The future of cryptocurrency and blockchain technology in finance

• Main Authors: WONG, Wanyi, MEGARGEL, Alan @ Ali MADJELISI
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2023
• Subjects: Cryptocurrency; blockchain; stablecoin; decentralized finance; central bank digital currency; Finance and Financial Management; Software Engineering
• Online Access: https://ink.library.smu.edu.sg/sis_research/8053; https://ink.library.smu.edu.sg/context/sis_research/article/9056/viewcontent/The_future_of_cryptocurrency_and_blockchain_technology_in_finance__1_.pdf
• Institution: Singapore Management University

Cryptocurrencies have been all the rage in recent years, with many being drawn to their appeal as speculative investment assets. Its proponents also champion the secure and decentralised nature of the technology it is based on, called the blockchain. Given the secure nature of blockchain technology, the idea of adopting cryptocurrencies as legal tender currency has also been mooted and experimented with – with the most famous example being the Central American nation of El Salvador’s bold move to adopting the cryptocurrency Bitcoin as legal tender in September 2021. In theory, this would provide a solution to the high transaction costs faced by overseas El Salvadoreans transferring money home and the fact that 70% of its population have no bank accounts – Bitcoin does not require a bank account and can be transferred across borders easily. However, despite seeming interest by individual consumers for the adoption of cryptocurrencies as legal tender, there has been little appetite by most countries to do so or to integrate their use into their citizens’ lives. Does cryptocurrency have a future as a legal tender currency or as an investment asset? If not, what are the potential future developments? This paper examines and attempts to answer these questions by (i) analysing the pros and cons of adopting cryptocurrencies as legal tender; (ii) analysing the pros and cons of adopting cryptocurrencies as legal tender; (iii) discussing alternative uses for the blockchain technology behind cryptocurrency; (iv) reviewing regulatory challenges to cryptocurrency as an investible asset.