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The Impact of Cryptocurrencies on the Financial Market: National and International Monetary Systems

The Impact of Cryptocurrencies on the Financial Market: National and International Monetary Systems

Phuong Nam Le (University Canada West, Canada)
Copyright: © 2023 |Pages: 33
DOI: 10.4018/978-1-6684-8368-8.ch004
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Abstract

The emergence of cryptocurrencies has posed challenges to governments in managing the money supply. For years, governments have exercised monetary policy by controlling the supply of national currencies. However, cryptocurrencies are decentralized, meaning governments have little or no power to control them. This chapter provides a literature review on the impact of cryptocurrencies on (1) the national monetary policy, (2) the international monetary system, and (3) the role of cryptocurrency within the banking system. Research reveals that governments could consider developing their own cryptocurrency to maintain power and influence the money supply. Alternatively, they can use the legal framework to enable or disable cryptocurrency as legal tender within their jurisdictions. Due to its global nature, cryptocurrency can be used as an international payment method and become an integrated part of the FOREX market. Lastly, as cryptocurrency continues to gain popularity worldwide, regulations on crypto exchanges and issuers will be needed to avoid price bubbles.
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Introduction

In the last decade, the topic of cryptocurrency has been of great interest to academics, business professionals and policymakers. These digital currencies were developed based on blockchain technology with the goal of being decentralized and global. Indeed, cryptocurrency users want to maintain privacy and avoid government intervention. As a result, there has been a question about the government's ability to continue maintaining its power to exercise monetary policy. Furthermore, it is vital to look at how cryptocurrency fits into our national and international financial systems. This book chapter will help to shed light on these matters. First, an overview of monetary policy, fiscal policy and the economic concept of money will be discussed. Then, the impact of cryptocurrency on government policies will be synthesized from the current literature. Second, we will look at how cryptocurrency can fit into the global monetary system. Lastly, we will examine the adaptation of cryptocurrency around the world.

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