatives issuance protocol, which enables the decentral creation and trading of derivatives on assets such as stocks, currencies, and commodities. Also, decentral asset management for cryptocurrencies is evolving. Yearn Finance6 for example, is an autonomous protocol, which searches for the best yields in the DeFi space and invests automatically for its users.

5. Exchanges The function of an exchange is to organize the trading of different assets, such as stocks or foreign currencies, between two or more market participants. Even the exchange of cryptocurrencies against fiat money (e.g., US Dollar) can be attributed to CeFi, as the regular holder of cryptocurrencies needs to use exchanges like Coinbase7 or Binance8 (which are centralized organizations) Table 2. Exchanges and disruption Exchanges

Uniswap

Description Uniswap is a decentralized ERC-20 token exchange that supports Ethereum and ERC20 tokens. The advantage of Uniswap is that you can exchange ETH with other ERC-20 tokens in a decentralized way. No companies involved, no KYC, and no intermediaries. The Uniswap platform is unique in that it does not use an order book to derive the price of an asset or to match buyers and sellers of tokens. Instead, Uniswap uses the Liquidity Pool which comprises a group of tokens managed by smart contracts. The liquidity pool ensures enough tokens for users to exchange with each other using Ethereum as a channel.

Source: Kiong 2020.9

5

Synthetix. Yearn.finance. 7 Coinbase – Buy & Sell Bitcoin, Ethereum, and more with trust. 8 Bitcoin Exchange | Cryptocurrency Exchange | Binance. 9 See recent update: https://defipulse.com/. 6

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to swap a unit of a cryptocurrency against another. Now, with the emergence of decentralized exchanges (DEX), holders of cryptocurrencies no longer need to leave the crypto space for swapping their tokens. A prominent example of a DEX is Uniswap10 DEX are composed of smart contracts that hold liquidity reserves and function according to defined pricing mechanisms. Such automated liquidity protocols play a key role in the development of an independent decentralized ecosystem without any CeFi intermediaries.

6. Insurances An important function of insurance is to smooth out risks and bring security for market participants. An example of decentralized insurance is Nexus Mutual11 which offers insurances that cover bugs in smart contracts. Since everything is based on smart contracts in DeFi, vulnerabilities in the code of smart contracts is a fundamental risk for DeFi users. Decentralized insurances are still in their infancy, but it can be expected that a larger amount and more sophisticated insurance models have the potential to emerge in the DeFi space in the future.

7. Central Banks So-called stablecoins are based on blockchain protocols that have the principle of price stability inherently encoded and, thus, fulfill the function of a reserve currency. The introduction of stablecoins set the foundation of the functioning decentralized financial system, as they enable participants to engage with each other without the underlying risk of price volatility. There are three options how a cryptocurrency can reach price stability. First, stablecoins can reach high degrees of price stability by pegging a currency to other assets. For example, for each issued unit of USD Coin12 a real US Dollar is held in reserve.

10

Uniswap | Home. Nexus Mutual | A decentralised alternative to insurance. 12 USD Coin (USDC) - Stablecoin by Coinbase. 11

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Table 3. Platforms and descriptions Platform

MakerDAO

Description MakerDAO is a smart contract that allows users to open Protected Debt Positions, or CDP (Collateralized Debt Positions). Users deposit ETH as collateral and can mint or borrow tokens called DAI. DAI is a stablecoin linked to the US dollar. Borrowers pay an annual interest rate called the stability fee to mint a new DAI. After the debt is repaid, the DAI is burned along with the stability fee owed in the MKR Maker token. Stability charges prevent users from overspending the amount of DAI supply in excess.

Source: Kiong 2020. For the total overview and composition per niche see defipulse.com. The table is only a summary.13

From a decentralized finance perspective, another interesting approach is the issuance of stablecoins by using other cryptocurrencies as collateral. A central protocol for the Defi ecosystem is Maker DAO14 which issues the cryptocurrency DAI that is backed by other cryptocurrencies and ensures with its algorithm that the value of 1 DAI is hovering around the value of 1 US Dollar. Thirdly, there are more experimental approaches that aim to reach price stability without the use of collaterals. For instance, the protocol Ampleforth15 automatically adjusts the supply of token in accordance with demand.

8. Crypto-Based Finance Has Reached the Next Maturity Stage We argue that DeFi has reached an important intermediate step to become a substitute for traditional finance solutions. While crypto-based finance solutions were merely capable of realizing efficient value transfers in the past, now the time value of money is reflected in crypto-finance. There are three maturity stages of a decentralized finance system.

13

See recent update: https://defipulse.com/. MakerDAO | An Unbiased Global Financial System. 15 Ampleforth. 14

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8.1. Stage 1: Efficient Value Transfers Until now, centralized exchanges and wallet providers have been the only successful blockchain business models at scale. The reason for the success of centralized exchanges is that they are the main entry point to the crypto space (see Figure 1). The common user needs to swap fiat money (e.g., US Dollar) against a cryptocurrency before being able to interact with services in decentralized finance. With this they seem to assume that you must first have fiat and then convert it into crypto. Crypto creates itself by mining, but the question is what do you need exchanges for? Except that exchanges allow you to exchange all kinds of crypto assets, including derivatives and digital assets and the like. With the advent of Uniswap, among others, a successful decentralized model has now emerged in 2021. Not yet as successful as centralized exchanges, but 2021 did break with a trend with the arrival of automated market makers within decentralized exchanges. Furthermore, wallet applications are established that enable users to safely store and transfer their cryptocurrencies.

