What is Cryptocurrency? How does it affect global society? Has it been affecting Indian society also? UPSC GS Paper 1 2021, 15 Marks

Q19. क्रिप्टोकरेंसी क्या है? वैश्विक समाज को यह कैसे प्रभावित करती है? क्या यह भारतीय समाज को भी प्रभावित कर रही है ? ( 250 शब्दों में उत्तर दीजिए)

Q19. What is Cryptocurrency? How does it affect global society? Has it been affecting Indian society also?(250 words) 15 Marks

Ans.  Globalisation or the larger idea of the globe being a global village . It reconfigures and interconnects and integrate globe into one. The economic, political, climatic, socio-cultural, technological processes both positive and negative taking place in one part of the world influences pan regions. Globalisation being a historic process has sought to provide benefits in a continuum.

A new development in this process is the Crypto Currency. The names one hear Ethereum, Litecoin, Ripple etc are a buildup digital/ virtual currency created through a process of the Blockchain Technology that is a secured decentralised database that maintains a continuously growing list of records.

In some sovereign economies this currency is banned while in certain others like Venezuela it is allowed. A new version of cryptocurrency that is stablecoin too is gaining grounds as it is backed by reserve assets like gold etc.

In India initially banned by RBI has had been revoked by the SC of India as it goes against the Fundamental Rights of the citizens and it fails to pass the Test of Proportionality. Thus the cryptocurrency needs regulation and not an outright ban.

The use of crypto currency and its impact on the society

The crypto currency and behind it an inbuilt technology that is the blockchain technology has both negative and positive consequences but since the negatives outweighs the positive the government wants the walk the rope cautiously.

The impact of crypto currency on the economy, society, political sphere are all interrelated.

  • Severe indulgence in the financial illegitimate activities as in case of Narcotics, terror financing and money laundering.
    • The excessive use of the illegal narcotics business puts to test our youth and closes the window of the Demographic dividend short open.
    • The business of terror financing puts the security of the country in a jeopardy.
    • Money Laundering poses for wide open inequalities and social injustice in society.
  • Cause of excessive environmental degradation and a digital Divide.
    • It increases the e waste and electricity consumption.
  • The possibility of Tax evasion and the lack of traceability that defeats the aim of the progressive taxation and is bad for the society.  The government too is deprived of the tax revenue.
  • Crypto currency lacks an intrinsic value this too can put way forth the consequence of the investment on the ponzi schemes that deliberately wastes the hard earned money of the investors.
  • Digital Divide and inequality in the Financial Literacy, Access Points.
  • Further tightens for CYber Terrorism/Nuclear Attack/Natural Disaster. As the economy continue to rests on it anything untoward happens will malfunction the entire economy.

The positive aspects

  • It tends to reduce the cost of printing physical currency and that money can be used for the betterment and the development of the society.
  • Reduces the Scope for counterfeiting.
  • There is a promptness of disbursal of money where just one click away will be many things.
  • This allocation of new money can be used for the development of various sectors.
  • Spread of virus through physical currency notes.

Thus the financial crisis that the world faced was pan world as its ripples were felt almost everywhere whether be the Great Economic Depression, 2008 crisis thus cryptocurrency and its negative side effects will to be pan global society, thus individual countries along with the multilateral world must come in together to eliminate the negative consequences of the crypto currency and usage of the blockchain technology well. But it must be held true that the conventional sovereign money economy can’t be replaced as a whole.

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