Crypto Currencies Development and Its Impact on Economic Activities

This dissertation analyzes the impact of cryptocurrencies on economic activities, their advantages and limitations, and their prospect in the upcoming period. It also covers issues associated with the function and development of cryptocurrencies and their impact on economic activities, the way cryptocurrency has influenced the accounting world, and the way it shall have an effect on accountants highlighting on the way cryptocurrency has exerted an impact on the global economy.

Running head: CRYPTO CURRENCIES DEVELOPMENT AND ITS IMPACT ON
ECONOMIC ACTIVITIES
Crypto currencies development and its impact on economic activities
Name of the Student
Name of the University
Author Note

Running head: CRYPTO CURRENCIES DEVELOPMENT AND ITS IMPACT ON
ECONOMIC ACTIVITIES
Acknowledgement
It has been a period of intense learning for me, not only in the scientific arena, but also on a
personal level. Writing this dissertation has had a big impact on me. I would like to reflect on
the people who have supported and helped me so much throughout this period.
I would first like to thank my colleagues from my internship at (XYZ) for their wonderful
collaboration. You supported me greatly and were always willing to help me. I would
particularly like to single out my supervisor at (XYZ), I want to thank you for your excellent
cooperation and for all of the opportunities I was given to conduct my research and further
my dissertation at (). In addition, I would like to thank my tutors, (XYZ), for their valuable
guidance. You definitely provided me with the tools that I needed to choose the right
direction and successfully complete my dissertation.
I would also like to thank my parents for their wise counsel and sympathetic ear. You are
always there for me. Finally, there are my friends. We were not only able to support each
other by deliberating over our problems and findings, but also happily by talking about things
other than just our papers.
Thank you very much, everyone!
(XYZ)

Running head: CRYPTO CURRENCIES DEVELOPMENT AND ITS IMPACT ON
ECONOMIC ACTIVITIES
Abstract
In recent times, cryptocurrencies have become a highly debated topic mainly in the finance
industry. Fundamentally, a cryptocurrency is a digital or else virtual currency that utilizes
cryptography for the purpose of security. As such, a cryptocurrency is not easy to counterfeit
on account of its security aspect. A defining mark of a cryptocurrency, and possibly its most
appealing factor, is mainly its organic character. This currency is not issued and regulated by
any central governing authority, thereby making it supposedly immune to intervention or else
manipulation by the government. Basically, cryptocurrencies have their advantages as well as
disadvantages. The current study elucidates diverse facets of cryptocurrencies, beginning
with their evolution and early development, diverse challenges, threats, opportunities,
benefits and limitations, and their prospect in the upcoming period. Additionally, the paper at
hand also covers issues associated to function and development of cryptocurrencies and their
impact on economic activities, way cryptocurrency has influenced the accounting world, and
the way it shall have an effect on accountants highlighting on the way cryptocurrency has
exerted an impact on the global economy It was also hereby concluded that is complicated to
forecast the future prospect of cryptocurrencies, as there remains a lot to be completed and
done particularly in the area of formal convention and set of laws.

Running head: CRYPTO CURRENCIES DEVELOPMENT AND ITS IMPACT ON
ECONOMIC ACTIVITIES
Table of Contents
Chapter 1: Introduction..............................................................................................................5
1.1 Introduction..........................................................................................................................5
1.2 Background of the study......................................................................................................5
1.3 Aim of the research..............................................................................................................7
1.4 Objectives of the Study........................................................................................................7
1.4 Research Problem.................................................................................................................8
1.5 Rationale of the current study..............................................................................................9
Chapter 2: Literature review....................................................................................................10
2.1: Introduction.......................................................................................................................10
2.2: Theoretical framework......................................................................................................10
2.3: Emergence and development of crypto currencies...........................................................13
2.4: Analyzing the positive and negative impact of crypto currencies on economic activities
..................................................................................................................................................13
Chapter 3: Research Methodology...........................................................................................19
3.1 Introduction........................................................................................................................19
3.2 Research Onion..................................................................................................................19
3.3 Research Philosophy:.........................................................................................................20
3.4 Research Approach............................................................................................................21
3.5 Research Design:................................................................................................................22

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3.6 Data Used for the study......................................................................................................22
3.7 Technique of Interpretation of gathered data.....................................................................23
Chapter 4: Data Analysis and Interpretation............................................................................24
4.1 Introduction........................................................................................................................24
4.2 Qualitative Analysis of the acquired data..........................................................................24
Chapter 5: Conclusion and Recommendation..........................................................................33
Reference list:...........................................................................................................................35

Running head: CRYPTO CURRENCIES DEVELOPMENT AND ITS IMPACT ON
ECONOMIC ACTIVITIES
Chapter 1: Introduction
1.1 Introduction
The current introductory section of the study elucidates in details about background of the
topic, aim of studying impact of innovative technologies and emergence of virtual
communities generating new modes of transactions as well as methods of accounting on
global economy. The current section also presents intention of analyzing these virtual
communities that generate and distribute own disbursement medium for exchange of both
goods as well as services. In that way it can deliver a mode of transaction, in which emissions
or else centrally authorized monetary units are not engaged. Also, the current section
presents research objectives and questions framed for understanding nature and degree of
influence of virtual currencies (indicating cryptocurrencies) on economic actions. The study
also analyses cryptocurrencies from the perspective of economic and legal factors together
with its advantages and limitations. Also, the present study expresses research problems
identified in the piece and presents the reason and significance of the research.
1.2 Background of the study
Evolution
Even though the notion of electronic currency can be dated back to 1980s, Bitcoin,
introduced during the year 2009 by pseudonymous developer named Satoshi Nakamoto can
be considered as the first ever victorious decentralized cryptocurrency. Particularly,
cryptocurrency is in actual fact a virtual method of coinage that works as a typical legal
tender, helping different users to deliver disbursement for goods as well as services liberated