Figure 1. First maturity stage — The crypto space as alternative for value storage and payments (Eikmans, Welpe and Sandner 2021).

Based on those two applications, exchanges and wallets, efficient value transfers between unknown parties could be conducted for the first time without the need of traditional finance actors. This enabled the crypto space to fulfill limited functions of a financial system, namely speculation on (crypto) assets and the facilitation of payments. Thus, disintermediation of financial

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firms occurred — but only, if savers of traditional finance wanted to diversify their portfolio towards crypto assets or needed a frictionless payment system. We propose this to be the first maturity stage of a decentralized finance system.

8.2. Stage 2: Connecting Savers and Borrowers Still missing was the ability to deal with flows of funds from savers to borrowers and vice versa. In the following years, additional elements of a more advanced financial system were developed. The function of a payment system could be advanced with the development of stablecoins, decentralized exchanges, and borrowing/lending protocols. Thereby, DeFi developed the necessary platforms for facilitating the flows between savers and borrowers. It might be no coincidence that the start of the explosive growth for the whole DeFi ecosystem could be observed with the advancement of the lending/borrowing protocol Compound. Since Compound started the distribution of its governance token, COMP, on June 15, 2020, the whole DeFi ecosystem showed a steep growth trajectory. Functioning lending/borrowing protocols, such as Compound, might have been the missing cornerstone for the foundation of a properly working decentralized financial system. This can be marked as the second maturity stage of the decentralized finance system.

Figure 2. Second maturity stage — Schematic illustration of the interplay between traditional finance and decentralized finance (Eikmans, Welpe and Sandner 2021).

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8.3. Stage 3: Competing for Traditional Finance Funds DeFi can be described as a platform that is competing with traditional financial firms for the same resources. However, DeFi is an encapsulated system, which is not obeying the same rules as traditional finance. In particular, national law does not apply and regulatory policies can hardly be enforced in the DeFi space. This might be a major competitive advantage over the highly regulated traditional finance firms. For example, financial innovations can be freely developed and implemented in DeFi without regarding regulatory boundaries. On the other hand, the absence of common legislative and political principles has certainly major disadvantages. It can be doubted that mainstream savers would consider the current DeFi environment a trustworthy destination to invest their pension. Hence, the crucial question for the advancement of DeFi to the next evolutionary stage will be: (a) to which degree are savers of traditional finance willing to relocate their funds towards DeFi applications? And (2) to which degree are borrowers of traditional finance willing to access funds from DeFi applications? To answer both questions at the current point in time: Only to a very limited degree. The reason is that most traditional finance savers or lenders do not trust the crypto space or simply do not know about DeFi. The influx of capital into DeFi applications since June 2020 most likely stems from idle assets on crypto wallets, i.e., from a redistribution of assets within the crypto space. Nevertheless, the rising use of DeFi protocols proves that the system is scalable and working. Today, the users of DeFi belong to the group of “innovators” or “early adopters” (i.e., a very small proportion of households). Tomorrow, the users might be mainstream households.

9. DeFi Has the Potential to Outperform the Traditional Finance System in the Years to Come We argue that there are three reasons why DeFi has the potential to outperform the traditional finance system and to gain increasing attention in scientific, economic, and public debates: 1. Speed of growth: DeFi is a highly scalable and global ecosystem. Once DeFi as a whole (or a specific DeFi application) proves its

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utility, exponential growth is possible. The website DeFi Pulse16 monitors the total value locked (TVL) on smart contracts on all relevant DeFi applications (i.e., how much money has been poured into the ecosystem by its users). The increase of TVL between June and August 2020 illustrates powerfully the exponential growth potential of DeFi. While 1st of January 2020 the TVL was at $0.7 billion, it started skyrocketing in June 2020, reaching 1.9 billion 1st of July, 4 billion 1st of August, and surpassed the $8 billion mark 1st of September 2020. 2. Room for growth: According to Messari, a crypto market analytics firm, the capitalization of all DeFi applications was just at 1,5%17 of the total crypto market as of July 2020. Therewith, it could be argued that there is a lot of room for growth only by further asset redistributions within the crypto space. Looking beyond the crypto space, lets us derive the real potential of DeFi. According to the Institute of International Finance, global household debt alone amounts to 48 trillion18 US Dollar in 2019. If DeFi covers just 0.1% of that debt, DeFi’s TVL would grow by 500% compared to the beginning of September 2020. 3. New market segments: According to The World Bank, 1,7 billion19 adults do not have access to banking services. DeFi is permissionless, meaning that anyone can access those financial services from anywhere in the world. In principle, just electricity, an internet connection, and smartphones are needed. DeFi could provide a viable option in regions, where banking services are too expensive compared to income, little trust in financial institutions persists, or if financial institutions are simply too far away. A prerequisite, however, for reaching unbanked adults is that DeFi applications develop more intuitive user interfaces and simplify the on- and off-ramp with fiat currencies.

