IMPACT OF CRYPTO ON AN ECONOMY

 

THE IMPACT OF CRYPTO ON AN ECONOMY

Given the different high-level regulatory courses that cryptocurrency and stable coins may follow, our research tried to estimate their economic results. In order to help decision-makers in these dynamic environments, we aimed to provide predictions to corporate and governmental leaders. The macroeconomic effects of cryptocurrencies and stable coins have been thoroughly examined by the Digital Currency Governance Consortium of the World Economic Forum. Concern over the possible negative consequences of cryptocurrencies and stable coins on the financial system served as the catalyst for this study. Because of this, crypto legislation and protections are high on many people's agendas. While the European Council had just passed the Markets in Crypto-Assets (Mica) Regulation, the White House in the United States has produced a number of papers this year. A detailed study on the growing possibility of significant spillover effects as well as a list of informational gaps for cryptocurrencies and stable coins were released by the Financial Stability Board (FSB). Because of limitations imposed by monetary and financial data, appropriate macroeconomic models are also not frequently accessible for cryptocurrencies and stable coins. These data gaps serve as an excellent example of why, in the conventional financial system, it is more challenging to forecast outcomes with the same level of accuracy. With a broad and global perspective, we defined the criteria for successful macroeconomic results. Next, we projected the impacts of high-level regulation according to the criteria to determine which high-level regulatory course would provide the greatest economic outcome for society. To capture all conceivable situations and consequences, we polled and mapped economists' viewpoints over a wide variety of regulatory routes.

The goal of cryptocurrencies is to provide a new rail for current payment systems. They are innovative payment instruments and infrastructures. Additionally, the diversification of asset holdings and maybe payments includes the use of cryptocurrencies. They contribute to the flow of money and can supplement or replace current currency. On the other side, Stable coin is a DLT-based cryptocurrency that aims to keep its value steady in relation to other assets. It was created in response to the need for a reliable currency in distributed ledger systems and is used for transactions more often than crypto. Any sharp decline in value might cause investors to lose faith and have an impact on the entire market. Financial stability is a worry for the government since crypto makes it unable to implement flexible monetary policy. As a result, there is a chance that capital control procedures will be evaded. Due to poor regional regulations or ineffective payment methods, the use of cryptocurrencies has surged in several emerging economies. Black Americans in the U.S. have a larger exposure to cryptocurrencies, making some of them more susceptible to the recent economic crisis. Consumer protection stirs up conflicting feelings among people of color, and Pakistan is no different, according to the CEO of a civil society organization. Cryptocurrency could be more appealing to people who feel oppressed by the present financial system. Although the intention may be to guard against exploitation, these inclinations are paternalistic.