GS Paper 3
Syllabus: Effects of liberalisation on the economy (post-1991 changes), changes in industrial policy and their effects on industrial growth.
Context:
Bitcoin and many other cryptocurrencies have been crashing since they hit an all-time high late last year
Why are cryptocurrencies crashing?
Tight monetary policy by governments across the world: As central banks withdraw liquidity from the market, there’s less money chasing assets, which in turn causes the prices of assets to drop. Bubble: Crash could also mark the popping of the bubble that has driven the prices of cryptocurrencies to very high levels.
How do governments view cryptocurrencies?
Many countries have taken several steps to discourage the widespread use of cryptocurrencies. While countries such as China and Russia have opted to impose outright bans on cryptocurrencies, others such as India have tried to tax and regulate them heavily. In India, while the government has not imposed an outright ban on cryptocurrencies, the Reserve Bank of India has been quite vocal about the need to ban them completely.
Do these virtual currencies have intrinsic value?
Similar to Fiat currency, Bitcoin (or most of the cryptocurrencies) is also not backed by any gold or silver hence does not have any intrinsic value. The value of any currency comes from the backing of the state and the trust that people have over the government.
Prelims and Mains Link
Cryptocurrency and related Issues
Practice Questions:
Q. Consider the following pairs: (UPSC CSE 2018)
Terms sometimes Context/Topic
seen in news
- Belle II experiment — Artificial Intelligence
- Blockchain technology — Digital/Cryptocurrency
- CRISPR – Cas9 — Particle Physics
Which of the pairs given above is/are correctly matched?
(a) 1 and 3 only
(b) 2 only
(c) 2 and 3 only
(d) 1, 2 and 3
Answer: B
Q. With reference to “Blockchain Technology”, consider the following statements: (UPSC CSE 2020)
- It is a public ledger that everyone can inspect, but that no single user controls.
- The structure and design of the blockchain are such that all the data in it are about cryptocurrency only.
- Applications that depend on the basic features of blockchain can be developed without anybody’s permission.
Which of the statements given above is/are correct?
(a) 1 only
(b) 1 and 2 only
(c) 2 only
(d) 1 and 3 only
Answer: d
Q. What is a cryptocurrency? Discuss the need for the formulation of a clear, constructive, and adaptive regulatory environment for cryptocurrencies in India.
Source: The Hindu
