Influence of Cryptocurrency Adoption on National Monetary Policy Effectiveness
Abstract
The rapid growth of digital financial technologies has transformed the global financial landscape. Among these innovations, cryptocurrencies have emerged as decentralised digital currencies that operate independently of traditional financial systems. While cryptocurrencies offer benefits such as faster transactions, lower transaction costs, and increased financial inclusion, their growing adoption has raised concerns about their potential implications for the effectiveness of national monetary policy. This study examined the influence of cryptocurrency adoption on the effectiveness of national monetary policy in Nigeria. The study adopted a quantitative research design and relied on secondary data from credible sources, including the Central Bank of Nigeria (CBN), the National Bureau of Statistics (NBS), and international financial databases. The data were analysed using descriptive statistics, correlation analysis, and multiple regression techniques. The findings revealed that cryptocurrency adoption has a negative and statistically significant effect on the effectiveness of national monetary policy. The results indicated that increased use of cryptocurrencies reduces central banks' ability to control the money supply and influence economic activity. The study also found that inflation negatively affects the effectiveness of monetary policy, while interest rate adjustments and money supply management have positive effects on monetary policy performance. Based on the findings, the study recommends that governments establish appropriate regulatory frameworks to monitor cryptocurrency activities. The study also suggests that central banks should explore developing Central Bank Digital Currencies (CBDCs) to maintain monetary sovereignty while benefiting from digital financial innovations. The study contributes to the existing literature by providing empirical evidence on the relationship between cryptocurrency adoption and monetary policy effectiveness in an emerging economy.