Volume 10, Issue 1, January- 2025 International Journal of Innovative Science and Research Technology (IJISRT)

ISSN No:-2456-2165 https://doi.org/ 10.5281/zenodo.14737706

IJISRT25JAN1426 www.ijisrt.com

The Impact of Blockchains on Financial Sector

Vansh Gupta1; Krish Aggarwal2; Aarav Bansal3
1
Sri Guru Tegh Bahadur Khalsa College, University Delhi, India
2
Atma Ram Sanatan Dharma College, University Delhi, India
3
Institute of Integrated Learning in Management University

Publication Date: 2025/01/25

Abstract
This research looks at how blockchain technology has affected the growth of the American and Chinese banking sectors. Financial
markets could be radically altered by blockchain technology, a secure and decentralized digital ledger system, that increases
efficiency, decreases transaction costs, and increases transparency. As blockchain adoption grows globally, understanding its
implications for financial systems in different economic and institutional settings becomes crucial. This research uses econometric
methods, including “Fully Modified Ordinary Least Squares (FM-OLS)” and “Toda-Yamamoto causality tests”, to analyze the
relationship between blockchain adoption and financial development indicators such as financial market efficiency, liquidity, and
accessibility. By comparing the US, with its well-established financial infrastructure, and China, a leader in blockchain research and
development, the study offers valuable insights into the varying effects of blockchain in diverse institutional contexts. It is clear
from the results that blockchain can improve financial systems and boost economic growth, but the effect on these two economies
has been quite different. Insightful politicians, financial institutions, and tech developers can benefit from this study's practical
consequences as it adds to the expanding corpus of literature on blockchain and financial development.

Keywords:- Blockchain Technology, Financial Development, United States, China, Econometrics, Financial Market Efficiency,
Digital Ledger, Financial Systems.

I. INTRODUCTION "blockchain" refers to a system that records transactions by

creating a series of data blocks. Data about transactions, a
The immutability of recording transactions in a distributed timestamp, and a cryptographic hash of the prior block are all
digital ledger in near real-time is what blockchain technology included in each block. Although blockchain technology is now
provides. By having the nodes in the network needing to agree driving the Fintech revolution and is playing a major role in
on a new transaction before adding it to the ledger, we can financial innovations, its primary use case has been in payments.
guarantee that our data is always free of manipulation, errors, The ever-increasing expectations of consumers, coupled with
and bad quality. In layman’s terms, Blockchain is a protocol that new developments in technology and changes in corporate
ensures a decentralized online financial transaction. operations, have been driving the development and evolution of
payment instruments and systems. The primary goal of any
The distributed ledgers for Bitcoin were the original payment system should be to facilitate secure and intelligent
inspiration for blockchain technology, a subset of FinTech. For transactions. (Ali et al., 2018; Kshetri, 2018). A new paradigm
a while, the bitcoin craze stole the show from blockchain shift in the field of money transfers has recently occurred with
technology. However, in recent years, blockchain has begun to the advent of blockchain-based digital currencies, sometimes
garner attention independently and is quickly becoming an known as cryptocurrencies. Cryptocurrencies are based on
essential technology within the FinTech family. (Du et al., “cryptography, encryption, decentralized peer-to-peer (P2P)
2019). The effects of blockchain technology are not limited to networks, and a public key infrastructure (PKI)” wherein private
the cryptocurrency market; in fact, many professionals and and public keys are used to protect data transfers. (Abramova
academics have concluded that this technology will propel and Böhme, 2016). The autonomous infrastructure that is meant
transformation in a wide range of industries. (Ølnes, Ubacht and to enable a dispersed independent organization is another area
Janssen, 2017). All things considered, blockchain technology is where blockchain technology finds use. (Peters and Panayi,
among the most exciting developments in the realm of financial 2015; Chapron, 2017) These decentralized autonomous
technology. (Du et al., 2019). Blockchain has several uses organizations are the model of distributed organizing. When
beyond its original intent as a distributed ledger to record Bitcoin fully operational, they will be digital and dynamic, free from
transactions. The financial sector and other commercial spheres centralized strategic agendas, offices, managers, contracts,
are not immune to its potential to alter several business policies, and payrolls. (Barrett, Oborn and Orlikowski, 2016).
processes. (Underwood, 2016; Kshetri, 2018). The term

