Abstract
Cryptocurrencies are electronic forms of money that are seen as credible investments; these currencies, ranging from Bitcoin, Litecoin, and Ethereum, are increasingly viewed as a separate asset class with unique characteristics, driven by the distributed ledger technology (DLT) commonly referred to as blockchain, has increased trust in Bitcoin as a store of value and medium of exchange. This paper looks at the evolution of Bitcoin and the challenges that have come to characterize the Nobel currency. From sound governance, tax compliance, data privacy and portability, cybersecurity, and fair competition, the currency in its current form exposes economies to grave economic and financial stability risks. Policymakers should regulate the functioning of Bitcoin as they would a speculative asset class by constraining risk-taking from banks by increasing requirements for deposits whilst designing a mechanism that monitors and improve the functioning of markets that allow the proliferation of the currency.
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Notes
- 1.
Bitcoin is an example of a non-central bank digital currency. It was invented by an unknown programmer who used the pseudonym Satoshi Nakamoto and was released as open-source software in 2009 along with a white paper describing the technical aspects of its design (see Box A for further details).
- 2.
The purest form of peer-to-peer transaction is a cash exchange. On a computer network, the peer-to-peer concept means that transactions can be processed without the need for a central server.
- 3.
In a 1987 speech, Nobel laureate James Tobin argued that, in order to avoid relying too heavily on deposit insurance to protect the payment system, central banks should “make available to the public a medium with the convenience of deposits and the safety of currency, essentially currency on deposit, transferable in any amount by check or other order” (Tobin (1987, p. 6); see also Tobin (1985)). That is, people should be able to store value without being subject to the risk of bank failure.
- 4.
The purest form of peer-to-peer transaction is a cash exchange. On a computer network, the peer-to-peer concept means that transactions can be processed without the need for a central server.
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Kouam, H. (2023). Challenges and Implications of Cryptocurrencies, Central Bank Digital Currencies, and Electronic Money. In: Yamoah, F.A., Haque, A.u. (eds) Corporate Management Ecosystem in Emerging Economies . Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-031-41578-4_9
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