Running head: CRYPTO CURRENCIES DEVELOPMENT AND ITS IMPACT ON
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from a central trusted authority. LEE et al. (2018) asserts that cryptocurrencies depend on
digital transmission of information, using cryptographic mechanisms to make sure legitimate,
exclusive transactions. In essence, Bitcoin took virtual market for coins one stage ahead,
decentralizing this currency and liberating the same from hierarchical structures of authority
and power. Fundamentally, Litecoin was offered during the fall of the year 2011, gaining
humble achievement and getting highest market cap of cryptocurrency only subsequent to
Bitcoin till it was surpassed by particularly Ripple during 2014 (Décourt et al. 2017).
Essentially, Litecoin customized protocol of Bitcoin, enhancing speed of transaction with the
thought that it might prove to be more suitable for regular transactions. Again, Ripple,
introduced during the year 2013, established an completely exclusive model utilized by
electronic currency and presently preserves second uppermost capitalization of specific
market of roughly $255 million. The cryptocurrency sector comprised of more than 550 coins
with diverse bases as well as trade volumes of users. Owing to increasing volatility,
capitalization in the market of particularly cryptocurrency business alters radically, and is
estimated to be higher than $3.5 billion. However, virtual currency reflects around 88% of
entire market capitalization (Bouri et al. 2017).
In essence, there are diverse and at the same time confronting alternatives as regards prospect
of cryptocurrencies on the whole and specially bitcoin. However, the ones with libertarian
opinion regarding life are necessarily optimistic and embrace the system of cryptocurrency.
On other hand, there are authors, instigators, economists along with scholars from this
particular field who are not keenly interested about usage of cryptocurrency specifically in
the scheme of disbursements as well as financial transactions (Guo and Li 2017). They also
assert that cryptocurrencies are extremely volatile and can be utilized for the purpose of
money laundering otherwise different financing illegal actions.

Running head: CRYPTO CURRENCIES DEVELOPMENT AND ITS IMPACT ON
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1.3 Aim of the research
The aim of the current research is to analytically assess influence of cryptocurrency on
different economic actions. In essence, this research intends to concentrate on materialization
and development of cryptocurrency in the upcoming period. Also, the research study also
aims to examine the way cryptocurrency has exerted influence in the arena of accountancy,
and the way the same can affect diverse accountants. Again, yet another purpose of the
current piece is to highlight the way the cryptocurrency plays an important part in the global
economy. Analysis of the reports declared by World Economic Forum reveals the fact that
10% of Gross Domestic Product can be maintained and stored on block chain associated
technology by the year 2025 (Lehner et al. 2017). Basically, this reflected that the manner in
which different transactions are registered and interlinked can be entirely altered within the
specified period. Also, ‘evolution of money’ also calls for adequate education and training of
future accountants on Bitcoin along with other cryptocurrencies, since it is anticipated to
dominate various business transactions of the upcoming period (Bunjaku et al. 2017). In
itself, it can be hereby observed that this occupation also requires evolution and skills of
adaptation over the future years. Accountants and auditors have therefore begun work of
auditing business transactions within the block chain. Essentially, cryptocurrency is
extensively put to use over the past few years for buying goods/services as well as for
investment purposes (D’Alfonso et al. 2016). The evolution of cryptocurrency will affect
accountancy, as accountants are expected to help clients understand the reporting and tax
ramifications of cryptocurrency.
1.4 Objectives of the Study
Objectives of the current research study are as mentioned below:

Running head: CRYPTO CURRENCIES DEVELOPMENT AND ITS IMPACT ON
ECONOMIC ACTIVITIES
1. To analyse the significance of cryptocurrencies within the market.
2. To detect the future development of cryptocurrencies.
3. To evaluate positive as well as negative influence of cryptocurrency in economic
actions, and the way it will affect accountancy.
Research Questions
1. Do cryptocurrencies influence the actions taking place in the economy?
2. Does cryptocurrency have prospects of further development in upcoming period?
3. Can cryptocurrencies pose threat to banking as well as financial industries in
upcoming period?
4. Does cryptocurrency upset the global economy?
1.4 Research Problem
There are different as well as confronting viewpoints concerning effect of cryptocurrencies
on economic actions and future of cryptocurrencies in general. There are libertarians opinions
of life that are necessarily optimistic and embrace this system of cryptocurrency; diverse
authors, varied economists as well as different scholars from this specific arena are not keen
regarding usage of cryptocurrency in the system of disbursement and pecuniary transactions.
The optimistic opinion regarding cryptocurrencies usage is supported by the fact that they
make it easier to transfer finances between two diverse parties in a particular transaction. In
essence, these transactions are assisted by means of use of public as well as private keys for
purposes of security. Fundamentally, transfers of finances are carried out with minimal

Running head: CRYPTO CURRENCIES DEVELOPMENT AND ITS IMPACT ON
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processing fees, permitting users to avert the steep fees charged by majority of banks. On the
other hand, the opponents of this virtual community of cryptocurrencies state that
cryptocurrencies are extremely volatile and can be utilized for money laundering else wise
financing illegal actions. Therefore, the current study intends to evaluate pessimistic and
optimistic views on cryptocurrencies and assess influence of the same on economic actions
based on analysis of advantages as well as disadvantages of the same.
1.5 Rationale of the current study
The current study can help in analyzing the use of cryptocurrency in general and evaluate the
benefits along with the drawbacks of the same. Study of advantages as well as disadvantages
can help in analyzing nature of influence of the same taking place in the economy both
nationally as well as internationally. Also, the study can help in analyzing whether the future
holds a certain place for this virtual currency as a momentous currency solution or show the
way to financial fraud that subsequently can lead to crumpling of the financial system.

