Digital Currencies and Financial Transformation

Abstract

The global economy is undergoing a fast digitalization process. Digital-ization and interest in crypto technologies have accelerated, in particular post the Covid pandemic. Meanwhile, crypto and blockchain technologies represent a major design shift in terms of how the economies, financial transfers, payments, and even trade connectivity work. Cryptocurrencies and their technology have already started transforming the global financial and payment systems. Yet, central banks and other policy institutions also need to follow these trends closely. Digitalization itself, on the other hand, might be defined as the incorporation of digital instruments or new digital technologies into our lives. The role of ICTs (information and communica-tion technologies) has substantially increased in economies, financial flows, payment systems, and even in social life. In that sense, digital currencies lead the contemporary major financial transformation era. They combine the privacy of physical central bank money and the convenience of electronic private bank money. The rise of e-commerce and digital payment systems, coupled with blockchain technology, has hence led to the emergence of digital currencies, much more efficient payment technologies, and further financial innovations. Financial systems will also be much simpler, as they get digitalized. Blockchain could potentially even replace internet technology. After all, the centralized internet structure and rising monopoly or oligopolistic power over certain services within modern internet technologies have already led to a major IT outage in 2024. In the short term, though, it will probably need to be used together with the internet.