FINANCIAL RISK MANAGEMENT IN THE AGE OF CRYPTOCURRENCY
Abstract
The rapid emergence of cryptocurrencies has transformed global financial ecosystems, offering decentralized and innovative means of transaction and investment. However, this digital revolution has also introduced complex financial risks that challenge traditional risk management frameworks. This study explores the evolving landscape of financial risk management in the age of cryptocurrency, aiming to identify major risk categories—such as market volatility, cyber threats, regulatory uncertainty, and systemic vulnerabilities—and assess the effectiveness of current mitigation strategies. Utilizing a qualitative research design, the study reviews institutional practices, regulatory developments, and technological tools such as RegTech and blockchain analytics. Key findings highlight a growing need for adaptive risk management approaches that incorporate real-time monitoring, international regulatory harmonization, and robust cybersecurity infrastructures. The paper emphasizes the crucial role of institutional frameworks and global cooperation in ensuring financial stability and investor protection in increasingly digital and decentralized markets. It concludes by offering strategic policy recommendations for enhancing resilience and fostering trust in the rapidly expanding world of digital finance. The rise of cryptocurrencies has revolutionized global financial systems, introducing decentralized and innovative modes of transaction. However, this evolution has also brought unprecedented risks including market volatility, cyber threats, regulatory uncertainty, and systemic instability. This article explores the dynamics of financial risk management in the context of cryptocurrencies, emphasizing the need for adaptive frameworks, regulatory oversight, and technological vigilance. It analyses key risk categories market, operational, compliance, and systemic and evaluates current mitigation strategies employed by investors, institutions, and regulators. The paper concludes by offering policy recommendations for enhancing risk resilience in an increasingly digital financial ecosystem.
Keywords: Decentralized finance, Market volatility, Blockchain regulation, Cybersecurity risks, Regulatory compliance, Digital asset protection, Portfolio diversification, Systemic financial threats, Risk mitigation strategies, financial innovation
