Q. What is Cryptocurrency? How does it affect global society? Has it been affecting Indian society also?

Model Answer: 

What is Cryptocurrency?

Cryptocurrency is a digital or virtual currency that uses cryptography for security. It operates on decentralized networks based on blockchain technology, without the need for a central authority. Examples include Bitcoin and Ethereum.

Cryptocurrency’s impact on global society:

• Economic:
– Promotes financial inclusion for the unbanked, particularly in developing countries
– Disrupts traditional banking systems, challenging established financial institutions
– Introduces high volatility in investments, as seen in Bitcoin’s price fluctuations

• Technological:
– Drives innovation in fintech, spurring development of new financial products
– Expands blockchain applications beyond finance (e.g., supply chain management)

• Social and cultural:
– Shifts perceptions of money and value, creating new forms of wealth
– Fosters crypto communities and subcultures, often centered around specific coins

• Regulatory:
– Necessitates new legal frameworks to address unique challenges of digital currencies
– Requires international cooperation to combat crypto-related crimes

Impact on Indian society:

• Growing adoption:
– Increasing awareness and interest, especially among young Indians
– Rising number of crypto exchanges and users in India

• Economic implications:
– Potential for easier remittances and cross-border transactions
– Concerns about capital flight and tax evasion

• Regulatory landscape:
– Initial RBI ban, later overturned by Supreme Court
– Government’s evolving stance, balancing innovation and investor protection

• Social aspects:
– Creating job opportunities in crypto and blockchain sectors
– Sparking debates on financial literacy and investment risks

• Challenges:
– Addressing fraud and illicit activities (e.g., crypto scams)
– Balancing technological advancement with economic stability

Conclusion: Cryptocurrencies are transforming global and Indian societies, offering opportunities and challenges that require careful navigation and regulation.