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Chapter 2: Literature review
2.1: Introduction
A structured literature review is undertaken for giving an overview of the state of
field of academic research on the topic of crypto currencies. In this particular section of
literature review, several philosophies that have been developed in the context of crypto
currencies have been highlighted. There have been introduction of numerous private crypto
currencies since the introduction of Bitcoin in year 2009. Concerning the technology of
digitized assets, the first application is the introduction of crypto currencies. This section
further highlights and includes discussion on the development and emergence of crypto
currencies along with the advantages and disadvantages and how such digitized assets
development has impacted the economy. Analysis illustrates how the development of crypto
currencies impacts the economy in different aspects.
2.2: Theoretical framework
Over the course of the short life span of crypto currencies, there has been
unprecedented and erratic evolvement of its market. There has been development of more
than 550 crypto currencies along with a considerable doze of confusion on the ongoing
scenario. In spite of such facts, the contribution of academic research on crypto currencies are
done by exposing pitfalls and limitations payment system of crypto currencies. The operation
of Bitcoin began in January 2009 being called the first decentralized crypto currencies and
Namecoin being the second crypto currency that emerged in year 2011. Public ledger is the
common element in the system of different crypto currency (Gamble 2017). Crypto currency

Running head: CRYPTO CURRENCIES DEVELOPMENT AND ITS IMPACT ON
ECONOMIC ACTIVITIES
is the system of virtual coinage that enables users to make the virtual payment of goods and
services that does not account for central trotted authority. A unique and legitimate
transaction is enabled by crypto currencies by relying on digital information transformation
utilizing the methods of cryptographic. A large clone of bitcoin and other currencies forms
the majority of crypto currencies and it incorporates different parameters value. It can be seen
that there has been three times increase in the total market capitalization of crypto currencies
since 2016 making the value to reach at $ 25 billion in year 2017 (Elendner et al. 2017).
Total market capitalization of crypto currency:
(Source: Schmidt 2017)

Running head: CRYPTO CURRENCIES DEVELOPMENT AND ITS IMPACT ON
ECONOMIC ACTIVITIES
The innovative crypto currencies contribute a growing share while a relatively low
share is allocated to duplications that are altcoins. After Bitcoin, the largest crypto currencies
comprised of dash, Ethereum, Ripple, Monero and Litecoin. The most dominant crypto
currency in terms of market capitalization has been Bitcoin along with other crypto
currencies getting into capturing the market share. Use of crypto currencies is facilitated by
emergence of companies and multitude of projects for building the infrastructure and
mainstream users. Ecosystem of crypto currencies composed of traditional finance, public
block chains and several economic sectors. Such currencies are provided with additional
value due to existence of such services as the native currencies and means for block chains
are done in context of broader economy (Teo 2015). The industry of crypto currencies
comprised of important groups that is industry sectors such as exchange, wallet, payment and
mining.
Market capitalization of top five crypto currencies:
(Source: MacDonald et al. 2016)

Running head: CRYPTO CURRENCIES DEVELOPMENT AND ITS IMPACT ON
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2.3: Emergence and development of crypto currencies
Historically, it was military, intelligence agencies and secret services that made use of
crypto currencies for protecting the leakage of classified information. Such currencies would
help in facilitating quick and easy accomplishment of money transfer across region at both
international and domestic level without involvement of any government regulations. Bitcoin
is the virtual currency that is not backed by any sovereign obligation and or any physical
commodities and involves the combination of peer to peer protocol and crypto graphic
protection for witness settlements (Brenig et al. 2015). The main idea behind the crypto
currencies is to provide users with an easier way to transfer the funds globally while
maintaining privacy and keeping transaction cost at low. At the same time, users are not
dependant on any third parties. The essential factor to crypto currencies is the concept of
proof of work since the integrity of block chain is guaranteed by it. For the occurrence of
transactions, the one transaction in a block cannot be changed by attacker and all the work is
required to be done again. The difficulty in finding the black increases if there is increase in
network of processing power. Therefore, the difficulty will be higher along with safety level
if the network has more processing power. These computational efforts are reward because of
increase reliance on miners.
2.4: Analyzing the positive and negative impact of crypto currencies on economic
activities
The main of crypto currencies in terms of economy is to make development of
method of exchange that did not require creation of trust in the third party financial
intermediaries. However, the basic functions of money is arguably failed to be satisfied by
such currencies. The increased popularity of the crypto currencies is encouraged by genuine

Running head: CRYPTO CURRENCIES DEVELOPMENT AND ITS IMPACT ON
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economic considerations that include irreversibility of transaction, lower cost of transactions,
pseudonymous payments and the potential to attract the new customer base. It has been
identified by some research bodies that the main factor motivating the use of crypto
currencies is the demand side factor that is lower cost of transaction. For the small business,
the important factor is transaction cost. For instance, it is indicated by high credit fees that
more than half of business in America do not accept credit card. In relation to international
transaction, lower cost of transaction is a particular advantage provided by such currencies.
Factors such as concerns over physical security and physical transportation cost are
responsible for unconstrained the crypto currency resulting from ubiquitous nature of
internet. It was indicated by some early analysis that compared to transaction cost of 8% to
9% for traditional remitters; using bitcoin for international remittances had transaction cost of
1% indicating that there is considerable reduction in cost (Bouoiyour et al. 2016).
Transaction cost:

