Theuseof cryptocurrencies on the payment market: new opportunities for national economies
Journal Title: Visnyk Ternopilskoho natsionalnoho ekonomichnoho universytetu - Year 2016, Vol 3, Issue
Abstract
The article examines the current state of virtual transactions and ways of conducting such transactions by means of digital currencies. Acomparative analysis of national and world institutions responsible for coordinating the use of cryptocurrencies has been undertaken.A number of legal risks and organizational pitfalls involved in using cryptocurrencies as an innovative network on the payment market have been represented. A particular attention is given to what differentiates cryptocurrencies from traditional currencies, namely, peer-to-peer architecture, mining methods, block-chain techniques, security and confidentiality, market value definition. The paper introduces distinctive features of major cryptocurrencies on the global payment market. It is also stressed that crypto-technologies are seen as solutions for structural modernization of the currency market and the global network for financial and monetary transactions. Based on empirical evidence, several modern sectors for the application of cryptocurrencies with the highest market capitalization rates have been represented, in particular through such payment networks asBitcoin, Onecoin, Litecoin, Ripple, Ethereum, Terracoin, PPcoin, Darkcoin, Peercoin, Namecoin, and Novacoin. Besides that, their advantages and disadvantages have been summarised. It is emphasized that the risks of using cryptocurrencies alongside national currency lie within a possible decline in the value of national currency, lack of bank supervisory control over the issue of money, limitations in monitoring transactions due to their anonymity, high volatility of digital currencies. The practical contribution of the research is the development of institutional framework for legalization of digital currency, which is seen as an official unit of account in financial accounting and domestic payment system. It is argued that cryptocurrencies have the potential to influence public finance, because under current legislation they can be taxed as investment assets. Since a cryptocurrency is a new form of currency which enables to avoid currency pitfalls, it can havea significant impact on the financial market and national economy. It has been demonstrated that a cryptocurrency is a universal instrument of global financial payments, and at the same time a financial instrument with high capitalization which acts as a competitive form of international capital flow. Therefore, national regulators should view it as a stabilizing instrument for investment and a source of crowdfunding which can mitigate the consequences of possible economic turmoil, and rapidly stabilize and revive the national economy through start-up support initiatives.
Authors and Affiliations
Tetiana Zheliuk, Oleksandr Brechko
Keywords
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