Close Menu
Invest Intellect
    Facebook X (Twitter) Instagram
    Invest Intellect
    Facebook X (Twitter) Instagram Pinterest
    • Home
    • Commodities
    • Cryptocurrency
    • Fintech
    • Investments
    • Precious Metal
    • Property
    • Stock Market
    Invest Intellect
    Home»Cryptocurrency»Cryptocurrency may be evolving into a shadow banking system
    Cryptocurrency

    Cryptocurrency may be evolving into a shadow banking system

    April 27, 20254 Mins Read


    Has cryptocurrency become a shadow banking system?
    Determinants of moneyness in the credit theory of money. Credit: Review of International Political Economy (2025). DOI: 10.1080/09692290.2025.2476738

    A recent study published by political scientists at Freie Universität Berlin, Christopher Olk and Louis Miebs, indicates that the global cryptocurrency system has been undergoing significant transformations. The crypto system, which was originally intended as an alternative to currencies that depend on a central authority like the state or banks, has developed into a credit-based shadow banking system.

    That is why the researchers advocate a reevaluation of cryptocurrencies on a political level, in which regulation is given greater attention in a way similar to traditional banks. The following questions become pertinent in light of the latest developments: Who will be allowed to create money in the future, and what regulations will apply?

    The study titled “A Credit Theory of Anti-credit Money: How the Cryptocurrency Sphere Turned into a Shadow Banking System” was published in the Review of International Political Economy.

    The starting point for the analysis is the crypto crash of 2022, when stablecoins like TerraUSD or the cryptocurrency exchange FTX collapsed. According to the researchers, these incidents were not isolated cases of fraud, but were instead symptoms of a systemic development. Cryptocurrencies increasingly began to function as money, but only because centralized platforms created credit relationships, provided liquidity, and allowed for convertibility with sovereign money.

    The researchers believe that “stablecoins”—crypto assets pegged to national currencies—in particular meet the definition of “shadow money.” They appear to offer price stability and ensure convertibility into sovereign money without having to be securitized by the state. In doing so, they adopt central functions of the financial system while also existing in a regulatory gray area.

    “The creator(s) of crypto originally intended for them to serve as an alternative to the conventional bank-based monetary system,” explains co-author of the study Christopher Olk. “However, it has taken the opposite trajectory. The crypto sphere today is dominated by shadow banks and has become a fixed component of the conventional monetary system.”

    According to the study, centralized cryptocurrency exchanges like FTX now act similarly to banks but without a banking license or regulatory banking oversight. Their financial practices often entail major risks, making them susceptible to bank runs—which is precisely what happened in 2022. The result was a loss in trust that spread across the entire crypto ecosystem and wiped out assets worth billions of dollars.

    “We are well acquainted with this phenomenon after 500 years of capitalism,” says Olk. “In times of low investment returns, private actors tend to develop new forms of credit that are designed to work like money but are not regulated like money. When the bubble eventually bursts, there are two options: Either the state saves these new forms of currency and regulates them—like after 2008—or they vanish into thin air.”

    But the crypto system has not vanished. On the contrary, thanks to the support of political actors—for example as a result of Donald Trump’s second presidency—it has soared to new heights. The authors have taken this as an indication crypto’s integration into the state-supported financial system will continue to progress and believe that this development will require a clear political response.

    “The crypto sphere has found itself at a crossroads,” says co-author Louis Miebs. “Either it will be more regulated and thus receive a new legitimacy, like what is currently happening in the EU, or it will remain a systemic risk area, with the next crisis being just a matter of time.”

    More information:
    Christopher Olk et al, A credit theory of anti-credit money: How the cryptocurrency sphere turned into a shadow banking system, Review of International Political Economy (2025). DOI: 10.1080/09692290.2025.2476738

    Provided by
    Free University of Berlin


    Citation:
    Cryptocurrency may be evolving into a shadow banking system (2025, April 28)
    retrieved 5 May 2025
    from https://phys.org/news/2025-04-cryptocurrency-evolving-shadow-banking.html

    This document is subject to copyright. Apart from any fair dealing for the purpose of private study or research, no
    part may be reproduced without the written permission. The content is provided for information purposes only.





    Source link

    Share. Facebook Twitter Pinterest LinkedIn Tumblr Email

    Related Posts

    How Does Cryptocurrency Actually Work Behind The Scenes?

    Cryptocurrency

    What Is Cryptocurrency And Why Is It Changing The Way We Think About Money?

    Cryptocurrency

    Delhi Police arrests Pune man for duping woman of over Rs 12 lakh in cryptocurrency scam – ThePrint – PTIFeed

    Cryptocurrency

    Decoding Digital Assets: Understanding Crypto Tokens, Coins, And Their Real-World Use Cases

    Cryptocurrency

    Chemistry graduate from Pune held for cheating Delhi woman of Rs 12 lakh in cryptocurrency investment scam

    Cryptocurrency

    What Do Investors Need to Know About Real-World Assets (RWAs) in Cryptocurrency?

    Cryptocurrency
    Leave A Reply Cancel Reply

    Top Picks
    Commodities

    ces bateaux métalliques qui deviennent des cercueils flottants pour les migrants

    L’agence Première accueille trois nouveaux clients

    Precious Metal

    18 Under 18: Leo Silver

    Editors Picks

    La division Silver Touch Technologies lance une plateforme d’IA pour les équipes chargées de la conformité pharmaceutique

    April 22, 2025

    Hong Kong to get first bitcoin inverse investment product, adding to crypto ETFs

    July 22, 2024

    3 Meme Coins Set To Spike By 222%-224% In July

    July 19, 2024

    AFD to Strengthen Cooperation with OCP in Applied Agricultural Research

    May 11, 2025
    What's Hot

    Le Real Madrid a déjà bouclé deux recrues en secret !

    April 24, 2025

    Authorship: The true currency of the digital age

    May 4, 2025

    Nuclear woes? Why MISO asked southeast utilities to load shed, prompting a brownout for 100,000+ customers

    May 27, 2025
    Our Picks

    Watch live as CFTC Chairman Rostin Behnam speaks at DC Fintech Week

    October 23, 2024

    Dunn vs. Bailey in 2024 election

    October 18, 2024

    Zhejiang China Commodities City Group lève 1 milliard de yuans grâce à une émission d’obligations à court terme -Le 21 février 2025 à 10:17

    February 21, 2025
    Weekly Top

    How Does Cryptocurrency Actually Work Behind The Scenes?

    August 1, 2025

    What Is Cryptocurrency And Why Is It Changing The Way We Think About Money?

    August 1, 2025

    How to save local farmland and help farmers

    August 1, 2025
    Editor's Pick

    So Many Thoughts on Joey Votto’s Retirement

    August 27, 2024

    Massachusetts town issues punishment for resident projecting Trump sign on town property, outline’s how it will cost the town

    October 12, 2024

    Boyfriend of George Jones’ widow stole millions from 2 safes

    July 28, 2025
    © 2025 Invest Intellect
    • Contact us
    • Privacy Policy
    • Terms and Conditions

    Type above and press Enter to search. Press Esc to cancel.