The Potential of Digital Currencies to Foster Financial Inclusion and Promote Balanced Economic Growth

Abstract

Cryptocurrencies have their foundation in encrypted data and operate in a decentralized peer-to-peer network referred to as the blockchain. The global expansion of internet and mobile technology has immensely driven the evolution of new monetary systems and electronic payment modes. These innovations, including electronic currencies and internet payment systems, have been introduced into existence to enhance the efficiency and liquidity of financial transactions. In contrast to fiat currencies issued and controlled by centralized institutions, such as financial institutions or governments, cryptocurrencies are not issued or controlled by centralized authorities. They are developed through sophisticated cryptographic mathematics, which are sustained and authenticated through a process known as mining, which is computational in nature. This is done through a network of computers—or specialized chips, such as application-specific integrated circuits (ASICs) - for the sole purpose of processing and authenticating transactional data with precision. CZU: 336.747.5:004.056.55(478); JEL: D40, E42, E58, G10