Running head: CRYPTO CURRENCIES DEVELOPMENT AND ITS IMPACT ON
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(Source: Haddad and Hornuf 2016)
The recent data on Bitcoin suggest that its transaction fees are ranging from 0.35% to
0.31% of total transaction value. Many new business platforms have been sparked by the
advent of crypto currencies along with new forms of peer to peer economic activities. Since
the central banking system does not control the currency, a number of concerns regarding the
tax authorities and law enforcement agencies are raised because of anonymity (Bianchetti et
al. 2017).
The payments systems of banks are the main function of banks are the main function
of crypto currencies that enable exchange of money between counter parties not having
enduring transactional relationship. The competitive pressure on financial institutions
providing payments for service has increased by the introduction of crypto currencies. Factor
of cost advantage is alleged by the introduction of crypto currencies and such advantage is
large enough for competing with the traditional financial institutions. Many varieties of
crypto currencies are created by the open source nature of Bitcoin. Transactions are
facilitated by the closed application network of block chain technology. In order to respond to
competitive pressure of crypto currencies, there is evolvement in the business practices of
traditional intermediaries such as banking institutions. The inter bank transactions are
facilitated by using the distributer technology and such technologies being investigated by
central banks (Li and Wang 2017).
The maximum number of Bitcoin is limited to 21 million of Bitcoins. There does not
exist any possibility for the development of inflation in future as such order relating to
currencies cannot be changed by the corporations or political factors. In addition to this, there
exists unlimited number of transactions using such currencies system as the number of

Running head: CRYPTO CURRENCIES DEVELOPMENT AND ITS IMPACT ON
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transactions cannot be controlled. The emergence of crypto currencies has been created in a
wish to allow for cheap and quick transactions and introduction of such currencies intended
to solve the problems of double spending. Concerning the crypto currencies, there are
substantial differences between such currencies in terms of market capitalization, average
amount of transactions and market price. While carrying out the economic analysis relating to
the usage of crypto currencies, it has been ascertained that there have been increase in total
number of crypto currencies in circulation (Gamble 2017). With respect to make payment for
international transactions, there does not exist any restriction in the convertibility to other
currencies.
The insurance industry has a major bottleneck relating to the process of claim
management because of existing dispute between insurers and reinsurers and insurers and
customers. The technology of block chain can solve such issue by auditing the documents of
insurance and time stamping. This would also automate the payment by embedment of smart
contacts once the events of payment triggers occur. Moreover, services of trade finance are
greatly enhanced by offerings from banks with the leveraging of smart contracts. The
contingent payments can be automatically triggered by such contracts that would help in
boosting the efficiency and freeing up the capital in emerging markets among the small
business (Blankenship 2017).
In near term, central bank should not be materially impacted by the development of
crypto currencies in terms of the implementation of monetary policies in their fiat currencies.
The influence of central bank on economic activities can diminish if the crypto currencies
become the most popular mechanism of making payment and this would have an adverse
impact on macro stabilization (McBride 2015). It has been ascertained that the ability of

Running head: CRYPTO CURRENCIES DEVELOPMENT AND ITS IMPACT ON
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Reserve bank of Australia to deliver stable and low inflation is hindered by the crypto
currencies. The reason is attributable to the fact that there is a pre determined supply path
resulting from schemes of crypto currencies that cannot be altered for matching it to the cycle
of business. For all the regulators, several challenges are posed by crypto currencies there
will not be any involvement of central authority for regulation in the presence of
decentralized ledger system. The regulation of exchange called by financial action task force
has created interface between fiat and crypto currencies. Service providers of Crypto
currencies are regulated by the enforcement network of US treasury financial crimes. There is
no immediate threat to the financial system by the crypto currencies as perceived by the
regulatory authorities and central banks (Burns 2016).
The influence of crypto currencies on financial market have been evidenced by
number of laboratory experiments and observational studies and the dynamics of crypto
currency markets is specifically studies by growing body of work studies. In the market of
bitcoin, there is a presence of specific behavior. The main concern about the challenges
facing the crypto currencies is related to transparency. There cannot be easy identification of
cash transactions whilst the transactions are completely transparent.
In using crypto currencies as a means of payment, it is likely that the trust will be
hampered due to high volatility of crypto currencies. It is suggested by reports that in such
events, there can be creation of currencies alternative to crypto currencies. However, creation
o such virtual currencies pose some problems due to the risks associated with it. It can also be
considered that the crypto currencies would have considerable impact on the stability and the
financial system. The reason attributable to the fact is that there is no connection of the
virtual world with the real economy. In spite of this, it can be said that the real money out of

Running head: CRYPTO CURRENCIES DEVELOPMENT AND ITS IMPACT ON
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circulation can be driven out of the economy by crypto currencies under extreme
circumstances (Robertshaw et al. 2016). There can be shrinking balance sheet if the non cash
and cash money would be replaced by the crypto currencies and this would have considerable
impact on conducting monetary policy. Moreover, there would also be difficulties in
measuring the supply of money. It can be argued by considering the above factors that
development and emergency of the phenomenon should be treated as the next stage in the
money development. It has been found that the rapid fluctuation in the rate of exchange have
been due to the thinness of market of crypto currency (Yao 2018). It is indicated by this fact
such form of accumulation of capital cannot be constituted by money due to high exchange
rate of fluctuations relating to uncontrolled level of risk.