16

DeFi - The Decentralized Finance Leaderboard at DeFi Pulse. Messari Indicates DeFi Sector Is Equal To Only 1.5% Of The Entire Crypto Capitalization | Crypto News Point. 18 Global Debt Monitor_April2020.pdf (iif.com). 19 Financial Inclusion on the Rise, But Gaps Remain, Global Findex Database Shows (worldbank.org). 17

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Conclusion: Crypto-Based Finance Is Here to Stay For the first time in history, a financial system is developing without intermediaries at a large scale. So far, DeFi applications cannot compete in terms of security, speed, and ease of use with traditional finance solutions yet. But DeFi has produced real, working applications that have already managed to attract billions of capital. Those resources will be used to develop more competitive and user-friendly applications in the future. Yes, there are parallels to the ICO hype of 2017, which resulted in a sharp increase and price crash across virtually all cryptocurrencies in 2018. Since then, the interest of mainstream media has diminished. However, it has been largely unnoticed that the influx of capital through ICOs has enabled the blockchain community to bring the technology to the next evolutionary stage. Now again, large sums are invested into blockchain technology. But in contrast to 2018, applications already have been developed and are running. While we might be standing at the verge of a new bubble, we might also be at the beginning of a new big development cycle for blockchain technology. For sure, many more development cycles need to follow. However, it is not unrealistic to state that decentralized finance will be more efficient, convenient to use, and secure than traditional finance. It will be highly interesting to observe how the different actors in traditional finance will respond when profits start to deteriorate because of DeFi.

References Eikmanns, B., I. Welpe and P. Sandner (2021), Decentralized Finance Will Change Your Understanding of Financial Systems. (Forbes.com) https://www.forbes.com/sites/ philippsandner/2021/02/22/decentralized-finance-will-change-your-understandingof-financial-systems/?sh=1692f1b35b52. Kampman, M. (2020), Slimme Contracten en de Algemene Verordening Gegevensbescherming Een verkennend onderzoek naar de verenigbaarheid van Slimme Contracten en de Algemene Verordening Gegevensbescherming. [Smart Contracts and the General Data Protection Regulation An exploratory study on the compatibility of Smart Contracts and the General Data Protection Regulation]. Enschede: Saxion University of Applied Sciences. Kiong, L. V. (2021), DEFI Investment Made Easy. A Beginner’s Guide to Investing in Decentralized Finance. Independently Published.

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Kiong, L. V. (2020), DeFi and Yield Farming Explained. DeFi and Yield Farming Explained. DeFi and Yield Farming have been the… | by Dr.Liew Voon Kiong | Medium. Veuger, J. (2020), Added Value of Blockchain for Financial Professionals in the Netherlands. Series: Advances in Economics, Business and Management Research, volume 159. Proceedings of the Fifth International Conference on and Business Management (FEBM 2020). Atlantic Press. https://doi.org/10.2991/aebmr.k.201211. 078.

Note This chapter is an adaptation and update by the four authors of this chapter of the earlier article by Eikmanns, Welpe and Sandner from 2021 as indicated in the sources.

Chapter 4

The Effects of Blockchain Technology on University Students’ Start-Up Intention in Fintech - Implications for Developing High Quality Young Human Resources in Vietnam Giang T. Q. Nguyen1,*, Duong T. Phan2 and Anh N. Tran3 1Institute

of International Education, Hoa Binh University, Hanoi, Vietnam 2Faculty of Transport Economics, University of Transport Technology, Hanoi, Vietnam 3Faculty of Finance and Banking, Hanoi Open University, Hanoi, Vietnam

Abstract Vietnam has emerged as a regional start-up hub in Southeast Asia with investments worth almost doubled from US$415 million (in 2019) to US$815 million (in 2020), in which, Fintech is one among the three key start-up sectors. However, experts and managers worried about Blockchain’s unintended systematic influences and seriously asymmetric information which may put the financial system and economic institution at risks. Meanwhile, students having start-up intention in Fintech have not yet been equipped with sufficient knowledge and skills for their startups dream in prior to entering the market. In this study, authors combined several research methods of desk-review, sociological survey, Google doc interview with supports of Linkert 5 level and SPSS 25 to study the *

Corresponding Author’s Email: [email protected].

In: Blockchain Technology and Applications III Editor: Jan Veuger ISBN: 978-1-68507-629-0 © 2022 Nova Science Publishers, Inc.

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Giang T. Q. Nguyen, Duong T. Phan and Anh N. Tran influences of Blockchain technology on university students’ start-up intention in Fintech. The study identified three major factors, the legal awareness, personality traits and education, influencing students’ startup intention in Fintech. Consequently, the authors suggested solutions to facilitate the teaching and learning of Blockchain in Fintech start-up ecosystem for developing Vietnamese high quality young human resources from perspectives of national human resource development strategy and Science Technology Innovation.

