Financial Crime World

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The Impact of Cryptocurrency Adoption on Financial Stability

Introduction

Cryptocurrencies have gained significant attention in recent years, but their rapid growth has also raised concerns about money laundering risks and financial instability. This review paper aims to examine the existing literature on the impact of cryptocurrency adoption on increasing money laundering risks and contributing to financial and economic instability.

Limitations of Previous Studies

The author highlights three limitations in previous studies:

  • Focusing solely on the negative aspects of cryptocurrencies
  • Lack of accounting standards and laws governing transactions
  • Limited use of quantitative research methods

Literature Review

Several studies have examined the relationship between cryptocurrency adoption and money laundering risks, including:

  • Campbell-Verduyn (2018): Evaluated the effectiveness of the global anti-money laundering regime in addressing digital currencies.
  • Bennett et al. (2020): Emphasized the need for stakeholders to collaborate on developing a regulatory framework for blockchain and crypto-assets.
  • Raiborn and Sivitanides (2015): Addressed six specific financial accounting issues related to bitcoin.

Key Findings

The review paper identifies the following key findings:

  1. Cryptocurrency adoption is associated with increased money laundering risks.
  2. Lack of accounting standards and laws governing transactions poses a significant limitation for understanding new forms of crimes caused by digital currencies.
  3. Most previous studies are qualitative research that focuses on the phenomenon of cryptocurrency from a theoretical standpoint.

Recommendations

The review paper suggests the following recommendations:

  1. Future studies should address the accounting treatment of cryptocurrencies.
  2. There is a need for interesting research avenues related to cryptocurrencies and the strength of auditing and reporting standards.
  3. Policymakers and regulators should be aware of the financial crime risks associated with digital currencies.

Conclusion

The review paper highlights the importance of addressing the potential risks and challenges associated with cryptocurrency adoption and emphasizes the need for further research in this area.