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Chapter 3: Research Methodology
3.1 Introduction
As per the setting of the current research study, this section elucidates thoroughly the
methodology that is deployed for conducting the current research. Essentially, this segment
reports on philosophies of the research, approaches adopted, strategies of research, design of
conducting the research and techniques of research evaluation and interpretation of amassed
data (Taylor et al. 2015). For the most part, the whole discussion presented in this current
part orients around detected problem of the research and are in conjunction with objectives
set for the research.
Different methodological dimensions otherwise concentration parameters for the research
piece is hereby presented below:
3.2 Research Onion
As rightly indicated by Mackey and Gass (2015), research onion illustrates different phases
that researchers adopts in a bid to develop policy for carrying out this study. In essence, this
research onion primarily replicates six different phases that is associated to time horizon
along with process of research.

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Figure: Research Onion
(Source: Gog 2015)
3.3 Research Philosophy:
Lewis (2015) suggests that there are mainly four different types of philosophies of research
namely, positivism, realism, pragmatism and Interpretivism. The research philosophy of
pragmatism essentially accepts notions to be pertinent if and only if action is supported.
Fundamentally, pragmatics are of the view that there are several ways of analyzing the world
and conducting research, and that no single opinion can ever present the whole picture as
there might be multiple realities (Flick 2015). Research question is considered to be the most
important determinant of research. Therefore, pragmatics can amalgamate both positivism as
well as Interpretivism notions within the research scope as per question of the research. The
research philosophy of realism depends on the thought of independence and liberty of reality

Running head: CRYPTO CURRENCIES DEVELOPMENT AND ITS IMPACT ON
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from human psyche. As such, this specific philosophy is founded on the supposition of a
scientific draw to knowledge development. The research philosophy Interpretivism, also
referred to as interpretivist philosophy requires researchers to analyse different components
of the research study, hence Interpretivism assimilates interest of human into a study.
Formulation of interpretivist philosophy is primarily founded on critique of philosophy of
positivism in particularly social sciences. For that reason, this philosophy stresses on
qualitative over quantitative analysis (Silverman 2016). However, as a research philosophy,
positivism sticks to the opinion that “factual” knowledge derived by means
of observation (that is through the senses) and measurement, is reliable. In positivism based
researches the role of learner is limited to collection as well as interpretation of data in an
objective manner. In these cases, findings of the research are more often than not observable
and quantifiable.
The learner has adopted the positivism philosophy of research as these validate theories and
notions. In essence, the positivism research philosophy stresses on acceptance of consistent
information that helps in developing effectual scientific knowledge. It can be hereby
mentioned that positivism helps in developing valid knowledge that derived from
substantiated data (Ledford and Gast 2018). For that reason, it can be said that the selection
of the positivism has helped the learner to acquire secondary and substantiated data also
positive facts derived from various sources that are referred to as empirical evidences.
3.4 Research Approach
The deductive research approach deployed by the researcher can be said to be justified since
this assists in development of research hypothesis based on subsisting concepts as well as
notions, notions and aids in formulation of a strategy of research for assessment of the framed

Running head: CRYPTO CURRENCIES DEVELOPMENT AND ITS IMPACT ON
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hypothesis. Fundamentally, this approach also helps in moving from specific knowledge to
generalized notions (Brinkmann 2014). In case when causal relation or nature of association
seems to the indicated by a concept, then this approach might possibly prove to be true in
certain cases. As a result, deductive research approach that facilitates assessment of nature of
association or else connections deduced from generic situations can be said to be effective.
Deductive approach also aids in framing research hypothesis and presentation of proposition
of linkages between research variables and validates or rejects the entire hypothesis based on
assessment results.
3.5 Research Design:
Descriptive research design learner has been applied by the learner for the purpose of
carrying out the present research. Essentially, selection of this research design can be said to
be justified as this specific design facilitates the process of exploring and illustrating whilst
presenting requisite information on definite matters relatable to research topic under
consideration. The learner adopts this descriptive research design since this employs
secondary data together with thorough and comprehensive evaluation of formerly accepted
and recognized facts that are important to a great degree (Humphries 2017).
3.6 Data Used for the study
The current study is mainly founded on secondary data. As rightly put forward by Gog
(2015), there are a range of ordered text (this includes varied reports, findings of prior
surveys, academic literature in particularly books, articles journals along with websites and
many others) collected as qualitative data. In essence, the data utilized for this study largely
consist of theme that refers to specific set of inter-associated premises, explanations together

Running head: CRYPTO CURRENCIES DEVELOPMENT AND ITS IMPACT ON
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with suggestions that can deliver systemic opinions as regards events or circumstances by
indicating towards associations among research variables (Taylor et al. 2015).
3.7 Technique of Interpretation of gathered data
For the purpose of carrying out the research, the learner assumes analysis of qualitative
research that can essentially be used for starting a procedure of enquiry into definite reasons
behind performance and actions of human beings whether be it ethical or else unethical
(Mackey and Gass 2015). In essence, the researcher uses analysis of different case studies,
analysis of themes and systematic analysis of prior body of academic literature for thorough
evaluation of gathered qualitative data.

