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Crypto assets as a threat to financial market stability

Author

Listed:
  • Joebges, Heike
  • Herr, Hansjörg
  • Kellermann, Christian

Abstract

Crypto assets' partial money-like use promotes toxic developments in the financial system. Even though crypto assets might be regarded as close substitutes to traditional money, we show that they lack important functions of money. Traditional fiat money requires several interacting institutions to stabilize its value and regulate its use. In our analysis, we elaborate on the risks associated with the difficulty of setting up regulatory institutions in the crypto sphere and the likelihood of periods of high volatility as well as their repercussions on the traditional financial system due to reciprocal integration. The shift of banking functions into the unregulated area of decentralized finance triggers a new quality of instability in the global financial system with an increasing probability of effects on the real economy. Regulation of crypto assets remains an urgent issue.

Suggested Citation

  • Joebges, Heike & Herr, Hansjörg & Kellermann, Christian, 2024. "Crypto assets as a threat to financial market stability," IPE Working Papers 233/2024, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    • Handle: RePEc:zbw:ipewps:296490
    as

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    References listed on IDEAS

    as
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    2. Marmora, Paul, 2021. "Currency substitution in the shadow economy: International panel evidence using local Bitcoin trade volume," Economics Letters, Elsevier, vol. 205(C).
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    crypto assets; Bitcoin; stablecoins; financial crisis;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • G01 - Financial Economics - - General - - - Financial Crises
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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