What is Cryptocurrency? How does it affect global society? Has it been affecting Indian society also?. UPSC IAS Mains 2021 General Studies (Paper – 1)
A cryptocurrency is a digital currency designed to work as a medium of exchange through a computer network that is not reliant on any central authority, such as a government or bank, to uphold or maintain it. It is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend.
Cryptocurrency affects society in following ways:
- Bringing the next level of globalisation as the cryptocurrency is digital currency and easily available across the international borders.
- Emergence of one currency for the countries of the world which are decentralised and not related to any country. This may make fiat money redundant in the future.
- Cryptocurrencies are way cheaper to use to execute international transactions making transactions faster and accurate, there are less chances of fraud. It has made it easier for entrepreneurs to reach international markets.
- However, it takes away the sovereign power of issuing currency. Thus, making economic policy of the government ineffective. It also makes capital more volatile posing risk to macroeconomic stability.
- Use of cryptocurrency by terrorist organisations, drug cartels etc. negatively impacts the global society and the anonymity of its use has potential to increase crime.
India is the largest receiver of remittances. However, people lose money on conversion, processing charges, and switching to crypto will help people to get rid of these expenses. But in the era of digital currency, those who are not able to afford technology are devoid of such digital currency. In 2018, The RBI issued a circular preventing all banks from dealing in cryptocurrencies. This circular was declared unconstitutional by the Supreme Court in May 2020. Recently, the government has announced to introduce a bill to create a sovereign digital currency and simultaneously ban all private cryptocurrencies.
Blockchain and crypto assets will be an integral part of the Fourth Industrial Revolution, Indians should not be made to simply bypass it. The framework on cryptocurrencies should be developed which will require global partnerships and collective strategies.
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