Blockchain Technology and Cryptocurrencies: An Alternative to Central Banking?

Abstract

Blockchain technology and its application to cryptocurrencies is gaining increasing importance in many sectors. Current events, including the hotly-debated announcement of the launch of Facebook’s digital currency ‘Libra’ illustrate that the topic is now as relevant as ever. In the present article, we investigate whether blockchain technology and cryptocurrencies have the potential to one day replace or offer a serious alternative to central banking and the traditional financial sector by illustrating how blockchain technology functions and offering a brief review of the 2008 global financial crisis in the light of blockchain technology. Furthermore, stablecoins and current events relating to central banking and cryptocurrencies are discussed, along with whether gold-backed cryptocurrencies could serve as a capital asset. Finally, the compliance risks of cryptocurrencies are demonstrated, including a re-enactment of the concrete steps that criminals take to launder their incriminated funds, finance terrorist groups or bribe corrupt foreign officials.