Title: Transforming Multidisciplinary Research Through Artificial Intelligence
Chief Editors: Dr. Nagasudha R and Dr. Geetha V
Associate Editors: Dr. Aarti Sharma and Ms. P. Nithyashankari
Co-Editors: Dr. Madhumathi Reddim and Dr. Shishira Srinivasa
ISBN: 978-93-7183-019-5
Chapter: 27
DOI: https://doi.org/10.59646/804/27
Author: Dr. Santosh Laxman Adamane
Abstract
The growing use of digital currencies is reshaping the financial landscape and its monetary policy implications. This research paper examines how digital currency adoption affects monetary policy, and how monetary policy impacts on money demand, payment systems, financial stability and traditional monetary policy tools. The study is conducted using a mixed-method design where the quantitative data from the participants related to the use of digital currency, monetary indicators and the situation of financial trends are complemented with a qualitative approach using semi-structured interviews with financial experts and policy makers. The findings suggest that digital currency adoption has the potential to affect monetary policy by altering the liquidity demand and behavior, interest rate dynamics, and demand for traditional money. Digital currencies offer potential benefits in terms of payment efficiency, financial inclusion, and access to digital financial services, but their fast adoption could also result in issues related to monetary control, financial stability, disintermediation of banks, cybersecurity, and privacy. Furthermore, the influence of digital currency adoption varies based on the sort of digital currency, the policy ecosystem, technological capabilities, and general acceptance. The paper also presents policy measures and strategies for the successful integration of digital currencies into the existing monetary and financial framework, such as regulatory frameworks, central bank supervision and the development of digital infrastructure. The study explores the connections between the adoption of digital currency and monetary policy, showcasing the potential for digital currencies to transform traditional monetary policymaking practices and present central banks with new opportunities and challenges. The results provide evidence-based views on the impact of the digital currency adoption on the future effectiveness and sustainability of monetary policy, which adds to the existing literature on digital finance.
Keywords: Digital currency, digital currency adoption, monetary policy, central banks, financial stability, digital payments, money supply, interest rates, financial innovation, monetary transmission