International Journal of Innovation and Entrepreneurship

(ISSN: 2753-6297) Open Access Journal
Rss Feed:
IJIE 2024, 3(1), 3; doi: 10.56502/IJIE3010003

Cryptocurrency and Financial Stability

1 China Development Bank, Beijing, 100031, China;
2 Guangzhou College of Technology and Business, Guangzhou, 510850, China;
* Corresponding author:
* Author to whom correspondence should be addressed.
Received: 14 Feb 2024 / Revised: 17 Mar 2024 / Accepted: 14 Mar 2024 / Published: 18 Mar 2024
Download PDF (1482kb)


This paper introduces cryptocurrency into a two-country open-economy model. Based on the theoretical model, we employ the TVP-VAR model to study the dynamic interdependence among interest rate spread (a proxy in the monetary market), exchange rate (a proxy in the forex market), and Bitcoin transactions (a proxy in the cryptocurrency market). The key finding is that Bitcoin has an effect of de-fiatization in the global financial market. When there is a higher divergence in monetary policy between the US and China, Bitcoin attracts greater attention with a higher price, posing a competing force against USD. When there are greater fluctuations in the exchange rate of USD/CNY, Bitcoin diverts investors from CNY. The fiat currencies of the two largest economies are both losers while Bitcoin gains. Therefore, cryptocurrency not only decentralizes the role of commercial banks as a medium of payment, but also decentralizes the role of central banks as a monetary policymaker. In face of this challenge, it is suggested that central banks should embrace blockchain technology and develop their own digital currency to restore the trust lost in the global financial crisis. International collaborations in terms of regulation are necessary given its borderless and authority-less feature.
Keywords: cryptocurrency; financial stability; de-dollarization
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).
Guo, D.; Zhang, H. Cryptocurrency and Financial Stability. ijie 2024, 3, 3.
Guo D, Zhang H. Cryptocurrency and Financial Stability. International Journal of Innovation and Entrepreneurship. 2024; 3(1):3.
Guo, Dong; Zhang, Hanlin. 2024. "Cryptocurrency and Financial Stability." ijie 3, no. 1: 3.
Not implemented