Vansh Gupta, Krish Aggarwal, Aarav Bansal, (2025), The Impact of Blockchains on Financial Sector.
International Journal of Innovative Science and Research Technology, 10(1), 833-843.
https://doi.org/ 10.5281/zenodo.14737706
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 Blockchain technology allows for the simultaneous code”—by storing and deploying data and code on the
recording of transactions on numerous computers using a blockchain network through cryptographically signed
distributed ledger system. The majority of digital currencies transactions.
keep track of financial transactions using blockchain
technology. As its foundation, the Bitcoin network was built on A. Types of Blockchain
top of blockchain technology (Abramova and Böhme, 2016). A
lot of new terms and components have emerged with the  Public Blockchain
blockchain, which can make it hard to keep track of everything All of these blockchains are amenable to the
that's being said about it and how to put it into practice. There decentralization principle. There are no limitations; everyone
are details about how transactions are aggregated and made with access to a computer and the internet can join the network.
public in separate data structures called blocks. These blocks are (Ferdous, Chowdhury and Hoque, 2021). With their proof-of-
then distributed in a decentralized network and encrypted in a work or proof-of-stake security mechanisms, public blockchains
way that prevents tampering with earlier transactions (Beck, could one day replace traditional financial systems. (Bischoff
Müller-Bloch and King, 2018). Nodes (miners) validate and Seuring, 2021; Tan, Mahula and Crompvoets, 2022). This
transactions added to blocks, and consensus models decide blockchain's smart contract, which allowed it to support
which node gets to publish the next block. Additionally, blocks decentralization, is its more sophisticated side. Digital
can facilitate native smart contract capabilities—like currencies like Bitcoin and Ethereum use public blockchains.
“Ethereum's smart contracts” or “Hyperledger Fabric's chain

Fig 1 Public Blockchain

Source : (Jha, 2023)

 Private Blockchain the hands of prying eyes provided it is properly protected and
These blockchains aren't as distributed as the public regularly maintained. So, businesses utilize them for managing
blockchain, but they're still more secure because only approved assets, conducting internal audits, and casting votes. (Jánoky,
nodes may join in. (Ismailisufi et al., 2020). This blockchain is Levendovszky and Ekler, 2020; Chen et al., 2021). An example
likely to be an important tool for keeping sensitive data out of of private blockchains is Hyperledger, Corda.

Fig 2 Private Blockchain

Source: (Jha, 2023)

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 Hybrid Blockchain estate agents, and banks all benefit from this improved solution.
This hybrid blockchain combines elements of both the (Alkhateeb et al., 2022; Mu et al., 2023). It offers a solution for
private and public sectors, with certain parts held by private situations where data needs to be accessible publically but
organizations and others made publicly available. (Marar and securely protected. (Ge et al., 2022). Examples of Hybrid
Marar, 2020). Government agencies, healthcare providers, real Blockchain are the Ripple network and XRP token.

Fig 3 Permissionless Permissioned

Source: (Jha, 2023)

 Consortium Blockchain federated solution, food monitoring is perfect for organizations

This method finds innovative solutions to the problems because it often works with their sectors.
faced by the company. This ledger system not only verifies the
transaction but also sends and receives payments. (Zhao et al.,  Examples of Consortium Blockchain are Tendermint and
2019; Zhang, Xu and Xie, 2022; Peng et al., 2023). Many Multichain.
financial institutions, including banks, see great promise in it. A

Fig 4 Consortium Blockchain are Tendermint and Multichain.

