essay on digital currency upsc

Essay on Cryptocurrency 1000 Words for UPSC

Essay on Cryptocurrency in 1000+ Words

Cryptocurrency, a digital or virtual form of currency that uses cryptography for secure financial transactions, has emerged as a disruptive force in the realm of finance. The genesis of cryptocurrency can be traced back to the introduction of Bitcoin in 2009 by an anonymous person or group known as Satoshi Nakamoto .

Since then, the cryptocurrency landscape has rapidly expanded, with numerous altcoins and blockchain projects offering diverse applications. This essay explores the evolution, benefits, challenges, and regulatory concerns surrounding cryptocurrencies, and their potential implications on the global financial landscape.

Evolution of Cryptocurrency

The advent of cryptocurrencies marked a significant departure from traditional financial systems. Unlike conventional currencies that are centralized and controlled by governments or financial institutions, cryptocurrencies operate on decentralized networks based on blockchain technology.

Blockchain, a distributed ledger technology, ensures transparency, immutability, and security in financial transactions, eliminating the need for intermediaries like banks.

As the pioneering cryptocurrency, Bitcoin introduced the concept of digital scarcity, revolutionizing the perception of value. Subsequently, various cryptocurrencies emerged, each serving unique purposes.

Ethereum, for instance, introduced smart contracts, allowing for the development of decentralized applications (DApps). This marked the beginning of a new era of blockchain-based platforms and utility tokens.

Benefits of Cryptocurrencies

Financial Inclusion: Cryptocurrencies have the potential to provide financial services to the unbanked and underbanked populations across the globe. Individuals in developing nations, without access to traditional banking services, can participate in the global economy through cryptocurrencies.
Lower Transaction Costs: Cryptocurrency transactions generally involve lower fees compared to traditional banking systems, particularly for international transfers. This aspect could facilitate more efficient cross-border trade and remittance.
Decentralization and Security: The decentralized nature of cryptocurrencies makes them resistant to censorship and fraud. The cryptographic security of blockchain technology ensures the integrity and immutability of transactions, reducing the risk of data manipulation and unauthorized access.
Investment Opportunities: Cryptocurrencies have attracted investors due to their potential for high returns. This has led to the emergence of a dynamic and innovative financial market.

Challenges & Risks

Volatility: Cryptocurrencies are known for their price volatility, which can be a double-edged sword for investors. While some see it as an opportunity for profit, others view it as a hindrance to mainstream adoption and stability.
Regulatory Uncertainty: The lack of comprehensive regulations in various jurisdictions has created uncertainty for investors, businesses, and governments. Regulatory challenges include concerns about consumer protection, money laundering, tax evasion, and market manipulation.
Security Concerns: Despite the inherent security of blockchain, the surrounding infrastructure, such as exchanges and wallets, can be susceptible to hacking and cyberattacks. Ensuring robust security measures is crucial for the sustained growth of the cryptocurrency ecosystem.

Global Impact & Future Prospects

Cryptocurrencies have the potential to reshape the global financial landscape in several ways:

Remittance and Cross-Border Transactions: Cryptocurrencies can make cross-border transactions more efficient and cost-effective, benefitting migrant workers and businesses engaged in international trade.
Financial Innovation: Decentralized finance (DeFi) platforms have emerged, offering novel financial services like lending, borrowing, and yield farming without intermediaries. This innovation could lead to increased financial accessibility and inclusivity.
Central Bank Digital Currencies (CBDCs): Several countries are exploring the idea of launching their CBDCs to complement their existing fiat currencies. CBDCs aim to provide the benefits of digital currencies while maintaining regulatory oversight.

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Cryptocurrencies have disrupted the traditional financial landscape, offering unique opportunities and challenges. While the benefits of financial inclusion, lower transaction costs, and decentralized security are evident, addressing concerns related to volatility, regulatory ambiguity, and security is vital for sustained growth and mainstream adoption.

As governments, financial institutions, and the public continue to grapple with the implications of cryptocurrencies, it is essential to strike a balance between fostering innovation and ensuring responsible financial practices.

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CURRENT AFFAIRS: Topical Analysis

Topical Analysis: Digital Currency Revolution in India.

Published: 21st Apr, 2022

Past 2010 digital payments to India is unknown but now-a-days digital payments overtake the conventional method of payments, Especially due to COVID-19 pandemic and SOP to contain spread of virus digital payments were preferred than that of conventional payment method’s. Since its inception in 2016 the value of monthly UPI transactions for four years comprises of 3-lakh-crore by 2020 September. Astonishingly the payments doubled to Rs 7 Lakh- crore in a year owing the due credits to cheaper internet data, growth of smart phone usage and exponential growth of digital payments platforms.

This as a part of digital payment system said to be a revolutionary step towards digitalisation of currency in India. Unified Payments Interface (UPI) has been at the forefront of India’s digital payments revolution, making faster inroads into retail payments than any other online mode, monthly transactions value clocked by UPI vaulting from ₹1.8-lakh crore in November 2019 to ₹7.6-lakh crore by November 2021. While credit and debit card payments flat-lined at ₹13-lakh crore between FY19 and FY21 and use of IMPS grew from ₹2-lakh crore to ₹3.6-lakh crore, UPI payments have jumped from ₹8.7-lakh crore to ₹41-lakh crore.

