Virtual Currencies - Monetary policy dilemmas and regulatory challenges

• Author: Daj A.
• Pages: 217-222

Bulletin of the Transilvania University of Braşov

Series V: Economic Sciences • Vol. 10 (59) No. 2 - 2017

Virtual Currencies – monetary policy dilemmas and

regulatory challenges

Alexis DAJ1

Abstract: Although the topic of virtual currencies is not completely new, the current

technological developments and the extent of the globalisation process appear to have

changed the scope of the research efforts needed to cover not only the advantages and

opportunities, but also the disadvantages and threats that the expansion of virtual currencies

can pose for monetary policy and the safety of the financial system. This paper comprises a

brief presentation of the different types of virtual currencies and identifies some of the most

significant implications of large-scale virtual currency adoption for monetary authorities

and regulators, while providing an overview of the main trends in the evolution of virtual

currencies. In the end, one conclusion is evident: whatever monetary policy or regulatory

issues arise from the use of virtua l currencies, their consequences are far from virtual.

Key-words: Virtual Currencies, Distributed Le dgers, Cryptocurrencies, Cen tral-Bank-

Issued Digital Currencies, and Blockchain Technology

1. Introduction

In the last decades, the financial services industry has proved to be one of the most

prone to the adoption of technological innovation and business model novelties. In

the quest for providing cheaper and quicker financial services and products to a

broader scope of customers, the financial sector ventured also in the field of virtual

currencies, following the more general trend of disintermediation.

This research paper inspects the role that virtual currencies can play in the

financial system, the problems they pose for monetary policy and regulators, while

scrutinising some of the opportunities generated by the current trends of virtual

currency evolution.

This study starts with a short description and classification of virtual

currencies and the way their mechanism works, after which it continues with the

analysis of how central banks can adapt their monetary policy instruments and

regulatory principles in order to harness the opportunities and threats presented by

1 Transilvania University of Braşov, alexis.daj@unitbv.ro