Source :(Jha, 2023)
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 Table 1 Comparative Analysis of Blockchain Types
Feature Public Blockchain Private Blockchain Hybrid Blockchain Consortium Blockchain
Access Control Open to everyone Restricted to specific Limited to a group of Combination of public and
participants organizations private
Governance Decentralized Centralized Semi-decentralized Mixed governance structure
Transparency High transparency Low transparency Moderate transparency Variable transparency
Scalability Limited scalability High scalability Moderate scalability High scalability potential
Security High due to Lower due to Moderate security Variable security
decentralization centralization
Transaction Slower due to Faster transactions Faster than public, slower Variable speed
Speed consensus than private
mechanisms
Use Cases Cryptocurrencies, Enterprise solutions, Supply chain, banking, Various applications need
decentralized apps data privacy collaborations flexibility

II. BLOCKCHAIN INCLUSION IN THE BANKING The long-term potential of this technology to ease cross-
SECTOR border financial transactions is being considered by Arvind
Krishna, senior vice president of IBM Research. (Teichmann
Blockchain technology has generated a lot of buzz in the and Falker, 2020). The 3.2 billion people expected to become
banking and financial industries since, at their core, all financial the middle class in the next fifteen years are his target audience
transactions are based on the promise to fulfill obligations. for expanding banking services, he declared. Consequently, I
(Javaid et al., 2022). Financial markets are built to address trust require a reduction in the expense of maintaining a ledger. In
and asymmetry in financial transactions through their risk that case, blockchain technology presents some interesting
management architecture. (Rella, 2019; Adegbite, 2024). opportunities. He will not succeed with a bank that is either firm-
centered or controlled from on high; instead, he can use
 The financial infrastructure places a heavy burden on the blockchain technology to tap into a digitally enabled network.
costs of identity verification, transaction authentication, (Mills et al., 2016; Del Río, 2017).
trustworthy and accurate transactions, record support, and
record storage security. Problems with trust, fraud, and B. International Adoption of Blockchain Technology
mistakes are addressed by these actions. A multitude of commercial and central banks, stock
 The financial system locks up substantial money and exchanges, and other significant financial services institutions
collateral as a safety net against the unpredictability and are keenly exploring the potential of blockchain technology.
trustworthiness of potential outcomes. (Mohd Fairoh et al., 2024). As per a report published by the
 Due to the high cost of the risk infrastructure, small-sized World Economic Forum in August 2016, 24+ countries and 90+
transactions are out of reach for low-income individuals corporations are an inherent part of the blockchain consortia,
since they are economically prohibitive. with over 2500 patents. Moreover, 90+ central banks are
actively discussing the inclusion of blockchain. (Schuetz and
Blockchain solves the problems of trust, information Venkatesh, 2020; Wu et al., 2024)
asymmetry, and the economics of small transactions without the
need for a risky infrastructure or a central intermediary. (Aspen Among U.S. banks, JPMorgan Chase was the pioneer in
Institute, 2021; Kayani and Hasan, 2024) introducing a digital currency based on the blockchain. (Bagai,
2017). Clients of JPMorgan Chase are the only ones allowed to
A. Alternative to Central Ledger use JPM Coin. With JPMorgan's approval and the blockchain,
Nowadays, it's common practice in the financial sector to institutional accounts can send and receive funds nearly
have a central ledger that stores all of this data. (Mills et al., instantly. (Tan, 2025). Digital tokens representing any
2017). Blockchain technology, on the other hand, eradicates the blockchain-based money exchange are called JPM coins, and
need for a trusted third party by securely storing all relevant one dollar is worth one coin. The bank should be able to save
transaction data in a decentralized database hosted in the cloud. money, decrease risk, and enhance efficiency in business-to-
(Renduchintala et al., 2022). The present mental and commercial business payments with digital currency. The bank's blockchain,
models of conventional financial institutions are being disrupted Quorum, is where the coin runs, but it's compatible with any
by their decentralized nature. (Koens and Poll, 2018). The regular blockchain. (Partners, 2021).
network verifies "blocks," or transactions, and adds them to the
"chain" of computer code; this replaces a centralized authority C. Outline of the Paper
(like a bank) in the blockchain. Cryptography is employed to To address a knowledge vacuum, this research empirically
ensure the security of transactions, and the dispersed nature of evaluates how blockchain innovation has affected financial
transaction approval further renders the system impenetrable. development in China and the United States. To better
(Allen et al., 2016). understand the wider implications of blockchain adoption for the
development of the financial system, this study aims to

