The effects of cryptocurrencies on the financial sector

Cryptocurrencies which have recently emerged and become increasingly popular with their developing technology, have become the substitutes of traditional currencies. Due to their decentralised characteristic and not subjecting to a comprehensive regulation, cryptocurrencies create various effects on financial markets. In this study, the effects of cryptocurrencies on the financial sector are investigated. There are many effects of cryptocurrencies on the financial sector. Because of the decentralisation characteristic and not subjecting to comprehensive regulation the probability of these currencies to used in illegal activities is high. Since cryptocurrencies can be used for money laundering and financing of terrorism that pose a great risk on countries, it is required to make joint regulations for these currencies. Governments need to approach cryptocurrencies more carefully and they should have comprehensive regulations for these currencies. Although the possibility of cryptocurrencies to used in illegal activities is high and this creates a risk for countries, these currencies are used more intensively by economic units day by day. Cryptocurrencies are preferred for a number of factors such as investment, ease of transfer and fast transaction. Price fluctuations on cryptocurrencies seriously affect their users. The authorities in every country warn their citizens for the price fluctuations on cryptocurrencies. Because of the cryptocurrencies' structure which is difficult to ban it is required to make strict regulations for these currencies instead of prohibiting them. Hence firstly, the procedure of know your customer should be implemented effectively in cryptocurrency markets. Identifying the customer, knowing the customer's activities and determining the source of customer's assets prevent the risk of the possible illegal activities. v In this study, after examining cryptocurrencies and the possible positive and negative effects of cryptocurrencies on the financial sector in detail, the structure and the development of cryptocurrency markets have been evaluated in selected countries and Turkey where cryptocurrencies are used around the world. As a result of the study, it has been concluded that cryptocurrencies are being used extensively both in developed and developing countries and the volume of transactions carried out with these currencies will gradually increase in the following years. Because of the cryptocurrencies' characteristic which leads to the high probability of these currencies used in illegal transactions, regulations for these currencies need to be implemented quickly both in developed and developing countries. Also, ensuring the effective monitoring of transactions made with these currencies is of critical importance for the stability of financial markets. Therefore, in all countries, especially in countries where cryptocurrencies are used extensively, it is imperative that the regulations and effective surveillance and control mechanisms are designed and implemented for cryptocurrencies as soon as possible.