Cryptocurrency is digital or virtual currency that relies on cryptography for security. Its global impact involves financial innovation, decentralized transactions, and debates on regulation. In India, despite regulatory uncertainties, cryptocurrencies have gained popularity, influencing investment trends and prompting discussions about their potential impact on traditional financial systems and societal norms.
UPSC Mains General Studies Paper – 1 Mains 2021
UPSC Mains Civil Services IAS Exam Question Paper – 2021
Approach
- Start with a brief intro with keywords “ Cryptocurrency” with the context of society with examples.
- Discuss how Cryptocurrency affects global society.
- Discuss how Cryptocurrency affects Indian society.
- Conclusion accordingly.
Answer
Introduction
- Cryptocurrency refers to digital or virtual currency that utilises cryptography for secure financial transactions, control the creation of new units, and verify the transfer of assets.It operates independently of central banks and governments, relying on decentralised technologies like blockchain.The impact on Indian society specifically, cryptocurrency has gained popularity among Indian citizens, offering opportunities for wealth creation and financial independence. Cryptocurrency does not have a physical manifestation; it has digital currency just like Bitcoin (BTC) , Ether (ETH) , Binance Coin (BNB),Tether (USDT).
Body
Cryptocurrency affects global society: Cryptocurrency has had a profound impact on society in several ways. Here are some key effects of cryptocurrency on society:
- Financial Revolution: Cryptocurrencies have disrupted traditional financial systems by introducing a decentralised and digital form of money. They offer individuals greater control over their finances, enable peer-to-peer transactions without intermediaries, and provide opportunities for financial inclusion and empowerment.
- Cross-Border Transactions: Cryptocurrencies facilitate fast and borderless transactions, eliminating the need for traditional banking systems and reducing transaction costs. This has the potential to simplify international trade, promote global economic integration, and empower individuals in underserved regions.
- Technological Advancement: The emergence of cryptocurrencies has spurred technological advancements, particularly in blockchain technology. Blockchain has applications beyond finance, such as supply chain management, healthcare, and governance, revolutionising various industries and driving innovation on a global scale.
- Economic Opportunities: Cryptocurrencies have created new economic opportunities, such as investment, trading, and entrepreneurship. The cryptocurrency market has attracted investors and entrepreneurs, stimulating job creation, economic growth, and fostering a new wave of digital innovation.
- Financial Inclusion: Cryptocurrencies have the potential to provide financial services to the unbanked and underbanked populations, offering them access to global financial systems and opportunities for wealth accumulation.
- Regulatory Challenges: The rise of cryptocurrencies has posed regulatory challenges for governments worldwide. Authorities are grappling with issues related to investor protection, market stability, money laundering, and taxation. Governments are striving to develop regulatory frameworks that balance innovation and consumer protection.
Cryptocurrency affects Indian society: In 2018, the Reserve Bank of India (RBI) issued a circular prohibiting all banks from engaging in cryptocurrency transactions. However, this circular was deemed unconstitutional by the Supreme Court in May 2020.
- Financial Inclusion: Cryptocurrencies provide opportunities for individuals without access to traditional banking systems to participate in the global financial ecosystem, promoting financial inclusion in Indian society.
- Investment Opportunities: Cryptocurrencies have opened up new investment avenues for Indians, offering the potential for significant returns. However, caution and thorough research are essential due to the volatile nature of cryptocurrencies.
- Remittances: Cryptocurrencies offer a faster and cheaper alternative for cross-border remittances, benefiting both senders and receivers by reducing fees and transaction times.
- Regulatory Challenges: Indian authorities face challenges in regulating cryptocurrencies due to concerns over money laundering, fraud, and investor protection. The regulatory framework is still evolving, leading to ongoing debates and uncertainties.
- Illegal Activities and Scams: Cryptocurrencies have been associated with illegal activities and scams in India, requiring vigilance from regulators to protect investors and combat fraudulent schemes.
Conclusion
- Hence, The integration of blockchain technology and crypto assets is expected to play a vital role in the Fourth Industrial Revolution. Indians should not be excluded from this transformative development. Instead of merely bypassing it, there is a need to establish a comprehensive framework for cryptocurrencies. This framework should be built on the foundation of global partnerships and collective strategies to ensure a balanced and inclusive approach.
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