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Cryptocurrencies and Financial Technology

The development of the first cryptocurrency, Bitcoin, launched in 2009, led to the creation of a new sector in the field of economy called financial technology (FinTech). The phenomenon of cryptocurrencies challenges the conventional understanding of financial transactions with their unique characteristics. The lack of regulation of this alternative digital currency quickly became the subject of debate and concern among financial institutions.

Currently, the technology of cryptocurrencies is still in the process of recognition by both governments and economic systems on the local and global scale. The main advantages of this technology, including decentralization, partial anonymity, privacy, and possible versatility, are what raises the most concern in the legal sphere. Being a direct opposition to banking and tangible or electronic but centralized money, cryptocurrency stands out as a new way of engaging with the process of financial transactions.

FinTech and cryptocurrency are new phenomena in the field of economics as compared to other accepted mediums of exchange. Their legality is not investigated thoroughly by financial institutions and scholars alike, leaving many aspects of using and creating decentralized currency outside of the existing judicial practice. Thus, the need to explore legal issues arises from the fact that while current laws cover some aspects of financial transactions that can be attributed to the use of cryptocurrency, the judicial system still does not account for various threats and issues that cryptocurrency users may encounter now or in the future.

Such problems as money laundering, for instance, although researched and understood in regards to centralized systems and physical money, may be underexplored in the area of FinTech. Moreover, the technology field possesses some concerns that are unique to it – the process of mining is an example of an activity that is not fully explained and covered legally. These aspects and threats they may produce should also be under investigation.

This paper will attempt to provide a comprehensive view of cryptocurrency and the field of FinTech, focusing on its background and legal issues. As the process of regulatory bodies accepting or banning cryptocurrency is based on their understanding of the currency and its possibilities, this study aims to evaluate the positive and negative characteristics of decentralized systems and further the investigation into the concerns of law and policymakers on the local, federal, and international level. The field of FinTech is developing at a rapid speed, affecting all other types of financial exchange in the process.

Thus, the possibility of regulatory bodies accepting the cryptocurrency’s legitimacy and seeing its opportunities for the industries may become higher with time. Another important theme in research is the range of unique characteristics that such alternative digital currencies possess, as their difference from accepted centralized systems may become the primary barriers to their regulation.

The paper will be structured in multiple chapters. First, the introduction to the topic and the rationale for choosing it will be presented. Then, the main research questions will be outlined. The next section will explore the literature that exists on the subject of cryptocurrency. In this chapter, the overview of the FinTech field will be offered, along with the main issues, threats, and remedies that are currently investigated or recorded in scholarly literature and legal documents. Then, all findings will be summarized to reveal possible areas for future research and make conclusions about the current state of cryptocurrencies.

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