Keywords: blockchain, Fintech start-ups, high quality human sources, digital transformation, higher education

1. Introduction Blockchain technology is one of the most important developments since the Internet (Jenkinson 2018), one of the eight core technologies of the Fourth Industrial Revolution, and it is a new infrastructure technology can bring many benefits (Werbach 2018) (European Commission 2021). This disruptive technology is creating a transformation in depth, a gradual but noticeable change (Tett 2021) in the thinking and ways of financial regulators of many countries and major international financial institutions manage their work. Blockchain technology, if properly used, is forecasted to be the inevitable trend of the future in the world and in Vietnam. In this research paper, blockchain technology is mentioned with its influences affecting the Fintech start-up intention of university students in Hanoi, Vietnam. Besides, the Covid-19 pandemic has become a catalyst promoting the development of smartphones; application programming interfaces, cloud technology and distributed ledger technology, development of cashless payments (Hung 2021), which are the indispensable premises leading to accelerating Blockchain applications into life. Foreseeing the above trend, the Government of Vietnam, has recently taken series of actions in response. These included issuance a national digital transformation program including Fintech, a strategy for developing highquality human resources, Orientation and Solutions for Higher Education in the Education Development Strategy for the period 2021 - 2030, with vision to 2045. These actions, despite their segmentation, all aimed to prepare for young, high-quality, knowledgeable human resources who are professional at work, knowledgeable in law and fluent with new technology, especially Blockchain. Such preparations help not only nurture and incubate innovation

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in students’ start-up intention but also create the the base from which governments, universities and entrepreneurs jointly kick off start-up journey of their students right from universities.

2. Methods 2.1. Research Method This paper applies several research methods. Authors combine surveying the economics students of universities in Hanoi to assess the impact of Blockchain technology on the intention of starting business in Fintech field. The students’ entrepreneurial intentions and factors include: Personality characteristics, Subjective standards, Perception of feasibility, Capital accessability, Blockchain technology and Fintech education and Legal risk awareness are all measured on a Likert scale ranging across five levels of “Very good”, “Good”, “Average”, “Not good” and “Weak”. The 5-level Likert scale is popular and utilised in plentiful of studies. Accordingly, the authors quantify each factor by five levels. In this research paper, quantitative studies are performed with SPSS 25 software. The scope of the study is conducted on the third year students in economics major of Hanoi Open University, Hoa Binh University, and University of Transport Technology. Research data is collected through direct interviews and interviews via google doc. Out of 250 questionnaires distributed, the fulfilled surveying papers that came back are 220. After eliminating invalid questionnaires due to many blank boxes, 206 questionnaires were chosen to use by the authors. Data analysis process includes 2 steps: Step 1: Data collection. The data collection process was conducted through face-to-face interviews combined with sending questionnaires via email, Google docs. The study used a convenient non-probabilistic sample collection method. Respondents include economics students from public and private universities in Hanoi, which are Hanoi Open Universities, Hoa Binh University, and University of Transportation Technology. Step 2: Data processing. The authors conducted to test the scale of reliability, convergence and differentiation through Cronbach Alpha

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coefficients and exploratory factor analysis (EFA). Multi-variable linear regression model is used to confirm the influence of factors, especially education of Blockchain technology and Fintech, on students’ intention to start a business in the Fintech field. Coefficients, suitability of the model (Adjustes R Square, ANOVA), Multiple Collinearity, Autocorrelation were performed to determine the level of influence, suitability of the model and build regression equations on the relationship between the dependent variable and the independent variables.

3. Theoretical Basis and the Literature Review 3.1. Theoretical Bases 3.1.1. An Overview of the Fourth Industrial Revolution Industrial Revolution 4.0, as known as Industry 4.0, is a continuation of the three previous revolutions, thanks to these revolutions that the model in the manufacturing sector has changed dramatically. Previous revolutions were mechanization through water and steam power, mass production in assembly lines and information technology automation (Tay, 2018). It has been agreed that the invention of Industry 4.0 was at the Hanover Fair in Germany in 2011. The term was generated by a working group commissioned by the he Research Union Economy-Science of the German Ministry of Education and Research (Culot et al., 2020). Different studies have different perspectives and definitions of Industry 4.0. Tay (2018) has listed many definitions of the 4th Industrial Revolution, but in general, most of the definitions have common points related to: Network Physical System (CPS), Internet of Things (IoT), Industrial Internet, ... In short, Industry 4.0 is synthesizing existing ideas into a new value chain, playing an important role to transform the entire value chain of the life cycle of goods while developing innovative products in manufacturing, including the interconnection of systems and those that create self-organization and energetic control in the organization (Tay, 2018). Hieu and Cuong (2019) have listed 8 fundamental technologies of the fourth Industrial Revolution: The first is Internet of Things (IoT): If in the 3rd Industrial Revolution, the connection here is merely between people, between people and computers

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or between computers. Now it is between anything as long as the object has a connected device installed (Hieu & Cuong, 2019). The second is big data (Big data): Big data represents information assets characterized by “Large volume”, “Speed” and “Diversity” from which technology and specific analytical methods utilized to convert it into value (De Mauro et al., 2015). The third is artificial intelligence (AI): According to Kok et al. (2009) in the New International Webster’s Comprehensive Dictionary of the English Language, there are 4 different definitions of AI. However, in general, it can be seen that AI is a method of computation, programming machines to simulate intelligent human behavior such as the ability to think and reason, the ability to communicate, learn and adapt. The fourth is cloud computing: According to Hieu and Cuong (2019), cloud computing is a type of data storage service on computers, under which software programs, data and data mining services will be placed in virtual servers or “clouds” on the Internet instead of in home and office computers for people to connect when needed. The fifth is 3D printing technology (3D printing): This is the technology to create a physical object by accreting layers of material from a pre-existing 3D drawing or model (Hieu and Cuong, 2019). The sixth is self-driving equipment: Self-driving equipment here includes not only self-driving cars, unmanned aircraft, but also unmanned boats… These transport technology advances could open up important applications in road passenger transport, and short-distance airlift equipment transport in emergencies. The seventh is 5G mobile networks: This is the next generation of 4G network with speeds about 100 times faster than 4G network. When 5G mobile is introduced, everything will be connected faster and smarter (Hawley, 2018). Finally, the eighth is Blockchain technology. This is a special technology of recording and storing information since the recorded content is never changed or erased and the information is stored on distributed databases called decentralization (Conway, 2020). According to Pilkington (n.d.), Blockchain technology eliminates the issue of double spending, with the support of public key cryptography, whereby each agent is assigned a private key and a shared public key with all others. A transaction is generated when the future owner of the coin sends their public key to the original owner. Coins are converted with the digital signature of a hash function. Public keys are cryptographically generated addresses kept in the Blockchain. Every coin is associated with one address, and a transaction is simply exchanging money from one address to