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investigate the connection between blockchain innovation and might help the industry acquire a competitive edge. A study
the efficiency of financial markets. conducted by (Weerawarna, Miah and Shao, 2023) examines
academic literature in the field of finance from 2008 to 2022,
In addition, the research intends to fill a crucial knowledge specifically looking at the top 50 research papers and reports, to
vacuum about blockchain's function in economic variables draw out several potential characteristics of blockchain study in
including GDP growth, FDI, and the efficacy of the government. this area. This study outlined the many facets of blockchain
Previous studies have highlighted the importance of these technology, its applications in finance, the benefits it offers over
factors in shaping financial development, yet little has been done competing systems, the state of finance today, and the obstacles
to examine how these traditional drivers interact with emerging that have so far prevented the widespread adoption of
technologies like blockchain. By examining both the blockchain-based financial information systems. For blockchain
technological and institutional drivers of financial development, technology to mature into the "next-generation networks" that
this paper aims to provide a comprehensive understanding of would radically alter the banking industry, they pinpointed three
how blockchain can facilitate financial system advancement. key areas that necessitate further study.

Examining the effects of blockchain technology on two The shift from the industrial to the silicon age has been
major economies throughout the world, this study aspires to add accelerated by technological advancements, prompting the
to the expanding corpus of scholarship on the subject. The widespread use of the term "FinTech" to describe the extensive
results of this study will shed light on the potential of blockchain use of technology in the financial sector. Along with Industry
technology to enhance financial systems and fuel economic 4.0 has come powerful technology like blockchain. Blockchain
expansion, which is of great interest to lawmakers, financial technology allows network nodes to trace every data transfer by
institutions, and IT entrepreneurs. storing it in decentralized databases made up of blocks. Data
encrypted with digital signatures can be stored in a distributed
III. LITERATURE REVIEW ledger called a blockchain. Better and safer transactions are
made possible by blockchain qualities including
(Zhang, 2024) Examined the effects and potential future decentralization, consistency, accountability, and openness.
developments of blockchain technology on the financial Beyond Bitcoin, blockchain technology has found applications
industry from an economic data analysis standpoint. With the in healthcare, risk management, and financial services. (Sharma,
help of econometrics, they thoroughly examine how blockchain 2023) Laid out the many pros and cons of using blockchain
technology has the potential to revolutionize financial market technology in the banking industry. Additionally, this research
operations, leading to more efficient and transparent transactions helps fill in certain gaps in our understanding of blockchain
with lower costs. The research shows that blockchain's technology by illuminating some of the possibilities and threats
decentralized structure can facilitate the democratization of it poses to the financial services industry. Within the chapter,
financial services by removing obstacles from the conventional you will find three main divisions: First, the Fourth Industrial
financial industry. Simplifying financial transactions and Revolution and blockchain technology; second, the impact of
reducing the danger of human interference and fraud, smart technology on the banking industry and financial services; and
contracts automate their execution. Furthermore, by making data third, forthcoming technological challenges and issues.
more secure and traceable, blockchain technology has improved
the financial markets' trust mechanism. When it comes to Modern technological developments and shifting customer
econometric analysis, they employ various methodologies such tastes are the main forces causing widespread upheaval in the
as regression models and time series analysis on massive banking sector. As a distributed ledger system that is both safe
amounts of financial data to evaluate the hypothesis that and transparent, blockchain has attracted a lot of interest as a
blockchain technology will affect the market's performance. The potentially game-changing new technology. The potential for
application of blockchain technology correlates positively with quicker, more secure, and cheaper transactions is a major selling
financial market efficiency, liquidity, and stability, according to point of blockchain technology, which has already shown its
the results. Blockchain technology is set to become increasingly usefulness across several sectors. One such industry is finance.
more widely and deeply used in the financial market as it It also improves financial ecosystem openness and deals with
undergoes constant innovation and improvement in the future. fraud threats. (Duan, Pang and Lin, 2023).
There is hope that blockchain technology can help the financial
industry become even more intelligent and computerized, as (Evans, 2019) Explores the connection between
well as make financial services more convenient and tailored to cryptocurrency and the stock market. According to the
each individual's needs. However, blockchain technology will estimations, the association between blockchain technology and
also encourage financial market innovation and cross-border the US and Chinese financial markets is positive and statistically
integration, which will provide new life to global economic significant. That is to say, these nations' financial markets reflect
development. the degree to which they innovate using blockchain technology.
It can be inferred that the introduction of BCT into financial
Due to its efficacy as an intermediary-free platform, markets promotes growth in the financial sector. For mature
blockchain has lately grown in popularity as an information financial markets, blockchain innovation is thus a major plus.
system technology. The development of Internet-enabled Financial development in the two nations is positively and
"distributed databases" is being facilitated by blockchain significantly correlated with macroeconomic variables like
technology in many different industries, including energy “GDP per capita, the growth rate of GDP, foreign direct
consumption, supply chains, healthcare, education, and finance. investment (FDI), and trade openness”, according to the results.
However, there is a lack of exploratory studies that can shed The United States is the only country where the institutional
light on the state of the field. Consequently, it is critical to variable of government efficacy has a positive and statistically
investigate the current state of blockchain technology in the significant impact. (Ezekiel Onyekachukwu Udeh et al., 2024).
financial industry, with a focus on how blockchain designs

