Impact of Digital Currencies on Traditional Banking Systems

Abstract

Traditional banking systems were significantly disrupted by the advent of digital currencies, most notably cryptocurrencies like Bitcoin and Ethereum, which have provided alternative ways of conducting transactions and storing value. Among other aspects, this research paper explores the far-reaching effects that digital currencies have had on traditional banking including disintermediation, payment systems, cross-border transactions and risk management. Besides, the paper examines the regulatory challenges posed by digital currencies through presenting different case studies from various jurisdictions and it also analyzes the technological integration of blockchain as well as distributed ledger technologies within mainstream banks’ frameworks. The next section discusses broader economic implications such as financial stability, monetary policy and consumer behavior. In addition, future prospects and challenges are looked at with strategic recommendations being given for traditional banks to transform themselves in order to survive under a changing financial landscape. Therefore this full analysis seeks to provide an understanding of how digital currencies can be transformational while suggesting a path for guiding old banks through new era of financial innovation.