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another. According to Pilkington (n.d.), a prominent feature of Blockchain is that public keys are never tied to identity in the real world. Transactions, though trackable, are done without revealing an individual’s specific identity. According to Hung (2021), the Covid-19 epidemic has become a catalyst promoting the development of smartphones, application programming interfaces, cloud technology and distributed ledger technology. Distributed Ledger Technology (DLT) is considered the first step towards Blockchain. Also according to Hung (2021), along with the development of Industry 4.0 is the development of non-cash payments since Blockchain technology helps accelerate the noncash transactions. Therefore, Blockchain technology will be the inevitable trend of the future in the world in general and in Vietnam in particular. In this research paper, Blockchain technology is mentioned as the factor affecting the intention to start a sustainable Fintech start-up of university students in Hanoi, Vietnam.

3.1.2. An Overview of Start-Up Intentions There are many definitions of entrepreneurship. Luger and Koo (2005) synthesized the previous definitions and gave three common criteria defining start-ups: “new”, “active” and “independent”. Combining all 3 of these criteria, a start-up can be defined as follows: “Which did not exist before during a given time period (new), which starts hiring at least one paid employee during the given time period (active), and which is neither a subsidiary nor a branch of an existing firm (independent)”. Ries (2011) defines a start-up as follows: A start-up is “A human institution designed to create new products and services under conditions of extreme uncertainty”. According to Harrison (n.d.), a Fintech start-up is a fledgling business that applies technology (usually mobile) to provide financial services. This research paper covers a student Fintech start-up activity for starting a Fintech business. 3.2. Literature Review 3.2.1. Background Theories both in Vietnam and around the World Related to Entrepreneurial Intentions Theory of Reasoned Action (TRA) by Fishbein and Azjen (1975) is considered a pioneering theory in the field of psychosocial research. This

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model shows that the behavior is determined by the intent to perform that behavior. The relationship between intent and behavior has been suggested and tested experimentally in numerous studies in many different fields. The two main factors that influence intentions are personal attitudes and subjective standards. In this research, personal attitudes can be understood as a student’s preference for entrepreneurship. The subjective standard is the judgment of relatives, friends, and society... about the student’s Fintech start-up. Theory of Planned Behavior (TPB) is an improvement of Theory of Reasoned Action (TRA). According to Ajzen (1991), the third factor influencing human intent is the cognitive factor that controls behavior. In this research paper, the perception of behavioral control is defined as a student’s perception of how difficult it is to start a business. According to Lu et al. (2003), there have been many studies providing theoretical basis for the study of information technology and information system adoption. Among them, the TAM model is arguably the most useful and was proposed by Davis (1989). TAM stems from the theory of rational action. The TAM model involves perceived usefulness as the degree to which a person believes using a particular system improves their performance (Davis, 1989), recognizing ease of use is the degree to which a person believes that using a particular system improves their performance (Davis, 1989) and that the attitude towards use is a positive or negative feeling that estimates the performance of the behavior for the sake of goal (Fishbein and Zen, 1975). In this study, the useful perceptions of the technology, the ease of use of Blockchain technology, and the positive or negative feeling with the use of Blockchain technology affect students’ Fintech start-ups. The Entrepreneurial Event Model (SEE) by Shapero and Sokol (1982) is a classic model that has been cited and applied in many researches on entrepreneurship. This theory points out that factors of important life changes and personal attitudes toward the start-up influence an individual’s intention to build a business start-up. Personal attitudes include an individual’s perception of the feasibility and desire of start-ups.

3.2.2. Research Has Been Conducted on Fintech Start-Ups In general, the number of research on student’s entrepreneurial intentions on Fintech is limited. Therefore, this is a research gap.

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3.3. Comments We can conclude theoretical basis and the literature review results in three points as following: Firstly, about technological base, technocracy theory represented by Frederick Winslow Taylor mentioned the necessity to have an elite workforce and these are appropriately applied in the process of state management towards development. (GASS 2015). The 4th Industrial Revolution includes 8 fundamental technologies (Phan và Nguyen 2019) and Blockchain technology is considered the most preeminent invention since the advent of the internet with the power of multi-disciplinary applications, multi-fields, from governance to business models and interactive culture in society. Secondly, about start-ups, Luger và Koo (2005); Ries (2011) defined three most typical criteria are “new”, “active” and “independence”. It is well shown in the concept of Fintech start-up through Theory of Reasoned Action -TRA by Fishbein and Azjen (1975), TPB by Ajzen (1991), technology adoption model (TAM) (Lu et al. 2003); Ajzen, 1985, 1991; Davis, 1989; David et al., 1989; Mathieson, 1991; Moore, 1987; Taylor and Todd, 1995) do Davis (1989) and Karma (SEE) by Shapero and Sokol (1982). Accordingly, Fintech start-up is a human institution designed to create new products and services under conditions of extreme uncertainty, or a nascent business that uses technology (usually mobile) to provide financial services. Start-up intentions are affected by various factors, including (Personality characteristics, (ii) Subjective standards, (iii) Feasibility awareness, (iv) Capital resources, (v) Blockchain technology education and Fintech, (vi) Legal risk. Thirdly, the research done on the intention to start a Fintech start-up, in general, the amount of research on entrepreneurship intentions and decisions of students is still quite limited, especially in the field of Fintech. This is a research gap that the authors will explore in depth.