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 Overall, the study underscores blockchain technology’s C. Model Specification
capacity to revolutionize the banking industry by improving The data used in this analysis comes from the World Bank
operational efficiency, reducing costs, enhancing transparency, (2017) database and covers the years 2009–2016 in China and
and fostering trust. Nevertheless, for banks to fully realize these the US. The only variables that are different are the institutional
advantages, it is essential to gain a nuanced understanding of factors, which come from the EIU (2017), and the individuals
blockchain’s features, assess its feasibility and impact, and who use Bitcoin, which comes from quandl.com (Evans, 2019).
navigate the challenges associated with its implementation.
American and Chinese financial markets have built
IV. METHODOLOGY expertise in blockchain technology and have enthusiastically
embraced it. Compared to the developed market in the US,
They use regression analysis to analyze the impact of China's market was only starting to take off at the time. The
blockchains on the financial sector as they are analyzing a one- study's findings will have broad applicability in each of these
way causal-effect relationship. areas.

A. Techniques Employed D. The Model

For statistical purposes, regression establishes a The economic model is based on the work of Ayadi et al.
relationship between a dependent variable and one or more (2015), Hauner (2009), and Chinn and Ito (2006). As the
independent variables; consequently, a regression model reveals dependent or explanatory variable, blockchain technology—the
whether or not changes in the dependent variable can be variable of interest—is included in the model.
accounted for by changes in the explanatory variables. Such a
model, once created, helps to predict the regress and (dependant  Model 1:
variable) based upon the changes in regressors (independent Fdt=β0+β1Blockchaint+ut ; Fd ~ Financial Development
variables) Blockchain ~ Blockchain Technology t ~ Year Using principal
component analysis, we may combine private sector credit as a
To gauge the market's overall performance over some time, percentage of GDP and stock trading as a percentage of GDP to
investors sometimes look to composites, which are a collection create a composite index of financial market development,
of shares or indexes. The social and natural sciences can also denoted as Fd. (Dogan and Turkekul, 2016; Adeola and Evans,
make use of composite indices to summarise redundant or 2017; Shahbaz, Bhattacharya and Mahalik, 2018).
complicated data with several dimensions.
As a stand-in for blockchain, it uses the amount of people
An often-used method for studying big datasets with many who have accessed Bitcoins in the past 24 hours. This metric is
dimensions/features per observation, principal component used to measure blockchain in the same way that the number of
analysis (PCA) allows for the display of multidimensional data, internet users is used in scholarly works to measure internet
improves data interpretability, and preserves as much usage. (Vu, 2011; Olaniyi Evans, 2016) Decentralized and
information as possible. operated between individual users, the blockchain technology
underpins the most well-known digital money, Bitcoin. (Crosby
B. Method of Data Analysis et al., 2016)
In this case, we use the “fully modified ordinary least
square (FM-OLS) approach” to analyze the data, which is a  Model 2:
semi-parametric approach. The estimations are steady and Given the significance of macroeconomic indicators for
accurate because the approach is resistant to serial correlation financial development, including “GDP per capita, GDP growth,
and endogeneity. (Breitung and Pesaran, 2008; Adeola and inflation, FDI, remittances, and trade openness”. Included in the
Evans, 2017; Evans, 2019; Evans and Kelikume, 2019) first model are the macroeconomic variables:
Fdt=β0+β1Blockchaint+β2Gdpc+β3Gdpgrowthdt1+β4Inflatio
The connection between an independent variable and its nt+β5Fdit+β6Remitt+ β7Tradet+ut.; “Gdpc ~ GDP per capita
own delayed version over different time intervals is called serial Gdpgrowth ~ growth rate of GDP Inflation ~ rate of inflation
correlation. The term "endogeneity" is used interchangeably in Fdi ~ FDI(Foreign Direct Investment) Remit ~ Remittances as
econometrics to describe instances where the error term is % of GDP Trade ~ Trade Openness”
associated with an explanatory component. And it doesn't matter
if the variables are completely I(0), completely I(1), or a  Model 3:
combination of the two; “FM-OLS” can be implemented to them Two institutional variables that have been incorporated
all. (Phillips and Hansen, 1990) into Model 2 due to their importance in the development of
financial systems are the rule of law and the efficiency of
The “Toda-Yamamoto approach” to the causality government:Fdt=β0+β1Blockchaint+β1Blockchaint+β2Gdpc+
technique is employed to assess the relationship between β3Gdpgrowthdt1+β4Inflationt+β5Fdit+β6Remitt+β7Tradet+β
blockchain technology and advancements in the financial sector. 8Govefft+β9Rulelawt+ut ; Goveff ~ Government effectiveness
Superior to previous methods of causation is the Toda- Rulelaw ~ Rule of Law
Yamamoto approach. As an alternative to the more traditional
Granger causality test, this method takes advantage of vector Previous research on the factors that influence financial
autoregression (VAR). Nothing says that the variables must be development served as the basis for both the identification and
cointegrated, that they must be in the same order of integration, replacement of the variables. (Chinn and Ito, 2005; Hauner,
or that they must be stationary. (Toda and Yamamoto, 1995). 2009; Ayadi et al., 2015) To account for wealth effects, GDP per
capita is used. Financial innovation and stock market
performance are affected by inflation. (Boyd, Levine and Smith,
2001; Evans, 2019) Among the factors cited as critical to

838
economic growth, foreign direct investment (FDI), remittances, financial managers and investors must navigate vast and
and trade liberalization stand out. (Billmeier and Massa, 2009; intricate financial ecosystems. (Demirgüç-Kunt and Levine,
Law and Habibullah, 2009; Seetanah, Durbarry and Ragodoo, 2008)
2010; Aggarwal et al., 2011; Takyi and Obeng, 2013) When it
comes to building financial systems, institutions play a
significant role as well. Rather than making decisions in a void,

V. DATA ANALYSIS AND FINDINGS

 Empirical Analysis
One significant feature of time series is stationarity. If the statistical characteristics of a time series remain constant throughout
its lifetime, we say that it is stationary. The covariance remains constant over time, and the mean and variance remain constant as
well.A large body of research suggests that time series data do not necessarily follow a normal distribution. Neglecting to account for
nonstationarity in the estimate process can result in misleading regression.

