Recently, the field of psychiatry has experienced a transformative shift with the integration of digital tools into traditional therapeutic approaches. Digital psychiatry encompasses a wide spectrum of applications, ranging from digital phenotyping, smartphone applications, wearable devices, virtual/augmented reality, and artificial intelligence (AI). This convergence of digital innovations has the potential to revolutionize mental health care, enhancing both accessibility and patient outcomes. However, despite significant progress in the field of digital psychiatry, its implementation presents a plethora of challenges and ethical considerations. Critical problems that require careful investigation are raised by issues such as data privacy, the digital divide, legal frameworks, and the dependability of digital instruments. Furthermore, there are potential risks and several hazards associated with the integration of digital tools into psychiatric practice. A better understanding of the growing field of digital psychiatry is needed to promote the development of effective interventions and improve the accuracy of diagnosis. The overarching goal of this review paper is to provide an overview of some of the current opportunities in digital psychiatry, highlighting both its potential benefits and inherent challenges. This review paper also aims at providing guidelines for future research and for the proper integration of digital psychiatry into clinical practice.