[Editorial Analysis] Catch the New Tech wave

Mains Paper 3: Economy
Prelims level: Cryptocurrency
Mains level: Digital Economy and BlockChain Technology

Context:

• The authors talk about opportunities posed by Cryptocurrency to India

What’s happening?

• In an astonishing event, the Ethereum founder has donated cryptocurrency worth $ 1 billion to support pandemic relief work in India.

• Recent China’s crackdown on cryptocurrency has wiped out trillion dollars from the global crypto market within a 24 hrs span.

1. The crypto market grew by 500% even while the pandemic unleashed global economic carnage has not been seen since the Great Depression.

2. Within 2-days of the China-provoked crash, the crypto market value again recovered by over 10%.

• This kind of extreme volatility has always been a concern for regulators and investors.

Brief about Blockchain Technology and Cryptocurrency:

• Cryptocurrency is a fully decentralized, peer-to-peer electronic cash system that didn’t need the purview of any 3rd party financial institution.

• It was a response to the lack of trust in the existing banking system that was reflected in the 2008 global financial crisis.

• Even though govts fully support it but Cryptocurrency has been one of the extraordinary stories of modern economic history.

• The cryptocurrency is based on an underlying system called Blockchain technology that has far-reaching benefits.

• The basic architecture of blockchain is a network where people share the extra space and computational power in their computers to create a global super-computer that is accessible to everyone. This network performs functions such as
a. Verification of transactions and contracts,
b. Updating and maintenance of these records in the form of tamper-proof ledgers.
c. The tasks are normally done by large intermediary organizations like banks.

• The participants of a network known as validators who were rewarded for their efforts by transaction fees.

• Integrating blockchain into these sectors could result in hundreds of billions of dollars in savings.
a. Blockchain could make every aspect of e-governance and judiciary more efficient and transparent.
• The cryptocurrency that is not backed up by any public institution would able to shake up the financial markets.
a. Within a span of a decade, bitcoin has surpassed the size of most modern nation’s economies.

India and Crypto currency:

• In India, the reflex action of law enforcement and taxation agencies has clamored for a ban on cryptocurrency on grounds of:
a. Possible misuse of these instruments such as
i. Money laundering
ii. Terror funding
iii. Drug and human trafficking
iv. Cybercrimes and blackmailing

• In 2018 RBI barred the financial institutions from supporting crypto transactions but SC overturned it in 2020.
a. Still, Indian banks block crypto transactions.
• Even govt has circulated a draft bill outlawing all cryptocurrency activities.

• Despite no policy in place, RBI has announced the launch of a private block chain-supported official digital currency similar to the digital Yuan.

• India’s impractical effort to while decoupling cryptocurrencies from their underlying blockchain technology and reap benefits shows its lack of understanding of this disruptive innovation.

• Thousands of companies across the globe are working on projects that could bring in paradigm changes that make digital space more redistributive and fairer. In 2021, while blockchain-based startups worldwide raised $2.6 billion in funding, Indian startups received less than 0.2% of that total amount.

Way ahead:

• Regulation is needed to prevent previous problems and misuse of cryptocurrencies and to protect unsuspecting investors from excessive market volatility and scams. But effective regulation needs to be clear, transparent, coherent and animated by a vision.

• Any new regulation made in the sector should prevent the misuse of these digital assets without hindering innovation and investments.

• Provisions have to make route the value extracted from these networks transparently into the financial system.

Conclusion:

• India was a late adopter in all the previous phases of the digital revolution. It is time for India to catch up with the crypto revolution.
• The world is now on the cusp of the next transformation led by blockchain and AI.

• It is high time for India to channel its human capital, expertise and resources into the revolution and to emerge as the winner. To achieve this All India need is to have clear-headed policymaking.

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Prelims Questions:

Q.1) With reference to the Craftsmen Training Scheme (CTS), consider the following statements:

1. It was introduced by the Government of India in year 1950 by establishing about 50 Industrial Training Institutes (ITIs) for imparting skills in various vocational trades.

2. It is implemented by the Union Ministry of Labour and Employment.

Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Answer: A

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