DIGITAL CURRENCIES VS. FIAT MONEY: ANALYZING THE FUTURE OF MONETARY SYSTEMS

Abstract

The evolution of monetary systems has brought digital currencies into direct competition with traditional fiat money, raising questions about the future of financial transactions, economic stability, and monetary policy. This paper provides a comparative analysis of digital currencies—such as cryptocurrencies and central bank digital currencies (CBDCs)—and fiat money, evaluating their implications for financial inclusion, security, regulatory frameworks, and economic efficiency. While digital currencies offer advantages like decentralization, lower transaction costs, and enhanced transparency, they also pose risks related to volatility, cybersecurity threats, and regulatory uncertainty. Conversely, fiat money remains the foundation of global economies, backed by governments and central banks, ensuring stability and control over monetary policies. This research explores the potential of digital currencies to disrupt or complement traditional financial systems, emphasizing the role of regulation, adoption rates, and technological advancements in shaping the future of money. The findings suggest that a hybrid financial system integrating both digital and fiat currencies may emerge, balancing innovation with economic stability