National Perspective:
At the national level, the emergence of blockchain technology and digital
currencies has spurred regulatory actions meant to reduce possible
threats to financial stability. In the United States, for instance, the
Commodity Futures Trading Commission has designated some digital
currencies as commodities subject to future trading regulations, while
the Security and Exchange Commission has provided guidance on the
classification of digital currencies as securities (SEC, 2019; CFTC,
2018). Comparably, the People's Bank of China in China has put tight
rules in place to limit the use of ICOs and digital currencies, as well as
published warnings about the risks involved (People's Bank of China,
2019).
These legislative initiatives show that national authorities are addressing
the possible threats that digital currencies and blockchain technology
may pose to established financial organizations and systems. For
businesses that operate internationally, however, the absence of
consistent regulations across governments breeds uncertainty and
complexity. Furthermore, governments find it challenging to manage and
regulate blockchain technology due to its decentralized structure, which
raises worries about illegal activities like financing of terrorism and
money laundering.
Global Perspective:
The emergence of blockchain technology and digital currencies has the
potential to completely transform the global financial system. Blockchain
technology's peer-to-peer decentralization eliminates the need for
middlemen like correspondent banks to facilitate cross-border
transactions. This possibility could result in a major shift in the structure
of global finance by lessening the influence of conventional financial
institutions in cross-border transactions.
The potential scope of this breakthrough is demonstrated by the World
Economic Forum's study, which revealed that 10% of the world's GDP
might be kept on blockchain technology by 2025 (World Economic
Forum, 2018). Furthermore, the potential for transforming industries
beyond banking through the use of digital currencies and blockchain
technology in supply chain management, smart contracts, and other
applications might further reduce the importance of conventional
financial systems and institutions. Blockchain technology, for example,
can be used to produce ownership and provenance records that are
impenetrable.