Cryptocurrencies: Are Disruptive Financial Innovations Here?


Digital currencies, virtual currencies, in-game currencies, etc., have gathered a lot of attention, despite the difficulties of definition, from all corners of society for many years. Cryptocurrency has gained unprecedented attention since the birth of Bitcoin in 2009. Bitcoin is an online system of making and receiving payments in bitcoins. The system distinguishes itself by providing an open-source, cryptographically secure, confidentiality-preserving platform for transactions and/or making payments. The number of transactions as well as the number of accounts (held by individuals and businesses) is steadily increasing. A whole industry of service-providers has sprung up alongside. We consider the development of Bitcoin and its sister currencies as an important disruptive financial innovation which is here to stay unless throttled by ill-considered legislative or regulatory actions. Potential problems are analyzed and solutions offered. The overall assessment is that cryptocurrencies and variants of virtual currencies are a welcome development, they will offer competition to the existing modalities of money and governmental regulation, they will provide alternative means to economic agents for their transactions, and their innovative existence should be encouraged so that their beneficial features outperform any deleterious ones.

Share and Cite:

Vora, G. (2015) Cryptocurrencies: Are Disruptive Financial Innovations Here?. Modern Economy, 6, 816-832. doi: 10.4236/me.2015.67077.

Conflicts of Interest

The authors declare no conflicts of interest.


