How regulatory conditions shape the sustainability effects of digital finance

Despite growing interest in digital finance and sustainability, no systematic review has jointly examined how regulatory frameworks determine whether digital financial services generate positive or negative sustainability effects. Following PRISMA guidelines, 65 empirical studies published between 2015 and 2025 were systematically retrieved, screened, and reviewed to examine how digital financial services interact with regulatory frameworks across varying institutional contexts. Through mechanism-based synthesis, the review identifies eight mechanism families linking digital finance to sustainability outcomes and yields three core findings. First, digital finance can support sustainability by reducing financial frictions, promoting green research and development, enabling economic upgrading through digitalization, and improving sustainability monitoring and transparency. Second, the relationship between digital finance and sustainability is complex and context-dependent: while advanced digital finance systems are generally associated with positive sustainability outcomes, early-stage or weakly governed digital finance systems particularly in developing economies may exacerbate environmental and sustainability challenges. Third, effective regulatory frameworks emerge as a decisive condition for aligning digital finance with sustainable performance. Environmental regulation, green finance policies, and institutional quality consistently strengthen the positive sustainability effects of digital finance, whereas weak governance allows digital finance to drift toward sustainability risks. Building on these findings, the review proposes an integrated conceptual framework that maps the interplay between digital financial services, mediating mechanisms, and regulatory enabling conditions across three sustainability outcome clusters. Overall, the review demonstrates that the sustainability performance of digital finance is fundamentally regulation-dependent, with regulatory design and institutional capacity determining whether digital finance functions as a sustainability catalyst or an emissions amplifier. The review also proposes an integrated conceptual framework connecting digital finance, regulatory conditions, and sustainability outcomes.