The Forms and Effects of Cryptocurrencies in a Dual Banking System

Khoutem Ben Jedidia and Hichem Hamza
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Khoutem Ben Jedidia: University of Manouba
Hichem Hamza: King Abdulaziz University

Chapter Chapter 9 in Islamic FinTech, 2021, pp 143-171 from Springer

Abstract: Abstract This chapter examines the effects of private cryptocurrencies in dual system (conventional and Islamic), an area which has not been critically addressed in the literature. Despite the benefits of private cryptocurrencies, we highlight some challenges that private cryptocurrencies pose for financial stability. We show that the widespread use of private currencies causes a compromised payment system notably with the absence of guarantee mechanisms. Moreover, the impacts of cryptocurrencies on commercial bank activities may exacerbate financial stability risks. The loss of control over monetary policy and the lack of lender of last resort of Central Bank lead to higher exposition to systemic risk. Nevertheless, the cryptocurrency compatible with sharia can avoid many concerns and ensure better financial stability and social cohesion in a dual system.

Keywords: Banking Intermediation; Blockchain; Financial Stability; Sharia; Dual Banking; Central Banks; Islamic Bank; Cryptocurrency (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-45827-0_9

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DOI: 10.1007/978-3-030-45827-0_9

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