The plant and the bitcoin cryptocurrency coin

By Rafael Alfonso R. Remo and John Paolo R. Rivera

Cryptocurrency continues to redefine the global financial landscape. As digital currencies grow in adoption, institutions face a pressing question: does crypto drive sustainable financial progress or invite further instability? Rafael Alfonso R. Remo and John Paolo R. Rivera explore this tension, weighing its promise against the risks of volatility and disruption.

Since the introduction of cryptocurrency into the financial market, many institutions have seized the opportunity to grow and innovate amid rapid technological advancement and globalization. Is it possible for cryptocurrency to strengthen financial sustainability; or might it contribute to heightened volatility in the financial markets instead?

What is cryptocurrency?

Digital currency is any form of money or payment that exists only in spreadsheets (Zhong, 2022). On the other hand, cryptocurrency is a subset of digital currency that refers to any form of digital or virtual currency that can be obtained using cryptography for security (Beerbaum, 2023). It uses a decentralized system to create transactions. Urquhart and Yarovaya (2023) discussed that cryptocurrency becoming mainstream dates to the establishment of Bitcoin[1] in 2009. Its prominence grew in the late 2010s to early 2020s, paving the way for the establishment of other cryptocurrencies[2] (Urquhart & Yarovaya, 2023).

Cryptocurrency functions similarly to traditional transactions, such as those between institutions and banks (Beerbaum, 2023). The key distinction is that it operates without regulatory oversight and utilizes virtual currency rather than physical money. It involves placing digital entries or tokens of equivalent value into databases to represent deals or agreements (Zhong, 2022).

Since cryptocurrency operates without oversight from a national governing authority yet, it raises a critical inquiry about its legality. Like any institution that handles financial transactions, they are required to be licensed and registered (Terner, 2023). This grants them legitimacy and allows them to operate independently while remaining recognized by the government.

What is financial sustainability?

Financial sustainability refers to the absence of system-wide disruptions that lead to failures within the financial system, while also promoting sustainable finance for the effective management of money and assets (World Bank, 2017). It highlights an institution’s resilience to market-induced stress. As such, financial sustainability is a core objective that institutions aim to achieve through strategic frameworks and policies, such as securing stable sources of funding, income, and revenue, to ensure long-term viability (Financial Stability Board, 2022).

Digital finance refers to the impact of emerging technologies on the financial services industry (European Commission, 2024). It encompasses a broad range of products, applications, processes, and business models that have transformed traditional banking and financial services. Within this digital landscape, cryptocurrency operates using blockchain technology, which is an advanced database mechanism that enables transparent information sharing across a network (Reserve Bank of Australia, n.d.). This allows individuals to manage personal accounts and execute transfers without the involvement of a traditional financial institution (Kramarenko et al., 2019). Thus, blockchain facilitates secure, peer-to-peer transactions without a central authority, offering the potential for faster, more affordable, and accessible financial services.

Additionally, cryptocurrency enables individuals to make direct online payments to one another without the involvement of a governing body. Shin and Rice (2022) highlighted that in an evolving financial landscape, cryptocurrency holds the potential to drive market innovation, promote growth, and support long-term sustainability. As a socio-technical system, it introduces new and significant dimensions for social inquiry. Furthermore, with continued technological advancements, cryptocurrency may offer a range of benefits that surpass those of traditional financing, including enhanced security for consumers. However, despite these proactive developments, concerns around privacy, transparency, and cybersecurity persist.

Well-known forms of cryptocurrency

Jacoby (2025) noted that cryptocurrency began gaining traction in the financial market when Bitcoin emerged as the most widely traded digital currency, paving the way for the rise of others such as Ethereum, Litecoin, and Ripple (Aggarwal & Kumar, 2021). These developments helped establish cryptocurrency as a household name in the years that followed, contributing to significant shifts in market dynamics and prompting the adoption of new digital financing systems.

Since the introduction of Bitcoin, various organizations have entered the space thereby expanding the potential of cryptocurrency and solidifying its presence in the digital financial market. Its continued emergence underscores cryptocurrency’s growing development and. Despite speculative attacks and inherent risks, many continue to pivot toward this asset class due to its ability to reach broader consumer bases and its adaptability to technological innovation in modern financing.

Relevance of cryptocurrency towards financial sustainability

Shahzad et al. (2024) emphasized that cryptocurrency is not only a financial innovation but also a significant contribution to technological advancement. By introducing a new platform for seamless institutional transactions, it has expanded the use of digital space and redefined the concept and value of currency. As such, Javaid et al. (2022) noted that financial service providers are increasingly adopting blockchain technology to enhance authenticity, security, and risk management. Many institutions have begun integrating blockchain into trade and finance systems to implement smart contracts, improve efficiency and transparency, and unlock new revenue opportunities. With its unique recording capabilities, blockchain has the potential to render traditional clearing and settlement processes obsolete.

However, the innovation is not without its challenges. Alsalami and Zhang (2019) pointed out that cryptocurrency is characterized by a high degree of user anonymity, with no definitive record of the number of users on a platform. This incognito nature has raised concerns, particularly as blockchain technology itself does not inherently guarantee user anonymity. Despite this, major players like Bitcoin and Ethereum have continued to push for innovation in the financial sector, introducing updates aimed at enhancing user safety and privacy protection (Chuykov et al., 2024).

