DIGITAL ECONOMIES: THE RISE OF CRYPTOCURRENCY AND ITS IMPLICATIONS FOR GLOBAL FINANCIAL SYSTEMS

Abstract

This study will delve in the development of digital economies and more specifically, how cryptocurrencies are transforming the world financial systems. The sudden surge of cryptocurrency has severely disrupted the world financial system, forcing us to reconsider classical financial models. Cryptocurrency, especially bitcoin and Ethereum, will challenge the domination of existing financial systems as well as their policies and regulations. This study investigates digital economies, the growth of cryptocurrencies and how they might affect global monetary systems. The research explores the role of blockchain technology in fueling cryptocurrency, providing alternative financial systems and bypassing traditional banking services. Applying a qualitative methodology, the paper analyses some of the possible advantages (or downsides) for crypto-assets and digital currencies: financial inclusion; greater speed; and the systemic risk that they may cause. Key findings indicate that despite the great potential of cryptocurrencies to promote economic activities, they also pose certain challenges in terms of regulations, security threats, and market turbulences. The paper concludes with a brief examination of the requirement that global financial institutions create responsive regulatory environments in order to marry digital currency, and thus financial inclusion, with mainstream finance. This research adds to the discussion on technology, economics and global finance.

Keywords: Cryptocurrency, blockchain, digital economy, financial systems, decentralized finance, regulation, global economy.