The Impact of Cryptocurrencies on Developing Market Economies

Cryptocurrencies are electronic forms of money that are seen as credible investments; these currencies ranging from Bitcoin, Litecoin, and Etherium are increasingly viewed as a separate asset class with unique characteristics, driven by the distributed ledger technology (DLT) commonly referred to as Blockchain has increased trust in Bitcoin as a store of value and medium of exchange. This paper looks at the evolution of bitcoin and the challenges that have come to characterize the Nobel currency. From sound governance, tax compliance, data privacy and portability, cybersecurity, and fair competition; the currency in its current form exposes economies to grave economic and financial stability risks. Policymakers should regulate the functioning of bitcoin as they would a speculative asset class, by constraining risk-taking from banks by increasing requirements for deposits, whilst designing a mechanism that monitors and improve the functioning of markets that allow the proliferation of the currency.

Keywords: Cryptocurrencies, Competition, Distributed Ledger Technology, Financial Stability