Main Article Content

Abstract

Purpose: This study aims to explore the profound impact of cryptocurrencies on traditional monetary systems, mainly focusing on how they challenge the effectiveness of central banks' monetary policies and contribute to economic instability, especially in emerging markets.


Research Design and Methodology: The study employs a qualitative, exploratory research design, drawing on a comprehensive review of existing literature and empirical evidence from emerging markets. The research examines the interactions between cryptocurrencies and traditional financial systems, emphasizing the implications for monetary policy, financial stability, and economic inequality.


Findings and Discussion: The findings reveal that the rise of cryptocurrencies significantly diminishes the effectiveness of traditional monetary tools, such as interest rate adjustments and money supply control. This impact is particularly pronounced in emerging markets, where financial infrastructures are less resilient. The study also highlights the risks associated with cryptocurrency volatility, which can exacerbate systemic financial risks and contribute to greater economic inequality. Moreover, the study underscores the urgent need for central banks to innovate, possibly through the development of Central Bank Digital Currencies (CBDCs), to maintain economic stability.


Implications: The study suggests that central banks and regulators must adapt to the growing influence of cryptocurrencies by developing new strategies and regulatory frameworks. This adaptation is not just important, but necessary to maintaining financial stability, managing economic inequality, and ensuring the continued relevance of traditional financial institutions in a rapidly evolving digital landscape.

Keywords

Cryptocurrencies Financial Stability Monetary Policy Economic Inequality Central Bank Digital Currencies CBDCs

Article Details

How to Cite
Muslim, M. (2024). Cryptocurrencies and Their Impact on Traditional Monetary Systems: An Exploratory Study. Advances in Economics & Financial Studies, 2(3), 153–164. https://doi.org/10.60079/aefs.v2i3.312

