DIGITAL CURRENCIES AND THEIR POTENTIAL TO DISRUPT TRADITIONAL ECONOMIC SYSTEMS

Abstract

Digital currencies, encompassing cryptocurrencies and central bank digital currencies (CBDCs), have emerged as transformative financial instruments that challenge the established norms of traditional economic systems. This paper explores the underlying mechanisms of digital currencies, their advantages, and the potential risks they pose to conventional financial structures. By examining case studies and theoretical frameworks, we analyze how digital currencies can enhance financial inclusion, streamline cross-border transactions, and reduce transaction costs. However, the adoption of these currencies also raises significant concerns regarding regulatory oversight, security, and economic stability. The findings indicate that while digital currencies hold the promise of disrupting traditional economic paradigms, their integration into the existing financial ecosystem necessitates a balanced approach that addresses both opportunities and challenges. The study concludes by emphasizing the need for comprehensive regulatory frameworks to harness the benefits of digital currencies while mitigating associated risks.