Abstract This study uses the Structural Factor Augmented VAR in exogenous variables (SFAVARx) approach to analyse the impact of cryptocurrency transactions on India’s major macroeconomic variables. Monthly data from May 2013 to October 2021 are sourced from the Reserve Bank of India and statista.com. The current form of cryptocurrency did not have a significant impact on inflation, production, the money supply, or major interest rates. However, given the increasing marginal participation in the crypto market, these important macroeconomic variables can be adversely affected in the future. The Central Bank Digital Currency (CBDC) with features related to India is being proposed as a proactive measure.
This study investigates how U.S. monetary policy affects decentralized finance (DeFi), focusing on capital flows and interest rate sensitivity across over 500 DeFi pools from 2022 to 2024. Using three models: (1) static TVL regression, (2) rolling DeFi deposit beta, and (3) rolling DeFi interest beta, the analysis captures both cross-sectional and time-varying monetary transmission effects. Model 1 shows that DeFi deposits decline in response to rising interest rates. Model 2 confirms that DeFi deposit betas are weakly negative overall, with stablecoin pools exhibiting stronger sensitivity. Model 3 finds limited responsiveness in DeFi lending rates, suggesting that APYs are primarily driven by internal protocol mechanisms rather than macroeconomic rates. The study further analyzes these effects across pool types and over time to capture heterogeneity in monetary policy transmission. The results indicate that DeFi is partially responsive to monetary policy, mainly through capital reallocation rather than interest rate pass-through. This research extends traditional monetary transmission frameworks to decentralized markets and provides new insights into DeFi’s evolving role in the financial system.
Over recent decades, especially since the 2007–08 global financial crisis, the world has experienced a rapid shift toward the adoption of digital payment methods. This trend has been driven by the rise of cryptocurrencies and introduction of central bank digital currencies (CBDCs), which are accelerating the move to a cashless society. This article explores the socio-cultural and geopolitical values of cash, often overlooked in the transition to digital currencies such as bitcoin and CBDCs. Using a historical lens, we analyze the role of cash in shaping culture, history, and geopolitics and propose policy measures to integrate these values into the design of digital currencies.
The decentralized autonomous organization (DAO) represents a radically new way to manage databases. Since money and payments are all about managing databases and since banks play a central role in money and payments, DAO-based money and payments systems are potentially a disruptive force in the banking system—which includes central banks.
The emergence of cryptocurrencies represents a significant innovation in the financial domain, where subsequently, the market has experienced exponential growth. The proliferation of digital assets has captured the attention of investors, financial institutions, and regulatory bodies, necessitating the development of research to further investigate the market–s growing action with the global financial system, specifically monetary policy and those actions executed by central banks to modulate economic activity, whether through conventional mechanisms or otherwise. The continued growth of cryptocurrency markets has prompted questions regarding the efficacy of these instruments and the evolving nature of money, necessitating the adaptation of central bank and regulatory policy frameworks. Given the considerable variation in regulatory environments across jurisdictions, international collaboration and harmonisation are essential to address potential regulatory arbitrage and establish a consistent approach to cryptocurrency oversight.
Aiming to connect key financial infrastructures in ASEAN+3 markets, this publication examines the uses of distributed ledger technology (DLT) and blockchain (BC) for settling cross-border delivery-versus-payment (DVP) securities transactions.
A cryptocurrency is designed to be a currency, but it does not really function like a currency. Currency always has an issuer, usually a trusted entity like the sovereign. There are already indications that cross-border flows are taking place in cryptocurrencies. If this trend is regulated, a part of the flows related to trade payments, remittances or cross border investments would be made in these cryptocurrencies. Cryptocurrencies have specifically been developed to ignore the regulated financial system. These should be reason enough to treat them with caution. It is also seen that cryptocurrencies are not amenable to definition as a currency, asset or commodity; they have no underlying cash flows, they have no intrinsic value; that they are akin to Ponzi Schemes, and may even be worse. These should be reason enough to keep them away from the formal financial system. More significantly, they can destabilise the currency system, the monetary authority, the banking system, and in general Government’s ability to control the economy.
This article explores cryptocurrencies and poses the research question, whether cryptocurrencies are the future of the currency market. The cryptocurrency market has undergone considerable growth, however given recent scandals of cryptocurrency markets and cryptocurrencies have led to increasing calls for regulation. Due to the fact of ultra-volatile cryptocurrency markets cryptocurrencies are assets, which are also assessed as gambling and extremely risky to the overall macroeconomic market stability instead of serving as a medium of exchange for goods and services in an economy. Cryptocurrency currently do not provides a standardized unit of value that allows people to conduct transactions without the need for bartering or exchanging goods directly. It is not without surprise that real digital currencies are developed by regulator cbdc, which are the future of currency.
Central banks may shift their international reserve holdings in order to protect themselves ex-ante against the risk of financial sanctions by fiat reserve currency issuers. For example, from 2016 to 2021, countries facing a higher risk of US sanctions increased the gold share of their reserves more than countries facing a lower risk of US sanctions. This paper explores the potential for Bitcoin to serve as an alternative hedging asset. I describe a dynamic Bayesian copula model to simulate the joint returns of Bitcoin and other reserve assets under a wide range of plausible sanctions probabilities, quantifying the extent to which varying levels of sanctions risk increase optimal gold, renminbi, and Bitcoin allocations. I conclude that sanctions risk may diminish the appeal of US Treasuries, propel broader diversification in central bank reserves, and bolster the long-run fundamental value of both cryptocurrency and gold. • The paper simulates the returns of Bitcoin and other reserve assets. • The simulations balance expected return, volatility, and sanctions risk. • In the presence of sanctions, there is no completely safe asset. • The model shows that cryptocurrency can act as a form of insurance. • Sanctions risk may propel broader diversification in central bank reserves.