To ensure that digital transactions are both affordable to users and remunerative to service providers, RBI plans to issue a discussion paper specifying transaction charges across digital modes. The time is opportune for RBI to redouble efforts to wean the economy away from cash to digital modes.

Digital currency in various parts of world.

Digital currency is a form of currency that is available only in digital or electronic form. It is also called digital money, electronic money, electronic currency, or cybercash, has utility similar to physical currencies also be used to purchase goods and pay for services.

Digital currencies also enable instant transactions that can be seamlessly executed across borders. Typical digital currencies do not require intermediaries and are often the cheapest method for trading currencies.
All crypto currencies are digital currencies, but not all digital currencies are crypto currencies.

CBDC (Central Bank Digital Currency) is the digital form of fiat currency issued and regulated by central bank of a country which promotes financial inclusion and simplify implementation of fiscal and monetary policy.

CBDC’s are of 2 types:

Wholesale CBDC, primarily used by financial institutions.
Retail CBDC, used by consumers and businesses similar to physical form of currency.

Across the world, only 9 countries launched CBDC and 80 countries with CBDC initiatives are underway till date.

Finance minister during budget session 2022 announed; CBDC in India will be ready by 2023 and overseen by RBI.

Are crypto currency and digital currency same? What are the differences?

Finance minister announced during budget session 2022-2023 that “Non Fungible Tokens”-NFT’s will be taxed at 30% on any income from their transfer. On the same stage finance minister also announced rolling out of “Digital currency” by RBI sooner in 2023 called after “The Central Bank Digital Currency (CBDC)”.

Here, erupts a conflict on the weather digital currency and crypto currency are same? But the idea of digital currency is different from crypto currency as follows:

Digital currency is a legal tender issued by RBI mostly centralised, where as crypto currencies are decentralised and run by single group or community which are not yet accepted as legal tender in India.

How is Digital currency different from UPI payments?

Unified Payments Interface (UPI) is a system that powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing & merchant payments into one hood. It also caters to the “Peer to Peer” collect request which can be scheduled and paid as per requirement and convenience.

Digital Rupee/ currency in itself will be the underlying payment mode that can be used for digital payments in lieu of currency/cash. “The payment rails like UPI, IMPS etc use the underlying currency/cash to transfer the funds.
Currently, UPI payments are made using the digital equivalent of existing currency notes. That means every rupee transferred via UPI is backed by physical currency. “The digital rupee will be legal tender in and of itself and need not necessarily be backed up by physical currency
The digital rupee/ currency will be operated by RBI and not by bank intermediaries in the case of UPI where each bank has a different UPI handler. Digital rupee will be Settled by RBI instantly, where as UPI payments were settled by transacting bank with RBI

Role of Digital currency in financial inclusion

Retail CBDCs can help reshaping a financial system into one that is more accessible to the unbanked and under banked. Retail CBDCs are issued by a central bank directly to people without going through traditional bank accounts. In this system, individuals have CBDC accounts directly on the central bank core ledger.
By establishing a more inclusive digital payments ecosystem and
Creating financial data identities.
It transforms the payments ecosystem ; management of physical currency is expensive and should hold a wider network/ chain of branches of banks to deal with. Whereas digital currency reduces this expenditure on maintenance, Resulting in including more people into the financial ecosystem.
The high cost for small ticket size financial transaction in conventional financial system makes the transactions unviable. Digital currency and mobile technology can cater the needs of small transaction at affordable cost. It can also help reducing time, more accurately and make faster transactions in bulk.
Many emerging economies like India, Brazil, and Nigeria have embarked on mobile technology to overcome financial exclusion.
Arguments for CBDC increasing digital currency:
Digitizing the value chains in the economy.
People can access a wide range of digital financial products and services that are not easily accessible when using cash.
Can help to enlarge the digital economy, where service provides develop API (Application Programming Interface) used to serve better for customers on real time basis.
It allows faster payment settlements enabling more transparency.
The advantage of a CBDC has offline features as well that helps people in remote areas where there is no internet connectivity, will be able to use retail CBDC conveniently .

Advantages of digital currency:

There are many advantages of digital currency including:

It is Free from credit and liquidity risk as it curbs financial misuse such as; Fake currency printing, money laundering and so on.
Cross-border payment improves; with this digital mode it creates an eco system of similar currency even at distant places.
Financial inclusion will took place as it will be accessible to everyone in the society, expanding peer to peer transactions.
Expands access to the general public through API.
It is more secure compared to conventional payment as it is more discrete and confidential.
Reliable and faster way of transaction with fewer charges.
Helps in saving tonnes of paper in banking sector as it will completely run on digital platform.
As it is centralised, Regulating will be easier.

Disadvantages of digital currency:

Concerns of cyber attacks, as data are the mostly held in digital devices.
As it requires less number of people, will result in loss of employment in financial sector.
In rural areas implementation will be a great task, where internet connectivity is low.
Chances of generating digital divide.
Non-interest bearing CBDCs hinders financial inclusion.
Digital illiteracy may act as barrier.
Privacy concerns may turn up.