Running head: CRYPTO CURRENCIES DEVELOPMENT AND ITS IMPACT ON
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Chapter 4: Data Analysis and Interpretation
4.1 Introduction
The present section presents analysis of data to acquire usable and at the same time effective
information. The evaluation intends to describe and present the data in a succinct manner,
recognize associations between variables, compare different variables, recognize the
variances between different variables and predict the outcomes. Essentially, qualitative data
analysis is carried out for understanding recurrent patterns or else themes that are emergent
from the prior body of literature. Also, this section also presents analysis of various pertinent
and prior business cases for analysing the subject matter under consideration.
4.2 Qualitative Analysis of the acquired data
Theme 1- Positive effects of the cryptocurrency
As rightly indicated by Adams et al. (2014), there are open codes for mainly cryptocurrency.
The only variance of internet banking is the disclosure of specific information regarding the
users, however, there is no data regarding the recipient or else the sender of virtual
currencies. There is no inflation that is to say the total number of coins is firmly limited and
there exists neither political forces nor corporations to alter this specific system. In essence,
there exists no prospect for development of inflation in this specific system that can
positively affect the economic operations. As recommended by Böhme et al. (2015), there
are unlimited probabilities of transaction and each one of the holders of wallet can make
payments to anyone, anywhere or of any amount. In essence, transactions cannot be

Running head: CRYPTO CURRENCIES DEVELOPMENT AND ITS IMPACT ON
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particularly controlled or else prevented and can undertake transfers everywhere in the world
wherever another holder of wallet of Bitcoin is located.
Chuen (2015) suggests that in itself, there exists no boundaries and disbursements made in
this specific system cannot be cancelled. Essentially, the virtual coins cannot necessarily be
faked, copied otherwise spent twice. In essence, these capabilities and potential of the
cryptocurrency help in assuring overall integrity of the whole system. In essence, every
month the total number of different online shops, corporations as well as resources accepting
these coins are increasing. As suggested by Dwyer (2015), there is a lower cost of operations
of cryptocurrency. Cryptocurrency operates as physical cash combining purpose of e-
commerce. There is no requirement to disburse commission as well as fees to different banks
as well as other business concerns. As such, the most important part of this specific procedure
is mathematics that necessarily does not require money. In itself, the commission fee used in
this specific system is comparatively lower in comparison to others. It can be observed that it
amounts to around 0.1% of the overall amount of transaction. Gandal and Halaburda (2016)
suggest that there exists no central authority that can regulate the entire network. Essentially,
the network is essentially distributed to different participants. This implies that the central
authority possesses no authority or power to present rules to owners of the virtual currency.
This suggests that even if certain areas of this network goes offline, then also the system of
transaction can operate in a stable manner.
As suggested by Gans and Halaburda (2015), the virtual currencies are necessarily easy to
use and considering overall process of opening a specific account. The wallet of
cryptocurrency gets started within 5 minutes and immediately begins to utilize the same
without posing any further questions or else payment of commission. Therefore, the account

Running head: CRYPTO CURRENCIES DEVELOPMENT AND ITS IMPACT ON
ECONOMIC ACTIVITIES
can be effortlessly handled without any kind of hassle that in turn makes the entire system
extremely uncomplicated. Also, the transactions are also carried out speedily and this has the
capability to transfer money anywhere in this world within a few minutes after completion of
the process of disbursement.
As rightly put forward by Hoy (2017), complete anonymity is maintained in this system of
cryptocurrency, and complete transparency is also maintained. Thus, it can be hereby
mentioned that any business concern can generate infinite coins and address without referring
to any name, address or else any other information. Also, stores of coins however stores
history of different transactions that have occurred. Essentially, this is known as a sequential
chain of blocks else wise block chain. Furthermore, block chain also maintains information
regarding everything.
Theme 2- Negative effects of cryptocurrency
There exists strong volatility and majority of the ups and downs of value of virtual currency
rely on declared assertions of government of different nations. Essentially, this is said to
generate problem in the market during the short term period. Also, there exist huge risks of
investing in particularly cryptocurrency that need to be taken into consideration specifically
in the medium as well as long term.
Hutchings and Holt (2017) is of the view that overall disadvantages as well as limitations of
cryptocurrency are comparatively much longer and are associated to the threats of money
laundering along with different other illegal action funding, dearth of central issuer that
implies that there exists no legal formal unit that can provide assurance in case of occurrence
of any bankruptcy. Nevertheless, even though it is very complicated to forecast, several
academics as well as professionals claim that the future of this virtual community of

Running head: CRYPTO CURRENCIES DEVELOPMENT AND ITS IMPACT ON
ECONOMIC ACTIVITIES
cryptocurrencies is very bright as it can remove barriers and intermediaries. This can lessen
the transaction costs and thus promote trade as well as overall economy. Nonetheless, there is
need to take into account pessimistic voices even in the academic world, advising that higher
volatility risk, risks of hacking and dearth of institutional backup makes future of
cryptocurrency very pessimistic.
Findings:
Based on the empirical research it can be observed that the overall future of this virtual
community of cryptocurrency can be very bright provided certain formal as well as
institutional conditions are satisfied. Essentially, the advantages of using cryptocurrency are
said to facilitate trade operations in a nation and lessen cost. These are said to be recognized
by majority of academics. Also, it can be hereby mentioned that bitcoin as well as other
cryptocurrencies have the capacity to replace different traditional along with new
mechanisms of payment. However, in order to the attain the same and to become a dominant
power in a worldwide system of transactions, there is need to deliver distinctive incremental
value for the purpose of addressing and at the same time overcoming diverse critical
challenges, namely formal regulatory concerns. However, that is unlikely to happen in the
near future. But banking as well as finance industry has the need to take a close look at the
specific technology that underlies these cryptocurrencies as a potential generic way to
transfer ownership of value in the long term.
Theme 3: Impacts of Identified Factors of cryptocurrency
-1) Regulations of the government

