THE RISE OF DIGITAL CURRENCIES

IMPACT ON TRADITIONAL MONETARY SYSTEMS

Devang
Seminars on contemporary Issues
X-BBA-2107
 INTRODUCTION TO DIGITAL CURRENCIES

• In today's rapidly evolving digital age, traditional forms

of money are facing a challenge from a new wave of
innovation that is the digital currencies.

• This presentation will explore the rise of digital

currencies and how they are impacting the landscape of
traditional monetary systems. We will delve into the
potential benefits and drawbacks, and the significant
changes these digital currencies may bring to the global
financial ecosystem.
 WHAT ARE DIGITAL CURRENCIES?

• Digital currencies are electronic forms of money that exist

outside the control of central banks or governments.
• They utilize cryptography for security and operate on
decentralized networks, often leveraging blockchain
technology.
• Examples of prominent digital currencies include Bitcoin,
Ethereum, and Litecoin.
• Digital currencies represent a paradigm shift in the way we
think about money.
• Cryptography safeguards these digital assets, and transactions
are recorded on a shared public ledger known as a blockchain.
Bitcoin, launched in 2009, is the most well-known digital
currency, but numerous others have emerged, each with its
 BENEFITS OF DIGITAL CURRENCIES

• Faster and cheaper transactions: Digital currencies

allow for faster and potentially cheaper cross-border
payments compared to traditional methods.

• Increased financial inclusion: They can offer access

to financial services for unbanked populations,
promoting financial inclusion.

• Transparency and immutability: Blockchain

technology ensures transparency and immutability of
transactions, reducing the risk of fraud.
 CHALLENGES OF DIGITAL CURRENCIES

• Despite their potential benefits, digital currencies also come with significant challenges. Their value can
be highly volatile, making them a risky investment.
• Security breaches of digital wallets and exchanges pose a threat to user funds. Furthermore, the
regulatory environment for digital currencies is still under development, leading to uncertainty for
businesses and consumers alike.
• Regulators are grappling with how to oversee these new financial instruments while mitigating potential
risks.
• Regulatory uncertainty: The regulatory landscape surrounding digital currencies is still evolving,
creating uncertainty for businesses and consumers.
• Security concerns: Digital wallets and exchanges can be vulnerable to hacking and cyberattacks
 IMPACT ON TRADITIONAL BANKS

• Digital currencies could disrupt the traditional banking model

by disintermediating financial institutions.
• Banks may need to adapt and innovate to compete with new
financial services offered by digital currency platforms.
• Collaboration between traditional banks and digital currency
companies could emerge to create hybrid financial solutions.

• To stay competitive, banks may need to adapt and innovate,

potentially offering their own digital currency solutions or
integrating digital currency services into their existing
offerings. Collaboration between traditional banks and digital
currency companies could be a way forward, creating a blend
of the old and the new in the financial services landscape.
 Potential Impact on Central Banks

• Digital currencies may erode the control of central banks

over monetary policy.
• Central banks are exploring the issuance of Central Bank
Digital Currencies (CBDCs) to maintain control over
digital money.
• CBDCs could offer some of the benefits of digital
currencies while preserving central bank authority.
• The widespread adoption of digital currencies could
potentially weaken the control of central banks over
monetary policy.
 CONCUSION

• The rise of digital currencies presents both

challenges and opportunities. As this
technology continues to develop,
collaboration between regulators,
traditional financial institutions, and
digital currency companies will be crucial
for navigating this evolving landscape.
Whether digital currencies become the
dominant form of money or coexist with
traditional systems, they are undoubtedly
shaping the future of finance.