ECON (211) Research Project

Cryptocurrency Impact on the World Economy

Electronic payments in return for goods or services are known as e-payments in e-commerce. Budree and Nyathi (2023) note that since electronic payments are now essential to e-commerce, their widespread acceptance may be hampered by the lack of an effective system to manage them. To overcome these problems, blockchain technology has been identified as a crucial innovation. This is because it allows the usage of digital currencies, or cryptocurrencies, of which Bitcoin was the first and is still one of the most well-known. Budree and Nyathi (2023) describe cryptocurrency as a type of electronic money that is backed by abstract mathematical and cryptographic concepts. Aiello et al. (2024) highlight, "In the last decade, cryptocurrencies have gone from relative obscurity to a peak global market capitalization of over $3 trillion”.

Although the cryptocurrency sector has proliferated, it still needs to be discovered how households view this asset class compared to more conventional investments and whether cryptocurrency impacts the overall economy (Aiello et al., 2024). While cryptocurrency and financial stability have received some attention, research on how the introduction of cryptocurrencies has affected individual households' investment and consumption behavior and how it has permeated other asset classes has been limited due to data shortages resulting from the anonymous nature of transactions on public blockchains.

It is worth noting that user acceptability is crucial in determining whether any information system, like a cryptocurrency, succeeds or fails (Marweg, 2019). This research paper aims to investigate the complex effects of cryptocurrencies on the global economy (Aiello et al., 2024). This research aims to offer a comprehensive knowledge of the consequences of cryptocurrencies on the broader economic landscape by analyzing their impact on established financial systems, international trade, monetary policy, and technological innovation.

Outline

I. Introduction

II. Understanding Cryptocurrencies

Definition and characteristics of cryptocurrencies

Evolution of cryptocurrencies

Major players and market dynamics

III. Cryptocurrencies and Traditional Financial Systems

Disruption of traditional banking and financial services

Impact on payment systems and remittances

Regulatory challenges and responses

IV. Cryptocurrencies and Global Trade

Facilitating cross-border transactions

Challenges and opportunities for international trade

Adoption by businesses and implications for supply chains

V. Cryptocurrencies and Monetary Policy

Decentralization and its implications for monetary sovereignty

Central bank digital currencies (CBDCs) and their role

Inflationary concerns and monetary policy implications

VI. Cryptocurrencies and Technological Innovation

Blockchain technology and its applications beyond finance

Smart contracts and decentralized finance (DeFi)

Potential for transformative innovation in various sectors

VII. Challenges and Risks Associated with Cryptocurrencies

Volatility and market instability

Security concerns and risks of fraud

Environmental impact and sustainability

VIII. Conclusion and Recommendations

References

Aiello, D., Baker, S. R., Balyuk, T., Di Maggio, M., Johnson, M. J., & Kotter, J. D. (2023). The effects of cryptocurrency wealth on household consumption and investment. https://doi.org/10.3386/w31445

Budree, A., & Nyathi, T. (2023). Can Cryptocurrency Be a Payment Method in a Developing Economy? The Case of Bitcoin in South Africa. Journal of Electronic Commerce in Organizations, 21(1), 1-21. https://doi.org/10.4018/JECO.320223

Dierksmeier, C., & Seele, P. (2018). Cryptocurrencies and Business Ethics. JBE.Journal of Business Ethics, 152(1), 1-14. https://doi.org/10.1007/s10551-016-3298-0

Marweg, A. (2019). Toward A New Economy: Cryptocurrency and International Development. Colorado State University. https://magazine.libarts.colostate.edu/article/toward-a-new-economy-cryptocurrency-and-international-development/

Milutinović, M. (2018). CRYPTOCURRENCY. [КРИПТО ВАЛУТЕ] Ekonomika, 64(1), 105-122. https://doi.org/10.5937/ekonomika1801105M

Shukla, A. (2023). The impact of cryptocurrency on the global economy. LinkedIn. https://www.linkedin.com/pulse/impact-cryptocurrency-global-economy-akash-shukla/