Running head: CRYPTO CURRENCIES DEVELOPMENT AND ITS IMPACT ON
ECONOMIC ACTIVITIES
In spite of the footing that virtual currency has gained over last decade, the entire path of
cryptocurrency can be considered to be turbulent. There are many who disagree that
presentation of chaotic and lawless cryptocurrency has been overriding and uncontrollable as
compared to publicity it stimulated at the time when the same appeared during the year 2009
(Kristoufek 2015). The following factors help in understanding effect of cryptocurrency
industry and influence of the same on development as well as assimilation into broader
pecuniary scheme.
Whilst the expanding market of cryptocurrency has the prospective to transfigure the entire
manner of exchanging funds, its establishment into international site is loaded with threats
along with probable downside (ElBahrawy et al. 2017). As virtual currencies (that is
cryptocurrencies) are not recognized across the world as certified mode of payment for
different goods as well as services, formulating consistent mechanisms for its utilization is
important. As suggested by Pilkington (2016), for the virtual currencies to be sustainable,
there needs to be establishment of their legal status.
It can be hereby observed that systems of regulatory mechanisms are growing, with
innumerable tactics being adopted by varied governing bodies. Present authoritarian
dimensions are in formative years and persist to advance with the speedily intensifysing
section (Dyhrberg 2016). In essence, regulations and directives can present enhanced
authenticity to a legal tender that is thriving to attain approval of the entire mass. Tavares et
al. (2016) asserts that they shall standardize components of the market and reduce volatility.
Whilst governments are examining a blend of regulatory stages, their ending goal remains the
same that is to restrict fraudulent acts, guard consumers, revere economic approvals, and
establish viable taxation systems. In essence, an aspect of present cryptocurrency strategy in

Running head: CRYPTO CURRENCIES DEVELOPMENT AND ITS IMPACT ON
ECONOMIC ACTIVITIES
varied states can deliver clarity and a wide overview of up to date regulation efforts (van
Hardeveld et al. 2016). Owing to infancy stage of virtual currency, existing data is essentially
in unrest and is exposed to repeated alteration.
Study of different cases on government regulation
United States:
The United States of America has adopted a permissive, somewhat neutral standpoint on
cryptocurrencies. Essentially, the present threat encountered by controllers is intensifying
subsisting directives to permit for exclusive facets and threats of electronic currency
community. However, for the current requirement of taxation, electronic currencies are in
essence referred to as “property” and not as notes or legal tender, and dealings are subject to
the identical taxation rules as other kinds of property. Particularly, at national stage, the
“Financial Crimes Enforcement Network” has implemented regulatory mechanisms
(Vovchenko et al. 2017). The early attempts of the Enforcement Network to make clear place
of cryptocurrencies’ in particularly the financial market can be traced back to the year 2013
with assertion that whilst usage at individual level of electronic currencies cannot be regarded
as money service business, transactions in addition to switch of electronic currencies
certainly come under money service business. For itself, transmitters of virtual currency have
the need to follow requirements of the government that are already in place for money service
business, counting reporting systems, documenting and sticking to the “Bank Secrecy Act of
the year 1970” (Wenker 2014). In itself, this can be considered to be noteworthy that it
stresses on a great extent on liability from transmitters of electronic currency and act as a
security against scam.
Australia:

Running head: CRYPTO CURRENCIES DEVELOPMENT AND ITS IMPACT ON
ECONOMIC ACTIVITIES
In Australia, where citizens stand for approximately 7% of users of Bitcoin, has not officially
adopted rules for electronic currency (Adams et al. 2014). However, the nation has instituted
a taxation system for particularly the coinage. Particularly, trading carried out in the shape of
cryptocurrency is put through preexisting rules of tax of the nation associated to both goods
as well as services. Whilst the government of the nation has clarified that Bitcoin is not a
lawfully accepted general means of transaction as well as form of paying as per the
regulations of Australia or else laws of other nation (Adams et al. 2014). However, it has
offered space for electronic currency to exist contentedly.
Canada
Canada possibly has the for the most part unified as well as developed system of regulation
and is considered to be the first ever nation in the entire globe that set up taxation on
electronic currencies. In essence, this arrangement of taxation has the necessity to cut overall
risks at a regular basis linked to cryptocurrencies that includes reduction of money-laundering
and terrorist-financing. Chuen (2015) has asserted that “The Bank of Canada” has uttered a
keenness to recognize the emergent market of electronic currency, but at present identifies
and considers electronic currencies as Investments Avenue rather than a currency for
transaction.
China
There is disbelief regarding “money surrogates” and the nation China too has this disbelief
and has carried out steps to limit utilization of virtual money. During the period of December
of the year 2013, Central Bank of China barred financial institutions from managing
transactions of Bitcoin, restricting legal trade of electronic coins to different individuals as

