you get the best experience on our website.
After the global financial crisis of 2008, public trust in conventional banking systems was a concern. The shock's ramification did not stop at these institutions; instead, the debt contagion continued to spread and hit other financial powerhouses. Beyond the United States, the global financial crisis spread to Europe and Asia. Banks reported a significant liquidity shortage after shadow banks had financed themselves using short-term unsecured or collateralised market borrowing. At a global level, the reputation of banks and other financial institutions was tarnished in the public eye.
Cryptocurrencies first emerged in the wake of the global financial crisis. It offered a vision of money free from central bank control. Since its creation, they have bloomed into a highly volatile and divisive asset class. The technology behind the proliferation of cryptocurrencies is blockchain. Whereas the definition of blockchain technology is as follows: "a digital, decentralised and distributed ledger in which transactions are logged and added in chronological order to create permanent and tamper-proof records." Many cryptocurrencies are used as a medium of exchange for daily payments, and they have similar characteristics to other financial markets.
Modern money is a blend of public and private money. Public money carries central banks-issued cash and digital claims against major banks, while private money includes deposits against commercial banks. However, the public sector protects money stability up to 95% of the money in developed economies is private.
Since the bitcoin launch, more than 1,600 cryptocurrencies have entered into circulation. Beyond the hype, cryptocurrencies are presently used to buy tangible goods and services in the actual world. They exhibit a significant shift away from the traditional design, management, and regulation of financial systems.
The financial sector has multiple challenges and experienced many crises. Also, it is widely argued that centralised financial institutions concentrate risks, socialise losses, and collect significant economic rents. Although cryptocurrencies are not a panacea for all financial problems, they can address several issues inherited in the current financial systems. Therefore it is vital to explore how these economic and financial instruments can impact financial stability and establish a more resilient financial sector.
The traditional approach of cross-border payment is characterised by its inefficiency, high cost, and liquidity blockage. Payment processes are not transparent, and they present several uncertainties regarding pricing and fraud risks. Accordingly, payments in cryptocurrencies could mitigate several issues like preventing fraudulent exchanges or payments, making service transactions straightforward and efficient.
The most extensive use of cryptocurrencies is online payment options. The proliferation of cashless payments and credit cards have contributed to the emergence of cryptocurrencies. Digital currencies have the potential to affect cash flows and supply chain structures because exchange partners could potentially trade, exchange value, and settle their payments using cryptocurrencies. By simplifying payments through cryptocurrencies, researchers reveal that companies can make instant money transfers, reducing commissions necessary to pay for goods and services.
Today, some online shops allow their consumers to make their payments in cryptocurrencies, such as bitcoin, Litecoin and Peercoin. But in other scenarios, cryptocurrencies are not yet accepted in many countries. The charges in cryptocurrencies can be carried out among accounts or wallets, independently of a major party, resulting in lower transaction costs, increased security and privacy. Although transferring a large amount of cash is risky in the physical world, it can be shared quickly and covertly between users with cryptocurrencies.
The mounting popularity and pervasiveness of cryptocurrencies reveal that they can save during the financial crisis. The applications of cryptocurrencies can range from simple to complex financial transactions. Cryptocurrencies help to spur innovation and create new business models. A cryptocurrencies-based ecosystem can provide opportunities for new market entrants and support start-ups by facilitating fundraising.
The growing momentum of cryptocurrencies and FinTech carries certain risks regarding the viability of the future integration of virtual currencies and financial systems without legislation and regulatory standards. Some economists reveal that cryptocurrencies are associated with illegal activities due to their ability to challenge government supervision of monetary policy and bypass existing regulatory schemes. Hence it has started to gain more recognition and popularity, which spills over into other domains and negatively affects other industries.
This article is brought to you by RemitAll Software, technology to enhance your business network. Do you want to start with a money transfer business? Then RemitAll Software is the best choice to opt for hassle-free remittance solutions for all dimensions of business. We assure you of your growth and return your business right on track with the money remittance application. Get connected with us by clicking on this link: https://www.remitall.co.uk
Reading Time. 3:00 Minutes
Irene has completed her post-graduation in Integrated Marketing Communication from Calcutta Media Institute, Kolkata, India. Her key areas are blogging and content writing. She is in this industry for three years. Her interest areas include travelling listening to music, and painting.
Mar 8-2 Minutes 45 Seconds
Feb 3-2 Minutes 30 Seconds