References

  1. Adrian, T., & Liang, N. (2016). Monetary policy, financial conditions, and financial stability.
  2. Amornkitvikai, Y., Tham, S. Y., Harvie, C., & Buachoom, W. W. (2022). Barriers and factors affecting the e-commerce sustainability of Thai Micro-, Small-and Medium-Sized Enterprises (MSMEs). Sustainability, 14(14), 8476. https://doi.org/10.3390/su14148476
  3. Arner, D. W., Auer, R., & Frost, J. (2021). Stablecoins: Risks, Potential and Regulation. SSRN Electronic Journal, 905. https://doi.org/10.2139/ssrn.3979495
  4. Auer, R., & Claessens, S. (2018). Regulating cryptocurrencies: assessing market reactions. BIS Quarterly Review, September, 51–65.
  5. Bekaert, G., Harvey, C. R., & Mondino, T. (2023). Emerging equity markets in a globalized world. Emerging Markets Review, 56, 101034.
  6. Bernanke, B. S. (2020). The New Tools of Monetary Policy. American Economic Review, 110(4), 943–983. https://doi.org/10.1257/aer.110.4.943
  7. Binns, R. (2017). Data protection impact assessments: a meta-regulatory approach. International Data Privacy Law, 7(1), 22–35. https://doi.org/10.1093/idpl/ipw027
  8. Böhme, R., Christin, N., Edelman, B., & Moore, T. (2015). Bitcoin: Economics, Technology, and Governance. Journal of Economic Perspectives, 29(2), 213–238. https://doi.org/10.1257/jep.29.2.213
  9. Bouri, E., Molnár, P., Azzi, G., Roubaud, D., & Hagfors, L. I. (2017). On the hedge and safe haven properties of Bitcoin: Is it really more than a diversifier? Finance Research Letters, 20, 192–198. https://doi.org/https://doi.org/10.1016/j.frl.2016.09.025
  10. Bradford, A. (2020). The Brussels effect: How the European Union rules the world. Oxford University Press, USA.
  11. Brown, I., & Marsden, C. T. (2023). Regulating code: Good governance and better regulation in the information age. MIT Press.
  12. Carstens, A. (2019). The future of money and payments. Speech Held in Dublin, 22. https://www.suerf.org/wp-content/uploads/2023/12/f_ffd2257b586a72d1fa75f4ba2ad914e6_5175_suerf.pdf
  13. Catalini, C., & Gans, J. S. (2020). Some simple economics of the blockchain. Communications of the ACM, 63(7), 80–90. https://doi.org/10.1145/3359552
  14. Chatterjee, B. (2023). Impact of Cryptocurrencies on Traditional Financial Systems. International Journal of Science and Research (IJSR), 12(8), 2139–2143. https://doi.org/10.21275/sr23824111829
  15. Claessens, S. (2014). An Overview of Macroprudential Policy Tools. Claessens, Stijn, An Overview of Macroprudential Policy Tools (December 2014). IMF Working Paper No. 14/214, Available at SSRN: https://ssrn.com/abstract=2544212
  16. Corbet, S., Lucey, B., Urquhart, A., & Yarovaya, L. (2019). Cryptocurrencies as a financial asset: A systematic analysis. International Review of Financial Analysis, 62, 182–199. https://doi.org/https://doi.org/10.1016/j.irfa.2018.09.003
  17. Djati, R. M., & Dewi, T. I. D. W. P. (2024). Regulasi Metode Pembayaran Dengan Mata Uang Kripto (Cryptocurrency) Dalam Transaksi Bisnis Internasional. Ethics and Law Journal: Business and Notary, 2(2), 91–106. https://doi.org/10.61292/eljbn.170
  18. Ferrey, S. (2024). Cryptocurrency-Legally Navigating the" Highway to Climate Hell". UC L. SF Env’t J., 30, 25. https://repository.uclawsf.edu/hastings_environmental_law_journal/vol30/iss1/3
  19. Foley, S., Karlsen, J. R., & Putniņš, T. J. (2019). Sex, Drugs, and Bitcoin: How Much Illegal Activity Is Financed through Cryptocurrencies? The Review of Financial Studies, 32(5), 1798–1853. https://doi.org/10.1093/rfs/hhz015
  20. Frost, J., Gambacorta, L., Huang, Y., Shin, H. S., & Zbinden, P. (2019). BigTech and the changing structure of financial intermediation. Economic Policy, 34(100), 761–799. https://doi.org/10.1093/epolic/eiaa003
  21. Gans, J. S., & Halaburda, H. (2013). Some economics of private digital currency. Bank of Canada= Banque du Canada.
  22. Guo, L., & Xu, L. (2021). The effects of digital transformation on firm performance: Evidence from China’s manufacturing sector. Sustainability, 13(22), 12844. https://doi.org/10.3390/su132212844
  23. Hagemann, R., Huddleston, J., & Thierer, A. D. (2018). Soft Law for Hard Problems: The Governance of Emerging Technologies in an Uncertain Future. Colorado Technology Law Journal.
  24. Handayani, T., & Abubakar, L. (2018). Regulasi Pengelolaan Likuiditas Bank melalui Kewajiban Penerapan Net Stable Funding Ratio (NSFR) sebagai Upaya Menciptakan Perbankan yang Sehat. Varia Justicia, 14(1), 10–20. https://doi.org/10.31603/variajusticia.v14i1.2039