Running head: CRYPTO CURRENCIES DEVELOPMENT AND ITS IMPACT ON
ECONOMIC ACTIVITIES
well as private parties (Dwyer 2015). Also, citizens are also inspired to consider bitcoins as
well as other cryptocurrencies as a good and not a workable currency.
- 2) Emerging markets
Empirical evidences show that significant devaluation of particularly national currency can
also take benefit of efficiencies that are offered by the electronic currency in respect of
money both moving in as well as out of the nation (Hutchings and Holt 2017). Let us
consider the example of Kenya. In this nation, more than half of the GDP of the nation is
influenced by the digital currency. A study conducted by PricewaterhouseCoopers shows that
the influence of uptake of emerging market can be considered to be more pertinent (Gandal
and Halaburda 2016). This reflects that more than 14 million coins are in circulation that has
the highest adoption along with lowest volatility.
- 3) Financial Markets
Prior scholars indicate towards the fact that financial institutions have expressed a willingness
towards experimenting with specific block chain technologies for the purpose of driving level
of operational efficiencies and access previously untapped markets. However, there is
disinclination by large sized financial institutions to accept particular currencies as
enterprises are looking forward towards validating transaction procedures that is something
that is seen to get challenged by adoption of block chain technology (Kristoufek 2015).
- Fintech Uptake
The applications of blockchain for fintech can be considered to be more desirable for the
platform of Ethereum since it is a supple platform for these kinds of institutions to execute

Running head: CRYPTO CURRENCIES DEVELOPMENT AND ITS IMPACT ON
ECONOMIC ACTIVITIES
their operations. As such, the benefit that is attained is a secure way of transaction along with
a single ledger that lessens the requirement to bring together independent ledger of each and
every party involved (Pilkington 2016). There are benefits of individual currencies in case if
the fintech corporations would intend to enhance liquidity in comparatively less liquidity
markets, although this is a moderately small break.
-E-commerce uptake
A study carried out by Tavares et al. (2016) shows that current systems of payment by e-
commerce companies are established such that there remains several touch points that again
shows the way to pricey transactions (that is almost equal to 10%) and longer times of
processing. In this case, the cryptocurrencies can eradicate the necessity for these long
procedures of verification and considerably lessen the time required for transaction.
Therefore, it can be hereby observed that Bitcoin seems particularly effective towards
minimization these identified costs, even as there remains higher propensity for hacks and
breaches of security as a consequence of intricacy for Ethereum, the probability and degree of
impact might perhaps be less for versatile network of Ethereum (Vovchenko et al. 2017).
-Effect of compromise of different network
As suggested by Wenker (2014), in a particular ecosystem that sponsors exceedingly
complex as well as anonymous data exchanges, the likelihood for compromises of major
network (that is to say, ‘hacks’) appears to be high. The instance of DAO attack leading to
3.6 million units of Ether to be drained off into a DAO refers to the likelihood and probable
rigorousness of this kind of hacks (Cocco et al. 2017). Whilst possibility of a ‘51% of the
attack’ where a greater part of stakeholder can considerably influence overall value of
electronic currency, the probability of a key hack is improbable due to the rigid structure of

Running head: CRYPTO CURRENCIES DEVELOPMENT AND ITS IMPACT ON
ECONOMIC ACTIVITIES
virtual currency and comparative dearth of extensive utility, the only notable exception being
Bitcoin Exchange failures as in the case of the Mt. Gox meltdown. Conversely, Ether has
already experienced a significant hack, leading to the fork between Ethereum and Ethereum
Classic (Liu et al. 2016).

Running head: CRYPTO CURRENCIES DEVELOPMENT AND ITS IMPACT ON
ECONOMIC ACTIVITIES
Chapter 5: Conclusion and Recommendation
Summary of Findings:
Founded on findings of the research it can be said that overall prospect of this virtual
community of cryptocurrency can be very bright given certain formal as well as institutional
conditions are fulfilled. Essentially, the advantages of using cryptocurrency are said to
facilitate trade operations in a nation and lessen cost.
Based on the findings in this regard it can be seen that with in USA dealings are put through
identical taxation rules as other categories of assets. Enforcement Network makes place of
cryptocurrencies’ in particularly the financial market and this acts as a guard against financial
scams (Bankston et al. 2017). Thus, it necessarily has enhanced the exchequer of the
government through taxation. In Australia as well, trading carried out in the shape of
cryptocurrency is put through preexisting rules of tax of the nation associated to both goods
as well as services, therefore, adding to the government exchequer. Bank of Canada” also
recognizes electronic currencies as Investments Avenue rather than a currency for
transaction, therefore, is said to affect the gross domestic product of the nation.
Thus, it can be hereby observed that electronic currency benefited from principally tolerant
regulation in western nations; however, the same has been subject to stricter regulations in
particularly Asia. However, it can be said that regulations will present better validity to a
legal tender that is striving to get mass endorsement. This can homogenize components of
this market and the same time lessen volatility (Bankston et al. 2017). Essentially, it can also
be hereby concluded by varied sources that in a bid to attain widespread adoption among
financial institutions, regulation must be in place to ensure safe and secure transactions.

Running head: CRYPTO CURRENCIES DEVELOPMENT AND ITS IMPACT ON
ECONOMIC ACTIVITIES
Also, prior studies suggest that there are different factors that affect the global economy both
positively as well as negatively. It can be observed from prior study that compromise of
network leads to higher propensity of hacks. Uptake by e-commerce industry reduces
transaction cost and time for transaction and thereby positively affects the sector. Uptake by
fintech enhances liquidity in less liquidity markets and positively affects the sector. Again,
financial markets are also adopting the block chain technologies for the purpose of driving
level of operational efficiencies and access previously untapped markets (Gainsbury and
Blaszczynski 2017). Devaluation of particularly national currency can also acquire benefit of
efficacies that are presented by the virtual currency with regard to money both coming in as
well as out of the emerging markets. Despite all the positive effects of virtual currency on
economy, the risks of hacks and breaches of security seems to be high that in turn exerts
immense negative influence on the economy.

Running head: CRYPTO CURRENCIES DEVELOPMENT AND ITS IMPACT ON
ECONOMIC ACTIVITIES
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