Version 1
: Received: 4 September 2024 / Approved: 4 September 2024 / Online: 4 September 2024 (08:40:44 CEST)
How to cite:
Ali, A.; Abdul-sobur Dembo, S. Decentralized Finance (DeFi) and Its Impact on Traditional Banking Systems: Opportunities, Challenges, and Future Directions. Preprints2024, 2024090344. https://doi.org/10.20944/preprints202409.0344.v1
Ali, A.; Abdul-sobur Dembo, S. Decentralized Finance (DeFi) and Its Impact on Traditional Banking Systems: Opportunities, Challenges, and Future Directions. Preprints 2024, 2024090344. https://doi.org/10.20944/preprints202409.0344.v1
Ali, A.; Abdul-sobur Dembo, S. Decentralized Finance (DeFi) and Its Impact on Traditional Banking Systems: Opportunities, Challenges, and Future Directions. Preprints2024, 2024090344. https://doi.org/10.20944/preprints202409.0344.v1
APA Style
Ali, A., & Abdul-sobur Dembo, S. (2024). Decentralized Finance (DeFi) and Its Impact on Traditional Banking Systems: Opportunities, Challenges, and Future Directions. Preprints. https://doi.org/10.20944/preprints202409.0344.v1
Chicago/Turabian Style
Ali, A. and Sardauna Abdul-sobur Dembo. 2024 "Decentralized Finance (DeFi) and Its Impact on Traditional Banking Systems: Opportunities, Challenges, and Future Directions" Preprints. https://doi.org/10.20944/preprints202409.0344.v1
Abstract
The rapid emergence of Decentralized Finance (DeFi), driven by blockchain technology and smart contracts, is transforming the landscape of the financial industry by enabling peer-to-peer financial services without traditional intermediaries. This paper examines the impact of DeFi on traditional banking systems, focusing on the opportunities, challenges, and future directions of this revolutionary financial model. We explore how DeFi disrupts traditional financial intermediation by offering faster, cheaper, and more transparent financial services, potentially reducing the dominance of conventional banks. The study addresses critical issues such as regulatory challenges, including compliance with Anti-Money Laundering (AML) and Know Your Customer (KYC) requirements, and the importance of consumer protection in a decentralized environment. We also investigate collaboration opportunities between traditional banks and DeFi platforms, which could lead to innovative financial products and services. To provide a comprehensive analysis, the paper employs a mixed-method approach, combining a review of recent literature, empirical data, case studies, and expert interviews. The findings highlight significant gaps in current regulatory frameworks and emphasize the need for a balanced approach that fosters innovation while ensuring financial stability and consumer safety. This study concludes by offering recommendations for policymakers, financial institutions, and DeFi developers to harness the potential of DeFi while addressing its inherent risks, paving the way for the sustainable growth of decentralized finance in the broader financial ecosystem.
Copyright:
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