[1] Kaul, V. (2013) Easy Money: Evolution of Money from Robinson Crusoe to the First World War. Sage Publications, Thousand Oaks.
[2] Ferguson, N. (2008) The Ascent of Money: A Financial History of the World. Penguin Books, New York.
[3] Eagleton, C., Williams, J., Cribb, J. and Errington, E. (2007) Money: A History. 2nd Edition, Firefly Books, Buffalo.
[4] Martin, F. (2013) Money: The Unauthorised Biography. Alfred A. Knopf, New York.
[5] Dalton, G. (1982) Barter. Journal of Economic Issues, 16, 181-190.
[6] Humphrey, C. (1985) Barter and Economic Disintegration. Man, 20, 48-72.
[7] Graeber, D. (2011) Debt: The First 5,000 Years. Melville House Publishing, Brooklyn.
[8] Walker, F.A. (1878) Money. Henry Holt & Co., New York.
[9] Reynolds, L.G. (1963) Economics: A General Introduction. R.D. Irwin, Homewood.
[10] Dalton, G. (1965) Primitive Money. American Anthropologist, New Series, 67, 44-65.
[11] Hicks, J.R. (1967) Critical Essays in Monetary Theory. Clarendon Press, London.
[12] Bergstra, J. and Weijland, P. (2014) Bitcoin: A Money-Like Informational Commodity. Working Paper, University of Amsterdam.
[13] Antonopoulos, A.M. (2014) Mastering Bitcoin. O’Reilly Media, Sebastopol.
[14] Franco, P. (2015) Understanding Bitcoin: Cryptography, Engineering and Economics. Wiley, Chichester.
[15] Swanson, T. (2014) The Anatomy of a Money-Like Information Commodity: A Study of Bitcoin.
[16] Bohme, R., Christin, N., Edelman, B. and Moore, T. (2015) Bitcoin: Economics, Technology, and Governance. Journal of Economic Perspectives, 29, 213-238.
[17] Castonova, E. (2014) Wildcat Currency: How the Virtual Money Revolution is Transforming the Economy. Yale University Press, New Haven.
[18] Harrison, A. (1967) The Problem of Privacy in the Computer Age: An Annotated Bibliography, I. Rand Corp, Santa Monica.
[19] Harrison, A. (1969) The Problem of Privacy in the Computer Age: An Annotated Bibliography, II. Rand Corp, Santa Monica.
[20] Hunt, M.K., and Turn, R. (1974) Privacy and Security in Databank Systems: An Annotated Bibliography, 1970-1973. Rand Corp, Santa Monica.
[21] Armer, P. (1968) Privacy Aspects of the Cashless and Checkless Society (Testimony before the Senate Subcommittee on Administrative Practice and Procedure). Rand Corp, Santa Monica, Document Number: P-3822.
[22] Oettinger, A. (1964) Proceedings of the National Automation Conference, American Bankers Association, New York.
[23] Lee, N.F. (1967) Tomorrow’s Checkless, Cashless Society: The Problems, the Solutions, The Benefits. Financial Executive, June. Reprinted in Management Review, 56, 58-62.
[24] Humes, K. (1978) The Checkless/Cashless Society? Don’t Bank on It! Futurist, October 1978, 301-306.
[25] Roland, J.D. (1979) The Microelectronic Revolution. Futurist, April.
[26] US House Subcommittee on Domestic and International Monetary Policy (1996) The Future of Money: Part 2 Hearing. Government Printing Office, Washington DC, 11 October 1995. Reprint, Forgotten Books, London, 2013.
[27] Szabo, N. (1997) Formalizing and Securing Relationships on Public Networks. First Monday, 2, 1 September 1997.
[28] Szabo, N. (1997) Contracts with Bearer. Nick Szabo’s Essays, Papers, and Concise Tutorials.
[29] Szabo, N. (2008) Bit Gold. Unenumerated: An Unending Variety of Topics. Blog Network.
[30] Nakamoto, S. (2008) Bitcoin: A Peer-to-Peer Electronic Cash System.
[31] Dai, W. (1998) B-Money.
[32] Chaum, D. (1982) Blind Signatures for Untraceable Payments. In: Chaum, D., Rivest R.L. and Sherman, A.T., Eds., Advances in Cryptology Proceedings of Crypto 82, Plenum (Springer-Verlag), New York, 199-203.
[33] Chaum, D. (1985) Security without Identification: Transaction Systems to Make Big Brother Obsolete. Communications of the ACM, 28, 1030-1044.
[34] Chaum, D. (1992) Achieving Electronic Privacy. Scientific American, 267, 96-101.
[35] Grassmuck, V. (1997) Money on the Internet: Strong Privacy Protection vs. Data Trail (Ecash Goes Live in the US, Finland and Germany). InterCommunication Magazine, No. 19, NTT Publishing, Tokyo.
[36] Back, A. (2002) Hashcash: A Denial of Service Counter-Measure (5 Years on).
[37] Back, A. (1997) Hashcash Package Postage Implementation.
[38] Mougayar, W. (2014) The 8 Identities of Bitcoin.
[39] Miller, R., Michalski, W. and Stevens, B. (2002) The Future of Money. In: OECD, Ed., The Future of Money, Chap. 1, 11-30, OECD, Paris.
[40] Cuthbertson, A. (2015) Bitcoin Now Accepted by 100,000 Merchants Worldwide. International Business Times, 4 February 2015.
[41] IMF (International Monetary Fund) (2015) Fact Sheet: Special Drawing Rights (SDRs). IMF, Washington, DC.
[42] Koning, J.P. (2013) Separating the Functions of Money—The Case of Medieval Coinage. Moneyness (The Blog of J.P. Koning), 13 September 2013.
[43] Andreessen, M. (2014) Why Bitcoin Matters. New York Times, 21 January 2014.
[44] Ron, D. and Shamir, A. (2012) Quantitative Analysis of the Full Bitcoin Transaction Graph, Working Paper. Weizmann Institute of Science, Rehovot.
[45] Jost, P.M. and Sandhu, H.S. (2000) The Hawala Alternative Remittance System and Its Role in Money Laundering. A FinCEN/INTERPOL Report, FinCEN, Vienna, VA.
[46] Bowers, C.B. (2009) Hawala, Money Laundering, and Terrorism Finance: Micro-Lending as an End to Illicit Remittance. Denver Journal of International Law and Policy, 37, 379-419.
[47] Martin, M.B.V. (2012) An Economic History of Hundi, 1858-1978. PhD Thesis, London School of Economics, London.
[48] Mayyasi, A. (2014) Hawala: The Working Man’s Bitcoin. Priceonomics Blog, 7 February 2014.
[49] Chance, D.M. and Brooks, R. (2013) An Introduction to Derivatives and Risk Management. Ninth Edition, Independence, KY.
[50] Hull, J.C. (2014) Options, Futures, and Other Derivatives. Ninth Edition, Pearson, Boston.
[51] Jarrow, R.A. and Chatterjea, A. (2013) An Introduction to Derivative Securities, Financial Markets and Risk Management. W.W. Norton Co., New York.
[52] Coyle, B. (2000) Currency Swaps. Financial World Publishing, Canterbury.
[53] Bock, D.R. (1986) Fixed-to-Fixed Rate Currency Swap: The Origins of the World Bank Borrowing Programme. In: Antl, B., Ed., Swap Finance, Vol. 2, Euromoney Publications, London, 218-223.
[54] Bock, D. and Wallich, C.I. (1984) Currency Swaps: A Borrowing Technique in a Public Policy Context, Staff Working Papers No. 640, World Bank, Washington DC.
[55] Jain, L.C. (1929) Indigenous Banking in India. Macmillan & Co, London.
[56] PricewaterhouseCoopers (PwC) (2013) Know Your Customer: Quick Reference Guide.
[57] FBI (Federal Bureau of Investigation) (2012) Bitcoin Virtual Currency: Unique Features Present Distinct Challenges for Deterring Illicit Activity. 24 April.
[58] FinCEN (Financial Crimes Enforcement Network) (Department of the Treasury) (2013) Application of FinCEN’s Regulations to Persons Administering, Exchanging, or Using Virtual Currencies (FIN-2013-G001). 18 March.
[59] IRS (Internal Revenue Service) (Department of the Treasury) (2014) Notice 2014-21: IRS Virtual Currency Guidance. 14 April.
[60] SEC (Securities and Exchange Commission) (2013) Testimony before the Senate Committee on Homeland Security and Governmental Affairs. 30 August.
[61] New York State Department of Financial Services (2014) Virtual Currencies. 17 July.
[62] New York State Department of Financial Services (2015) Virtual Currencies (Reproposed). 4 February.
[63] Barber, S., Boyen, X., Shi, E. and Uzun, E. (2012) Bitter to Better—How to Make Bitcoin a Better Currency, Working Paper, Stanford University.
[64] Schneier, B. (2013) Silk Road Author Arrested Due to Bad Operational Security. Schneier on Security.
[65] Schneier, B. (2013) The Internet is a Surveillance State. Schneier on Security, 16 March 2013.
[66] Zetter, K. (2013) NSA Is Wired into Top Internet Companies’ Servers, Including Google and Facebook. Wired, 5 June 2013.
[67] Jaycox, M. and Seth, S. (2013) The Government Wants a Backdoor into Your Online Communications. Electronic Frontier Foundation, 22 May 2013.
[68] (2015) Yahoo Exec Grills NSA Director over “Backdoor” Access to Private Data. 24 February 2015.
[69] Kelly, E. (2015) Bill Would Stop Feds from Mandating “Backdoor” to Data. USA Today, 2 April 2015. companies-federal-law-enforcement/70734646/

Copyright © 2022 by authors and Scientific Research Publishing Inc.

Creative Commons License

This work and the related PDF file are licensed under a Creative Commons Attribution 4.0 International License.