Can Digital Currencies Replace Traditional Money?

The development of the digital money sector raises multiple questions among users. One of the most triggering ones is: will the “new” digital money replace traditional finance? Today we'll try to answer it. Let's begin!

How Do Digital Currencies Challenge Traditional Banking?

The money world changes faster than ever before. Traditional banks have been a gate to the finance system for decades: payments, credits, and savings all used to pass through them. But today millions of people make transactions through apps and not physical banks.

Fintech companies, crypto, and central bank digital currencies (CBDCs) are undermining the monopoly of traditional banks. The International Monetary Fund notes: “Digital money could change how central banks manage money circulation and interact with citizens.”

We don't ask, “Is digital money a new big thing?”; we ask, “Will they be able to replace traditional money?”

Issues of Traditional Money

The traditional money system has a wide range of restrictions that are particularly noticeable in the digital age:

• Slow international transfers. Transferring money between countries can still take up to several days.

• High commissions. International transfers may cost tens of dollars in fees. According to the World Bank, the average cost of a cross-border transfer in the first quarter of 2025 was 6.49%.

• Financial inequality. More than 1.4 billion people worldwide still do not have a bank account as they do not have access to banking services or have no opportunity to use it.

• Dependence on intermediaries. Almost every transaction in traditional finance goes through intermediaries (banks, processing centers, SWIFT or Visa). They control access to the system, charge fees, and can delay transfers or block transactions according to internal rules.

• Lack of flexibility. National currencies are poorly integrated with modern digital services, and international settlements depend on SWIFT and correspondent networks.

• Lack of transparency. Сlients rarely know where their deposits are actually used or how stable the bank truly is. The financial crises of 2008 and 2023 showed that even major institutions can go bankrupt, leaving depositors without access to their money. In contrast, blockchain offers a more transparent model: all transactions are recorded in a public ledger, and users retain direct control over their funds without relying on intermediaries.

Pros and Cons of Digital Currencies

So, while traditional finance seems to have aged poorly, let's look at the digital currencies and compare their pros and cons.

What are CBDC?

We mentioned CBDC, so let’s find out about it in more detail.

CBDC (Central Bank Digital Currency) is a digital form of national currency issued by a central bank. It has the same legal force as cash but exists only in electronic form. In essence, it is an attempt to combine the reliability of government money with the speed of private blockchains.

For central banks, such currencies have become a strategic development area. They allow them to maintain monetary sovereignty amid the growth of private cryptocurrencies and stablecoins, offer a secure and predictable digital alternative, and modernize the payment infrastructure, making transfers faster, cheaper and more transparent. CBDCs create the potential for programmable money—where transactions can be executed automatically according to preset conditions, and financial flows become fully traceable and manageable.

In addition, CBDCs can help combat corruption and misuse of public funds, since every transaction is recorded on a controlled blockchain and can be traced from the source to the final recipient. This level of transparency enables central banks and regulators to monitor how money is spent and to prevent illegal financial flows—something that is often impossible within traditional financial systems.

So, CBDCs are not just another payment instrument, but a new digital money architecture in which states seek to obtain the power of blockchain and use it to benefit the stability, transparency, and efficiency of the financial systems of the future.

How Do Countries Use Digital Currencies Nowadays?

According to data from the [Bank for International Settlements (BIS)] (https://www.bis.org/publ/bppdf/bispap137.htm), 134 countries representing 98% of global GDP are researching or testing Central Bank Digital Currency (CBDC) in 2025. Let’s now look at some examples:

• China. This country is a leader in CBDC development. As of the end of 2025, there are approximately 260 million registered personal digital wallets, and the cumulative transaction volume in Digital Yuan has reached approximately 7.3 trillion yuan (~1 trillion USD).

• European Union. The European Central Bank is preparing to launch the Digital Euro by 2028, emphasizing that it will complement but not replace cash.

• Brazil. The Brazilian government is testing Drex, a digital version of the real that integrates with bank accounts and DeFi protocols.

• Nigeria. It's the first African country to launch a CBDC. Despite low initial adoption, the government is actively implementing eNaira in government payments and transportation.

• Japan. The Bank of Japan has completed the second phase of testing the digital yen, focusing on privacy and offline payments.

• United States. The Federal Reserve is still exploring the possibilities of a digital dollar but notes the risks of “centralized control” and the threat to banking stability.

Furthermore, at the same time as state-backed CBDCs, crypto is already being used globally as borderless digital money. Bitcoin, Ethereum, and stablecoins such as USDT and USDC enable fast, low-cost transfers that bypass traditional financial systems. For millions of people, especially in developing countries, crypto has become a practical financial tool—accessible anywhere with just an internet connection and offering an alternative to national currencies for cross-border trade, savings, and money transfers.

Are Cryptocurrencies the Future Money?

Digital currencies—whether it's Bitcoin, cryptocurrencies in general, or CBDCs—are no longer an experiment but have become part of the global financial reality. However, in the coming years, they will not completely replace traditional money but will only transform it. Crypto will retain its role as an investment and technological driver, while CBDCs will become the official digital form of fiat, combining the stability of the banking system with the flexibility of blockchain.

The future of money will be hybrid: cash, bank accounts, stablecoins, and government digital currencies will coexist and complement each other. Not a revolution, but an evolution — this is most likely how the transition from paper money to its digital successors will take place.

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