4. Status-Quo of Fintech Human Resource Projection and Fintech Start-Up in Vietnam 4.1. Overview of the Current Situation of Vietnamese Human Resources About population, Vietnam’s population is 97.3 million people, the number expected to hit 100 million by the end of 2024. Vietnam’s population is projected to hit its peak of 109.78 million people in 2054 (WPR 2021).

Abroad

Abroad

Abroad

3.

4.

5.

Abroad

Abroad

2.

6.

Research area Abroad

No. 1.

Develop an integrated structure model to understand entreprenuerial intention

Factors affecting college students’ entrepreneurial intentions The role of education in entrepreneurial intention

The factors that encourage entrepreneurial intentions

Approach The factors that can motivate individuals to start a business The potentials to create a new business

Factors 1. Desire, 2. Tendency to act, 3. Feeling feasible. 1. Desire, 2. Feasibility, 3. Trend of action. 1. Feeling the educational environment at the university level, 2. Market and financial conditions, 3. Personality. 1. Educational support and 2. Structural support. 1. Entrepreneurial intentions, 2. Perception of feasibility, 3. Perception of social norms, 4. Maturity as a trait for success, 5. Support of friends, 6. Employee planning, alliances and training, 7. Innovation, creativity and opportunity seeking, 8. Employee preference, 9. Business tradition in the family, 10. Choosing to become an independent professional, 11. Personal attitude. 1. The desire to start a business, 2. Confidence in self-capacity, 3. Feasibility, 4. Opportunity, 5. Attitude, 6. Collective capacity, 7. Business goals.

Esfandiar, Sharifi-Tehrani, Pratt & Altinay 2017)

Linan, Rodriguez-Cohard & Reuda-Cantuche 2011)

Turker & Selcuk 2009)

Luthje & Franke 2004)

Krueger & Brazeal 1994)

Sources Shapero & Sokol 1982)

Table 1. Some studies on the intention to start a business in Vietnam and abroad

Vietnam

Vietnam

Vietnam

8.

9.

10.

Source: Authors’ findings, 2021.

Research area Vietnam

No. 7.

Factors affecting the intention to start a business of information technology students in Vietnam

Factors influencing young people’s entrepreneurial intentions in Vietnam

The influence of Industry 4.0 on students’ decisions to start an online business in Ho Chi Minh City

Approach Factors affecting entrepreneurial intentions of Tra Vinh University students

Factors 1. Confidence in feasibility, 2. Teaching activities, 3. Extracurricular activities, 4. Opinions of people around them, 5. Individual business preferences. 1. Subjective standards when doing business online, 2. Information about online business, 3. Industry 4.0 technology trends, 4. Personal experience of Industry 4.0 technology, 5. Expect benefits when starting an online business, 6. Confidence in starting an online business, 7. Intent to start an online business. 1. Attitude towards starting a business, 2. Desire to succeed and challenge, 3. Cognitive behavior control, 4. Experience in entrepreneurship, 5. Gender, 6. Creativity, 7. Education. 1. Entrepreneurial attitude, 2. Perception of feasibility, 3. Personality, 4. Start-up support, 5. Financial resources, 6. Educational environment for entrepreneurship.

Table 1. (Continued)

Bui Nhat Vuong, Nguyen Ngoc Duy Phương, Dao Huy Huan, Chan Nhu Quan 2020)

Nguyen Anh Tuan, Do Thi Hai Ha, Vu Thi Bich Thao, Dang Kim Anh & Nguyen Hoang Long 2019)

Nguyen Thi Lieu Dien & Nguyen Xuan Truong 2018)

Sources Nguyen Thanh Hung & Nguyen Thi Kim Pha 2016)

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In 2020, Vietnam has about 22.6 million young people (accounting for 23.2% of the population). The majority of young people with education graduate from high school (approximately 48%). Meanwhile, the youth without technical expertise accounts for 76%. Of these, only 3.1% have vocational training qualifications; 3.7% have professional secondary education; 5.9% have college degree and 10.5% have university degree or higher. In addition, the proportion of young people participating in the labor force is up to nearly 80%. The number of young people with jobs accounts for 94.9%; Youth unemployment rate is 5.06% (NCYV 2021). The figures raised urgent need for capacity building, fostering professional skills to improve the quality of Vietnam’s young workforce to meet market needs and national targets. Therefore, the issue of youth development in the context of digitalization becomes one of the important working contents.

