Cryptocurrencies: The Future of Finance?

Abstract

Since 2009, more than 1600 cryptocurrencies have entered into circulation. The rapid development of the cryptocurrency market has raised questions about whether cryptocurrencies will challenge the existing order of traditional financial institutions. Opinion remains divided. Some commentators predict that they will cause massive disruptions to the current financial system. Others claim that they are unlikely to represent the “future of money”. Opponents have expressed concern over the association between cryptocurrencies and serious crimes, resemblance to Ponzi-schemes and the increasing incidence of crypto-scams. Supporters advocate that they offer a revolutionary system of payment, an alternative investment method or an alternative means of raising funds. The legal treatment of cryptocurrencies is, however, one of the most decisive factors that will determine their future. Currently, there is no governmental consensus on how, or if, cryptocurrencies should be regulated. Some governments are issuing outright bans on specific cryptocurrency activity; others are taking positive steps by introducing legislation to legitimize their use; the remainder are undecided whether to act or not. The methodology adopted in this research is a simple SWOT analysis to assess the durability and competitive positioning of cryptocurrencies. This chapter concludes that cryptocurrencies will cause disruptions to the future of money. It is expected that they will become a permanent new institution; however, they will be far more advanced than the current generation, be heavily governed by regulation and are likely to be state-issued.