22 Dec Cryptocurrencies could cause Global Financial Crisis: RBI Governor
Cryptocurrencies could cause Global Financial Crisis: RBI Governor
Cryptocurrencies are digital currencies designed as a medium of exchange through a network of computers that is not backed by any central authority, government, or bank. Recently, the government has brought income earned or gains from cryptocurrency under the tax bracket. This topic is related to daily current affairs for the UPSC examination.
Potential Negative Impact OF Cryptocurrencies Sovereign Guarantee:
Since there is no backing of legal tender, it poses risk to consumers.
- VOLATILITY: Owing to its speculative value, the price of Bitcoin is very volatile. A few years back it fell from $ 20,000 to $ 3000.
- MONEY LAUNDERING: They are more likely to use for money laundering and criminal activities given the anonymous nature of the transaction.
- ENVIRONMENT: Validating transactions is very energy intensive. It could have an adverse impact on global energy security.
The negative impact of Cryptocurrency
Potential Positive Impact OF Cryptocurrencies
- TRANSPARENCY IMPROVEMENT
Cryptocurrency enhances transparency where every transaction can be traced back to the source. Additionally, blockchain, the technology on which cryptocurrency is based, is immutable. This means that transaction histories are permanent and unalterable.
- EMPLOYMENT GROWTH
The crypto industry currently employs about 50,000 individuals. As per a report, the industry is poised to see massive employment opportunities, pegged at over 800,000 by 2030. India already has a strong talent pool of Fintech professionals and IT experts.
- ENHANCE DIGITAL PAYMENTS
Cryptocurrency transactions are both time and cost-effective. The transactions are carried out between the sender and receiver without the need for a third party, making the transactions instantaneous.
Strict regulation is the solution to ensure that the currency is not used for engaging in illegal activities. A clear and cut framework needs to be created which should clear the minds of investors.
India currently is at the pinnacle of the digital revolution. Harnessing cryptocurrency and blockchain technology will help fuel the 4th Industrial Revolution. The authorities rather than bypassing it should utilize the same.
Reference:
- The Hindu (Private cryptocurrencies can cause the next financial crisis if allowed to grow, warns RBI Governor)
- The Hindu (Cryptocurrencies clear danger says RBI Governor)
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