4.1.1. Status-Quo of Fintech and Fintech Start-Ups in Vietnam As reported by Fintech News Singapore’s 2020 in Vietnam Fintech report, Vietnam’s Fintech industry has grown significantly due to the increasing adoption of digital payments, the booming e-commerce industry and the push by government (Vietnam Fintech Report 2020). In 2019, Vietnam ranked second among ASEAN countries in terms of Fintech financing, attracting 36% of the region’s total investment in Fintech. In Q1 2020, e-payments increased by 76% with total transaction value increasing by 124% compared to Q1 2019. Vietnamese banks have accelerated digitalization, partnering with public Fintech companies. Regarding Fintech start-ups in Vietnam, the number of Fintech start-ups is increasing day by day. In 2015, there were only 35 start-ups in Vietnam but this number has tripled in 2019 (Vietnam Fintech Report 2020). Vietnam’s Fintech ecosystem include: Payment intermediaries e-wallets), personal finance, peer-to-peer lending (P2P lending), insurance technology, digital banking, credit scores, crowdfunding (A. T. Nguyen 2019). In which, the two biggest sectors are e-wallet and P2P lending with 28 members with license and more than unofficial 70 members. However, Vietnam still lags behind ASEAN nations with the coverage of official banking and financial services at only 59% compared with 86% of Thailand and 92% of Malaysia. Anh (2019) reports that, in Vietnam, there are the following advantages to develop Fintech such as a large and young population, low corporate income tax, and unclear legal environment for Fintech products to develop

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since there are no tax barriers. In addition, there are many investment funds and start-up incubators such as VSV, VinaCapital in Vietnam... The Government of Vietnam is also interested in Fintech and has already launched “the National Project 844” to support the start-up ecosystem. Nevertheless, there are still many difficulties to develop Fintech and Fintech start-up in Vietnam. The unclear legal environment makes businesses afraid to invest in technology development. Furthermore, Vietnamese people still have the habit of using more cash and have little knowledge of finance or payment services. Hence, they are afraid to use these services. Finally, the official database is incomplete, leading to difficulties in market orientation and management.

Source: Fintech News Singapore và Switzerland global enterprise, 2020. Figure 1. Fintech start-ups in Vietnam.

In Vietnam, Fintech development enjoys quite favorable conditions, i.e., large and young population, low corporate income tax, unclear legal environment for Fintech products to develop since there are no tax barriers (A. T. Nguyen 2019) and various investment funds and start-up incubators such as VSV, VinaCapital in Vietnam. The Government of Vietnam is also interested in Fintech and has already launched “the National Project 844” to support the start-up ecosystem.

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Source: Training curriculum for trainers on innovative start-ups in the Fintech field – Project 844 of Ministry of Science and Technology, Vietnam Figure 2. Fintech’s fields of activity.

Table 2. SWOT analysis of Fintech Strength Large and young population

Weakness Relatively lower productivity levels

Opportunities Low manufacturing cost

Adaptive to change

Shortage of skilled labour

Low corporate income tax

Strong growth in private consumption

High budget deficit may be a major concern

Unclear legal policy for Fintech

Digital marketing expertise

Many emerging new entrants

Various investment funds and start-up incubators such as VSV, VinaCapital… “National Project 844” to support the start-up ecosystem Expand product mix Build brand awareness

IT/ software expertise Growing brand equity Source: Authors’ findings, 2021.

Threats Unclear legal environment makes businesses afraid to invest in technology development Traditional habit of using more cash and have little knowledge of finance or payment services Incomplete official database leading to difficulties in market orientation and management Rapid technological change

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However, there are certain difficulties, i.e., unclear legal environment makes businesses afraid to invest in technology development; traditional habit of using more cash and have little knowledge of finance or payment services; incomplete official database leading to difficulties in market orientation and management.

5. Research Model and Findings 5.1. Model and Hypothesis From the research overview, the proposed research model is as follows: Studies on start-up intention often derive from the theory of planned behavior (TPB). Accordingly, intention represents an individual’s level of readiness and is a direct precondition for performing a behavior (Ajzen 1991; 2011). Start-up intention is the commitment to starting and owning a new business (Krueger, 1993); either the individual’s affirmation of his intention to own a new business and develop a plan of action at a certain point in the future (Thompson, 2009) or simply the motivation to establish a plan of action to create a new business (Fayolle, 2013). In addition, according to Luthje and Franke (2004), start-up intention is also influenced by external factors that are entrepreneurship education. Research conducted by Arenus and Minniti (2005) shows that well-trained individuals are more likely to pursue entrepreneurial opportunities. Besides, research by Amou and Alex (2014), Perera (2011), Phan Anh Tu and Giang Thi Cam Tien (2015) shows that the capital factor is also one of the important factors in realizing the business ideas, allowing students to implement business activities into practice. Most of the students used funding from parents and brothers, friends or bank loans in the early stages of starting a business. Besides, with the characteristics of Vietnam, legal risk is also an external factor affecting students’ entrepreneurial intentions, especially in the Fintech field, the legal framework is still incomplete. Administrative procedures and tax obligations are two of the biggest legal hurdles for innovative start-ups. Therefore, students still consider the legal corridor as a barrier affecting their intention to start a business. For such a specific field as Fintech, students’ understanding of Fintech and Blockchain technology is an important factor affecting the students’