  25. Juhro, S. (2023). Pengantar kebanksentralan: Teori dan kebijakan. PT. RajaGrafindo Persada-Rajawali Pers.
  26. Katsiampa, P., Corbet, S., & Lucey, B. (2019). High frequency volatility co-movements in cryptocurrency markets. Journal of International Financial Markets, Institutions and Money, 62, 35–52. https://doi.org/https://doi.org/10.1016/j.intfin.2019.05.003
  27. Krishna, S. S. V. S. P. P. J., & Panda, A. (2023). Cryptocurrency Adoption and Its Influence on Traditional Financial Markets. Interantional Journal of Scientific Research in Engineering and Management, 07(11), 1–11. https://doi.org/10.55041/ijsrem27054
  28. Laudon, K. C., & Traver, C. G. (2021). E-commerce 2020-2021: business, technology, society. Pearson.
  29. Mancini-Griffoli, T., Peria, M. S. M., Agur, I., Ari, A., Kiff, J., Popescu, A., & Rochon, C. (2019). Casting Light on Central Bank Digital Currency. Cryptoassets, 307–340. https://doi.org/10.1093/oso/9780190077310.003.0012
  30. Mikhaylov, A. (2020). Cryptocurrency market analysis from the open innovation perspective. Journal of Open Innovation: Technology, Market, and Complexity, 6(4), 197. https://doi.org/10.3390/joitmc6040197
  31. Nakamoto, S. (2008). Bitcoin: A peer-to-peer electronic cash system. https://assets.pubpub.org/d8wct41f/31611263538139.pdf
  32. Narayan, P. K., Phan, D. H. B., & Liu, G. (2021). COVID-19 lockdowns, stimulus packages, travel bans, and stock returns. Finance Research Letters, 38, 101732. https://doi.org/https://doi.org/10.1016/j.frl.2020.101732
  33. Obstfeld, M. (2019). Global dimensions of US monetary policy. National Bureau of Economic Research. https://doi.org/10.3386/w26039
  34. Othman, A. H. A., Musa Alhabshi, S., Kassim, S., Abdullah, A., & Haron, R. (2020). The impact of monetary systems on income inequity and wealth distribution: a case study of cryptocurrencies, fiat money and gold standard. International Journal of Emerging Markets, 15(6), 1161–1183. https://doi.org/10.1108/ijoem-06-2019-0473
  35. Philippon, T. (2016). The fintech opportunity. National Bureau of Economic Research. https://doi.org/10.3386/w22476
  36. Prasad, E. S. (2021). The future of money: How the digital revolution is transforming currencies and finance. Harvard University Press.
  37. Raharjo, B. (2021). Fintech Teknologi Finansial Perbankan Digital. Penerbit Yayasan Prima Agus Teknik, 1–299. https://penerbit.stekom.ac.id/index.php/yayasanpat/article/view/144
  38. Schneier, B. (2018). Click here to kill everybody: Security and survival in a hyper-connected world. WW Norton & Company.
  39. Tomić, N., Todorović, V., & Čakajac, B. (2020a). POTENTIAL EFFECTS OF CRYPTOCURRENCIES ON MONETARY POLICY. The European Journal of Applied Economics, 17(1), 37–48. https://doi.org/10.5937/ejae17-21873
  40. Tomić, N., Todorović, V., & Čakajac, B. (2020b). The potential effects of cryptocurrencies on monetary policy. The European Journal of Applied Economics, 17(1), 37–48. https://doi.org/10.5937/ejae17-21873
  41. Verhoef, P. C., Broekhuizen, T., Bart, Y., Bhattacharya, A., Qi Dong, J., Fabian, N., & Haenlein, M. (2021). Digital transformation: A multidisciplinary reflection and research agenda. Journal of Business Research, 122, 889–901. https://doi.org/https://doi.org/10.1016/j.jbusres.2019.09.022
  42. Wright, A., & De Filippi, P. (2015). Decentralized blockchain technology and the rise of lex cryptographia. Available at SSRN 2580664. https://doi.org/10.2139/ssrn.2580664
  43. Xudayberdiyeva, D. (2024). NAVIGATING THE COMPLEXITIES OF E-BUSINESS AND E-COMMERCE MANAGEMENT: CHALLENGES AND STRATEGIES IN THE DIGITAL AGE. Journal of Academic Research and Trends in Educational Sciences, SE-Articles, 13–17. http://www.ijournal.uz/index.php/jartes/article/view/926
  44. Zebua, R. S. Y., Hendriyani, C., Sukmadewi, R., Thaha, A. R., Tahir, R., Purbasari, R., Novel, N. J. A., Dewintari, P., Paramita, C. C. P., & Hierdawati, T. (2023). BISNIS DIGITAL: Strategi Administrasi Bisnis Digital Untuk Menghadapi Masa Depan. PT. Sonpedia Publishing Indonesia.
  45. Zohar, A. (2015). Bitcoin: under the hood. Communications of the ACM, 58(9), 104–113. https://doi.org/10.1145/2701411
  46. Zyskind, G., Nathan, O., & Pentland, A. ’. (2015). Decentralizing Privacy: Using Blockchain to Protect Personal Data. 2015 IEEE Security and Privacy Workshops, 180–184. https://doi.org/10.1109/SPW.2015.27