Table 2 Elliott-Rothenberg-Stock Unit Root Test

Hence, the “Elliot, Rothenberg, and Stock Point Optimal Establishing a cointegrating relation among the variables is
unit root test (ERS)” is employed to assess stationarity in this the first step in using the FM-OLS technique for estimation.
work. This test is more calculus as compared to the more (Adeola and Evans, 2017; Evans, 2019). For this reason, we look
conventional unit root tests, such as the “Augmented Dickey- for cointegrating correlations using the “Hansen Parameter
Fuller and Phillips-Perron tests”. The ERS test reveals that some Instability co-integration test”. The cointegrating test failed to
variables are stationary at I(0) and some at I(1), as evidenced in find any evidence of cointegration for all three models, as seen
Table. This suggests that the variables are mixed at I(0) and I(1), in the table that follows. This points to the existence of long-
making them appropriate for the FM-OLS technique. term correlations between the three models' variables.

Table 3 Cointegration test: Hansen Parameter Instability

Hansen
(1992b) Lc(m2=4, k=0) p-Values, Where m2=m-p2 is the Number of Stochastic Trends in the Asymptotic Distribution.

Having confirmed the presence of long run correlations The correlation between financial development and GDP
among the variables, these tables report the results of estimating per capita (Gdpc) is strong and positive. The expansion of
the models using FM-OLS. The most important point is: The financial markets is positively and significantly correlated with
more progress both the countries make in the financial field and the expansion of gross domestic product. As a whole, inflation
blockchain technology, the stronger the relationship between the hinders economic growth, but its impact is negligible (Boyd,
two countries. Therefore, the more innovative blockchain Levine and Smith, 2001; Demirgüç-kunt and Detragiache, 2005)
technology gets in both countries, the more advanced their FDI produces notable and beneficial outcomes. It has been found
financial markets will be. that trade openness has substantial and beneficial consequences.
In contrast to their substantial and beneficial impacts in China,
839
remittances have little and no positive impacts on the United positively but insignificantly correlated with the efficiency of
States. While the rule of law is positively related to financial government and adherence to legal principles.
development in the US, it is not statistically significant. The only
institutional component that has a substantial and positive link is  Dependent Variable: Fd
government effectiveness. Financial development in China is

Table 4 Relationship between Blockchain Technology and Financial development in the US

Table 5 Relationship between Blockchain Technology and Financial development in China

The second table shows that the variables are cointegrated, technology. In other words, financial development does not
which implies that there is a causal relationship. The “Toda- cause blockchain technology, but blockchain technology does
Yamamoto tests” are summarised in the table below. The cause financial development. The results demonstrate that the
empirical findings validate a one-way causal relationship two nations' banking sectors benefit from blockchain
between the two nations' financial development and blockchain technology. (Evans, 2019).

Table 6 Toda – Yamamoto Causality Tests

VI. CONCLUSION proves that blockchain innovation has a favorable and

substantial impact on the growth of financial markets in both
This research looked at how blockchain technology has nations. Based on the findings, it appears that blockchain
affected economic progress in two nations: China and the US. technology has the potential to improve the efficiency, liquidity,
Using state-of-the-art econometric methodologies, such as “FM- and stability of financial markets. This is because it can decrease
OLS” and “Toda-Yamamoto causality” techniques, the study transaction costs, increase security, and promote transparency.

840
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adoption can occur. New developments in blockchain market development in emerging markets—institutions,
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