Challenges and Opportunities of Digital Currencies for the Traditional Financial System

With the development of digital currencies, it has changed the financial world. These changes began after the 2007-2008 financial crisis. This article discusses the challenges and opportunities of digital currencies and how it influences traditional financial systems. It focuses on issues like price swings, government regulations, and the rise of CBDCs. Most research shows that digital currencies have advantages like making transactions faster, cheaper, and more accessible. They also have a lot of disadvantages like creating major risks concerning compliance with regulations, cybersecurity, and potential impacts on monetary policy. The review emphasizes the necessity for regulatory frameworks. It supports both innovation and stability for the digital currencies. It suggests that policymakers and financial institutions should adapt to changes and face the challenges by integrating digital currencies with existing systems. Overall, this review highlights the potential of digital currencies to transform finance. It also stresses the importance of focusing on the challenges they pose to ensure they can coexist successfully with traditional financial systems.