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intention to start a Fintech business. Education about Blockchain technology and start-up in the Fintech field has not received much attention from schools and students through extracurricular lectures or courses. On that basis, the authors propose 6 factors that affect students’ entrepreneurial intentions in the Fintech field, including: Personal characteristics; Subjective standards; Perceived feasibility; Financial accessability; Education about Blockchain technology and Fintech and Legal risk awareness. H1: Personal characteristics positively affect students’ intention to start a business in the Fintech field. Personal characteristics: Studies of (Luthje & Franke, 2003); (Ambad & Damit, 2016) both pointed out personality traits that positively affect students’ entrepreneurship intentions. H2: Subjective standards positively affect the students’ intention to start a business in the Fintech field. Subjective standards: The perception of pressures from the society to show support or opposition to the person intending to perform the behavior. Research by (Karali, 2013); (Ambad & Damit, 2016) point out that subjective standards have a direct and positive effect on students’ entrepreneurial intentions. H3: Perceived feasibility positively affects the students’ intention to start a business in Fintech field. Perceived feasibility: The level of the individual’s perception of ease or difficulty; whether to be controlled, restricted or not when performing a behavior, is an individual’s degree of confidence in the ability to perform the behavior (Ajzen, 2006). (Franke & Luthje, 2004), (Chell, Spence, Perrini, & Harris, 2016) pointed out that Perceived feasibility factor has a direct impact on students’ entrepreneurial intentions. H4: Financial accessability positively affects students’ intention to start a business. Financial accessability: The ability to access investment capital for a business idea. Easy access to finance will increase students’ entrepreneurial opportunities. Research by (Franke & Luthje, 2004), (Chell, Spence, Perrini, & Harris, 2016) shows that the factor of capital has a direct influence on the intention of students to start a business.

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Figure 3. Research model.

H5: Blockchain technology and start-up education positively impact students’ entrepreneurial intentions. Entrepreneurship Education: Program-related, extracurricular lectures or courses provide students with the knowledge, skills, and attitudes to pursue business (Clouse, 1990), (Ekpoh & Edet, 2011), (Ooi, Selvarajah, & Meyer, 2011). (Ambad & Damit, 2016) have shown that entrepreneurship education has a direct effect on students’ entrepreneurial intentions. H6: Legal risk awareness positively affects students’ intention to start a business. Legal risk awareness: Regarding the standards and principles of innovative start-ups, the completion of the legal framework for entrepreneurship in Fintech and the legal understanding of the students. This is a factor added by the group of author to match the specificity of Vietnam.

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5.2. Results and Findings 5.2.1. Scale Test The results of evaluating the reliability of the scale with Cronbach’s Alpha showed that all of the scales have the reliability higher than 0.6 and the corrected item total correlation was greater than 0.3. All scales satisfy the conditions of explanatory factor analysis - EFA. The reliability of the scales is summed up in the table below. 5.2.2. Exploratory Factor Analysis (EFA) Exploratory factor analysis (EFA) was performed with Principle Component extraction, Varimax rotation for the dependent observed variable. The results showed that the coefficient KMO = 0.779 (meet the condition > 0.5); Significance level and Barlett test = 0.000 ( 50% and factor loading are greater than 0.5 should meet the requirements. The official scale after the EFA treatment consists of 5 independent variables with 18 observed variables as proposed. Therefore, the model studying the influence of factors on the student’s entrepreneurship intentions in the Fintech field includes 5 scales of independent variables with 18 observed variables and 1 scale of the dependent variable including 4 observed variables. These were used to perform multivariate linear regression. Table 3. Scale test results

No.

Variable name

Symbol

Number of observed variables

Cronbach’s Alpha coefficient

Smallest Total variable correlation coefficient

1.

Entrepreneurial intention

EI

4

0.776

0.550

2.

Personal characteristics

PS

3

0.751

0.522

3.

Subjective standards

SS

4

0.711

0.428

4.

Perceived feasibility

PF

3

0.849

0.689

5.

Financial accessability

FA

3

0.747

0.544

6.

Blockchain and startup education

BC

3

0.817

0.621

7.

Legal risk awareness

LA

5

0.711

0.502

Source: Authors’ finding, 2021.

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Table 4. Results of EFA analysis 1 .840 .832 .805

BC3 BC2 BC1 SS3 SS4 SS2 SS1 PS2 PS1 PS3 FA2 FA1 FA3 LA2 LA3 LA1 Source: Authors’ findings, 2021.

Factor 3

2

4

5

.807 .787 .656 .641 .814 .778 .763 .864 .778 .656 .824 .782 .741

5.2.3. Regression Analysis The adjusted R-squared reflects the influence of the independent variables on the variation of the dependent variable. In this case, 5 factors (personal characteristics, subjective standards, financial accessibility, education about Blockchain technology and Fintech, legal risk awareness) influence 40.2% of students’ intention to start a business in the Fintech field. The Durbin-Watson coefficient is 2.071 which is within the range from 1.5 to 2.5; hence, there is no first order sequence auto-correlation. Table 5. Results of the statistical value of the factors Model summary Model

R

R squared

Corrected R squared

1. 0.647a 0.419 0.402 (a) Predictors: (Constant), LA, SS, BC, PS, FA (b) Dependent Variable: EI Source: Authors’ findings, 2021.

Error estimate of standard deviation 0.502

Durbin – Watson coefficient 2.071

In order to check whether this regression model is suitable with the collected data set and has application significance, the authors continue to test the suitability of the model through the ANOVA test as follows:

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Sig tests F = 0.000