Study on the Impact of Digital Currency on the Traditional Financial System

Abstract

The rapid development of digital currency is driving profound changes in the global financial system. This paper analyzes the impact of digital currency on the traditional financial system across several areas, including payment and settlement, monetary policy, financial intermediation, and the international financial landscape. Firstly, digital currency enhances the efficiency of payment and settlement through decentralized technology, challenging the dominant role of traditional banks within the payment systems. Secondly, the introduction of central bank digital currencies (CBDCs) has far-reaching implications for monetary policy tools and may strengthen central banks’ control over the economy. Meanwhile, the rise of decentralized finance (DeFi) weakens the intermediation role of traditional financial institutions, transforming patterns of capital flow. At an international level, the widespread adoption of digital currency may reshape the global financial order, reduce the influence of reserve currencies such as the U.S. dollar, and promote the liberalization of capital flows.