Topic: Science and Technology- developments and their applications and effects in everyday life
3) Cryptocurrencies are hailed as the future of digital currency. In light of the government’s aim to go cashless, discuss whether a Central Bank Digital Currency would help India achieve this aim? (250 Words)
Why this question
One of the biggest event last year was the meteoric rise in Bitcoin’s value which led to Bitcoin becoming a household discussion in India. The statement issued by Finance Minister regarding cryptos and RBI’s continued stand against cryptos, Bitcoin regulation and the possibility of a CBDC are issues always in news and hence, important for UPSC.
Key demand of the question
The central discussion in this question will revolve around the idea whether cryptocurrencies are the most optimum way to achieve the government’s aim of going cashless. We have to do an assessment of past, present and future as well as learn from global experiments to figure out whether a CBDR is the way forward.
Discuss – Here all aspects related to the possibility of a future CBDC for India needs to be discussed.
Structure of the answer
Introduction – Talk about the growing acceptability of Bitcoins, changing technological scenario etc to establish that countries across the world are toying with the idea of a government issued cryptocurrency.
- Discuss about the idea of CBDR
- Why is RBI toying with this idea
- Global experience
- Talk about India’s readiness for CBDR
- Legal issues
- Awareness / literacy
- Digital Infra readiness etc
- Talk about the problems of CBDR as a digital currency
- Here quote extensively from Ecuador’s experiment
- Present your view on whether India would benefit from adopting CBDC
- Discuss the impact on society (inequality issue etc), economy, polity etc
Conclusion : Mention your view whether Bitcoins are the future of digital currencies across the world in general and India in particular. Mention a short way forward such as govt and RBI should make its stand clear to end confusion.