Blockchain in Financial Intermediation and Beyond: What are the Main Barriers for Widespread Adoption?
Erez Yerushalmi and
No 22, CAFE Working Papers from Centre for Applied Finance and Economics (CAFE), Birmingham City Business School, Birmingham City University
Blockchain-enabled cryptocurrency instruments have gradually filtered into financial intermediation, disrupting traditional institutions. This paper discusses the benefits of blockchain to household welfare, focusing on financial intermediation services (FIS). Its main aim is to highlight points of incompatibility with current institutional frameworks and outlines the greatest barriers for its widespread adoption (i.e., regulatory, technological, and environmental). To support our discussion, we develop a stylized general equilibrium model with two competing FIS technologies (i.e., traditional and blockchain). We show that removing these barriers could displace traditional institutions with blockchain technology and raise welfare. Finally, we argue that the 2022 and 2023 cryptocurrency scandals and the ongoing calls for comprehensive, cross-country, institutional changes will be remembered as a turning point in terms of serious efforts to integrate this new technology and make it more mainstream.
Keywords: Blockchain; Institutional Barriers; Fintech; Cryptocurrencies; Financial Intermediation (search for similar items in EconPapers)
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