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The Influence of Digital Currency on the Banking Sector in Europe

Author

Listed:
  • Jakšić Milena

    (University of Kragujevac, Faculty of Economics, Republic of Serbia)

  • Todorović Violeta

    (University of Kragujevac, Serbia, Faculty of Economics, Republic of Serbia)

  • Matić Jelena

    (University of Kragujevac, Serbia, Faculty of Economics, Republic of Serbia)

Abstract

Historically, financial and monetary innovations have triggered positive and negative changes in the everyday operations of the financial sector. Similarly, digital currencies can significantly reshape the future of banking and financial intermediaries. Whether the aspect of digital currencies is through the public sector such as in central banks, digital currencies, or private means such as in cryptocurrencies, the eventual rollout of such innovative instruments has a critical influence on the retail use of digital assets. At the same time, digital currencies may create new risks and vulnerabilities in the financial or banking sector whose implications should be thoroughly assessed. However, the magnitude of the risks depends on the designs and policies attached to the digital currencies in use. These features of digital currencies trigger the subject of discussion in this paper. By outlining the benefits and risks associated with digital currencies in the banking sector, the paper aims to highlight the overall impact of digital currencies in the banking sector and available remedies to control the risks. Therefore, the paper provides information that is critical to the banking sector policymakers interested in digital currencies.

Suggested Citation

  • Jakšić Milena & Todorović Violeta & Matić Jelena, 2022. "The Influence of Digital Currency on the Banking Sector in Europe," Economic Themes, Sciendo, vol. 60(4), pages 481-494, December.
    • Handle: RePEc:vrs:ecothe:v:60:y:2022:i:4:p:481-494:n:6
    DOI: 10.2478/ethemes-2022-0026
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    References listed on IDEAS

    as
    1. Kumhof, Michael & Noone, Clare, 2018. "Central bank digital currencies - design principles and balance sheet implications," Bank of England working papers 725, Bank of England.
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    3. Ben Fung & Hanna Halaburda, 2014. "Understanding Platform-Based Digital Currencies," Bank of Canada Review, Bank of Canada, vol. 2014(Spring), pages 12-20.
    4. Mr. Tanai Khiaonarong & David Humphrey, 2019. "Cash Use Across Countries and the Demand for Central Bank Digital Currency," IMF Working Papers 2019/046, International Monetary Fund.
    5. Ali, Robleh & Barrdear, John & Clews, Roger & Southgate, James, 2014. "Innovations in payment technologies and the emergence of digital currencies," Bank of England Quarterly Bulletin, Bank of England, vol. 54(3), pages 262-275.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Digital Currencies; Banking Sector; Benefits; Risks; Design; Policies;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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