The mainstreaming of cryptocurrency, according to Shahzad et al. (2024), was driven by the rapid advancement of technology and globalization, with 2017 marking a pivotal year in its rise. Cryptocurrency heightened awareness of the potential of technology in transforming financial transactions, enabling faster processes with minimal government intervention—an aspect that remains a subject of policy debate (Bomer et al., 2023).

Ben-Ahmed et al. (2023) further observed that while cryptocurrency gained traction in 2017, it was the COVID-19 pandemic in 2020 that significantly accelerated its prominence in global markets. Its rise can be attributed to the intensification of globalization and the necessity brought about by lockdowns, which pushed people toward digital platforms as alternative sources of income (Dardouri et al., 2023).

During the height of the pandemic, cryptocurrency played a critical role in sustaining economic activity (Dardouri et al., 2023). Many businesses turned to cryptocurrency as a way to generate profits independent of government oversight (Masiha, 2022). However, this prompted debate about its reliability given its unconventional structure and absence of institutional regulation.

As cryptocurrency operates primarily through digital platforms (Bomer et al., 2023), questions have also emerged around user identity and the traceability of transactions. Shahzad et al. (2024) noted the lack of a clear transactional path, which complicates accountability and transparency. Nevertheless, Zakarneh et al. (2022) argued that the digital nature of cryptocurrency allows institutions to operate more efficiently, expand their digital footprint, and accelerate growth.

Comparing cryptocurrency with modern banking systems

Cryptocurrency has introduced numerous opportunities that have transformed the concept of money and reshaped how transactions are conducted between institutions (Wang et al., 2022). While these innovations offer significant advantages, they also present notable disadvantages, highlighting the dual nature of digital currency adoption.

One of the key advantages of cryptocurrency lies in its use of cryptography, which makes it nearly impossible to counterfeit or double-spend, which is a feature that strengthens transactional security (Zakarneh et al., 2022). Furthermore, Kumhof and Noone (2021) noted that most cryptocurrencies operate on decentralized networks through blockchain technology or distributed ledgers maintained by a network of computers. This allows for the efficient transfer of funds between parties without the need for intermediaries or regulatory oversight (Wang et al., 2022).

However, this lack of centralized control also gives rise to several disadvantages. Zakarneh et al. (2022) observed that many transactions are conducted anonymously or under fictitious identities, creating potential for misuse in criminal activities such as identity theft and fraud. Anonymity, if left unregulated, may weaken institutional safeguards and increase the risk of misinformation. Wang et al. (2022) added that the system is also vulnerable to cyber threats such as phishing, routing attacks, and malware, which pose serious security concerns.

Another significant drawback is the high price volatility of crypto-assets. Zakarneh et al. (2022) explained that due to the decentralized and speculative nature of cryptocurrency markets, assets often experience large price fluctuations within short periods. This volatility undermines financial predictability and limits institutions’ ability to rely on cryptocurrencies for stable returns (Kumhof & Noone, 2021).

Is cryptocurrency an impetus or impediment?

Cryptocurrency serves as a potential impetus for innovation in the financial system, yet it remains impeded from fully achieving financial sustainability. It has created more convenient avenues for conducting transactions and has pushed institutions to reconsider and expand the concept of currency in the virtual realm. However, despite its transformative potential, many institutions still lack the capacity to effectively incorporate cryptocurrency into their existing systems. This reflects the uneven applicability of digital currencies at present, with adoption varying widely across contexts and capabilities.

Significant risks and uncertainties remain, particularly regarding user identity, digital security, and regulatory oversight, which may discourage widespread adoption. The absence of a centralized authority contributes to operational arbitrariness and raises questions around reliability, accountability, and assurance. Furthermore, the market remains susceptible to speculative attacks and abrupt shifts in the perceived value of digital assets.

Nevertheless, cryptocurrency holds promise. It has the potential to contribute meaningfully to the creation of new financial systems that could support institutional resilience and long-term financial strength. Beyond improved networking capabilities, digital currencies may also lay the groundwork for more robust foundations that enhance their value and credibility. eventually reaching parity with physical currencies recognized by governments and monetary authorities.

Encouragingly, several economies have begun integrating cryptocurrency into legislative frameworks, with some classifying it as an asset under monetary authority’s regulation. This would allow for regularization, increase legitimacy, and drive investor confidence opening doors for broader opportunities in human capital development and resource mobilization, driving local economic growth. With further technological and financial innovations, such as improved user security, enhanced system protections, and reduced price volatility, cryptocurrency has a promising path. These developments may lead to a more sustainable and resilient digital financial market.

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About the Authors

Rafael Alfonso R. RemoRafael Alfonso R. Remo served as a junior economist at Oikonomia Advisory & Research, Inc. with a Bachelor of Science in Economics & Public Policy from San Beda University – Manila. His research interest is in maritime economics and human capital development of overseas Filipino seafarers.

John Paolo RiveraJohn Paolo R. Rivera is a senior research fellow at the Philippine Institute for Development Studies where he is involved in the study areas of macroeconomics, tourism development, trade and industry. He also founded Oikonomia Advisory & Research, Inc. He is the recipient of the 2024 Outstanding Young Scientist in the field of Economics by the Department of Science and Technology – National Academy of Science and Technology, Philippines.

References

[1] An innovative payment network and a new kind of money that uses peer-to-peer technology to operate with no central authority or banks; managing transactions and the issuing of bitcoins is carried out collectively by the network.

[2] Other forms of cryptocurrency include Ethereum, Litcoin, Ripple, among others.

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