Search results

This chapter introduces the concept of stablecoins such as Tether, DAI, or Ampleforth. It also provides a taxonomy of the different types of stablecoins consisting of (1) traditional asset-backed stablecoins, (2) crypto-collateralized stablecoins, and (3) algorithmic stablecoins and seigniorage shares. The chapter continues with a brief history of stablecoins, starting from BitShares as the first stablecoin implementation over tether and market-wide stablecoin adoption to Facebook-initiated Diem. Next, the chapter explains the impact of stablecoins on cryptocurrencies and other markets and discusses trends and challenges facing stablecoins. The chapter provides a basic understanding of stablecoins, their defining characteristics, challenges, and markets.

Bitcoin’s introduction as the first cryptoasset in 2009 ushered in a new era, representing a seismic shift in the financial markets. Since then, this evolving asset class has generated much interest, excitement, and growth. This chapter begins by providing a brief background of cryptoassets. It then discusses their main types (cryptocurrencies, security tokens, and utility tokens), users (individual investors, major financial institutions, endowments, and hedge funds), and benefits and drawbacks. Next, it sets forth the book’s purpose, distinguishing features, intended audience, and structure. The chapter provides a synopsis of each of the remaining 21 chapters. Although no single book can encompass all changes and iterations of these technologies as they emerge in the marketplace, this book brings together a broad collection of industry expertise and academic analysis to create a book helpful to researchers, academics, and practitioners.

One aspect of the opportunities and challenges for cryptoassets concerns decentralized finance (DeFi). DeFi is a growing area of cryptoassets that couples blockchain technology, digital assets, and financial services. DeFi is a publicly available system on a decentralized blockchain network, offering financial products and applications. This chapter provides an overview of the DeFi universe that has enormous potential in various industries in the global market. It also discusses the implications of DeFi’s new wave and its applications involving initial coin offerings and stablecoins and specific challenges like the scalability trilemma in DeFi and financial markets.

This chapter reviews developments concerning central bank digital currencies (CBDCs). It introduces, analyzes, and discusses the potential implications of CBDCs on the existing cryptoassets landscape. The chapter also provides an overview of the different approaches to adopting and implementing this new form of money. Additionally, it compares traditional cryptocurrencies, privately issued stablecoins, fiat currencies, and CBDCs. Although vastly divergent opinions exist on digital money’s purpose, benefits, and use cases, CBDCs can provide opportunities for innovation and experimentation at a central bank and systemic level. CBDCs may pave the way for democratizing access to unbundled financial services while rethinking the overall purpose of money, monetary systems, and global business.

Purpose: This chapter aims to lay out the issues regarding the world of digital currencies, private and central bank digital currency (CBDC). In that connection, the authors want to, as much as possible, systematically present the terminology, examples of various digital currencies and the technology behind that phenomenon. The chapter also highlights the occurrence of CBDC and the possible implications of its introduction to day-to-day commercial banking practice, possibly taking the payment systems and transactions alternation, balance sheet and profits’ issues into consideration.

Need for the study: Digital currencies already have and are also soon going to have an enormous impact on society as such, where payments for everyday goods and services are taken on a whole new platform and level, in the sense of how the payments are made and payment systems are constructed, as also in the sense of quantity, as the number and sum-wise payments carried out via such platforms are growing.

Methodology: A triangulation method, a mixed qualitative methodological approach was implemented, so the research offers a synthesis of previously published contributions in this field, followed by deductive and inductive reasoning interconnected with descriptive and comparative analyses.

Findings: As digital currency already have a vast impact on payment systems and modes of payment, the CBDC, an imperative of today and not the matter of the future, will have implications for commercial banks, probably in the field of lowering banks’ commissions, no big customer data-selling ability, accumulating the deposits and deposit policies and credit policies due to higher funding costs for banks. There is an interwovenness among the central bank activities, bank customer’s behaviour and commercial bank activities. Therefore, the change of payment and spending behaviour of customers because of central banks’ introducing novelties will also have consequences for the banking industry.

Practical implications: The choice to handle cash or digital currency will be obsolete, and an individual’s or a firm’s financial knowledge must be upgraded in the field of new money using angles. The issue of digital currencies and CBDCs are no longer a matter of choice but are becoming a new reality. Therefore, it is necessary for the common public, economy and banking system, especially now carrying out most of payments and transfers of money, to study this field and foresee the possible consequences and risks emerging.