Regulations related to digital currency in India:

Digital currency in India is how ever yet to be launched but the digital payments and crypto currencies were regulated to secure India’s soverign digital currency by restricting the role existing crypto currencies which can form as a great threat to economy.

" The Crypto currency and Regulation of Official Digital Currency Bill, 2021 ". Is the only bill introduced in parliament related to crypto currency regulation in India which has major provisions such as

Ban on crypto currencies: The draft Bill bans the use of crypto currency as legal tender or currency. It also prohibits mining, buying, holding, selling, dealing in, issuance, disposal or use of crypto currency.
Use as a medium of exchange, store of value or unit of account.
Use as a payment system.
Providing services such as registering, trading, selling or clearing of crypto currency to individuals.
Trading it with other currencies.
Issuing financial products related to it
Using it as a basis of credit
Issuing it as a means of raising funds, and
Issuing it as a means for investment.
Under the Bill, mining, holding, selling, issuing, transferring or using crypto currency is punishable with a fine or imprisonment of up to 10 years, or both.
Issuing any advertisement, soliciting, assisting or inducing participation in use of crypto currency is punishable with a fine or imprisonment of up to seven years, or both
The Bill provides for a transition period of 90 days from the commencement of the Act, during which a person may dispose of any crypto currency in their possession, as per the rules notified by the government.

The Inter-Ministerial Committee (2019) noted that the technology underlying crypto currencies i.e., DLT, could improve the efficiency and inclusiveness of the financial system. It can help lower the costs of personal identification for KYC, and improve access to credit. Global regulators (such as IMF) have also noted benefits of crypto currencies. These currencies could provide cheaper, faster and more efficient transactions.

Comparison of penalties prescribed under various economic offences


Mining, holding, selling, issuing, transfer or use of crypto currency in the country (draft Bill)	10 years
Proceeds of crime involved in money laundering related to offences under the Narcotic Drugs and Psychotropic Substances Act, 1985 (PMLA)	10 years
Involvement in activities connected with proceeds of crime including its concealment, possession, acquisition or use or projecting it as untainted property (PMLA)	7 years
Holding of foreign exchange of aggregate value exceeding one crore rupees (FEMA)	5 years

How digital currency helps in India’s goal of 5 trillion dollar economy and challenge’s there in?

The digital currency plays a major role if considered in achieving 5 trillion dollar economy by 2025 based on its advantages over conventional currency, but the digital currency not yet rolled out and will ready by 2023 can be a challenge to Indian’s goal to become 5 trillion dollar economy. Additionally, the recent pandemic pushed back the growth rate and settled down at 8.2% for FY2023 following the ongoing Russia-Ukraine war.

According to the World Bank, India needs to create 8.1 million jobs annually to achieve its growth targets. But on other hand, The NASSCOM has recently said that the Indian Crypto currency market has been growing exponentially over the last few years and is expected to reach up to $241 million by 2030 in India and $2.3 billion by 2026 globally.

A recent study on “Crypto Industry in India” by the NASSCOM and industry partner WazirX also said that the Indian investors have shown keen interest towards adopting Crypto currencies such as Bitcoin, Ethereum, and Polygon to make investments that promise them viable returns.

Former RBI Governor Raghuram Rajan, while addressing Reuters Markets Forum recently, had also endorsed the potential in Crypto currencies. The Crypto currency might find a way to become an effective means of payment, he had added.

Challenges:

In terms of digital currency and 5 trillion dollar economy, the challenges are:
Lack of implementation of various digital currencies in India.
More restricted rules for crypto currency users and providers.
Prolonged delay in rolling out sovereign digital currency (CBDC).
Less active participation of various age groups in digital currency
Lack of knowledge about crypto currencies and various other digital currencies.

Way forward:

India as 3rd largest economy in the world, its ambition to join 5 trillion dollar economy club is a great challenge ahead as there are many issues within the country, across the neighbourhood and environmental concerns posing continues obstacles for growth. The growth in digital payments in India and thriving for CBDCs can enhance the efficiency of digital payments. Whether CBDC will eventually increase financial inclusion depends on the CBDC design. However the digital transactions growth in India is throwing a positive ray of hope on India’s digital currency revolution.

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e-RUPI: Digital Payment Instrument

Last updated on April 6, 2024 by ClearIAS Team

e-RUPI, a digital payment instrument was launched in India in 2021. Recently the RBI has expanded the scope and reach of e-RUPI vouchers. It was one of the important initiatives by the government for fintech growth in India. Read here to learn more about e-RUPI.

The Indian government has developed a plan to use digital infrastructure to ensure that its social programs are delivered without error.

Prepaid vouchers for specific applications are a straightforward idea that is used in the US, Hong Kong, and many other nations.

India is undertaking a similar initiative by introducing a new payment system as a pioneer in the fintech industry and light of its propensity for techno-solutionism.

National Payments Corporation of India (NPCI) in association with the Department of Financial Services (DFS), National Health Authority (NHA), Ministry of Health and Family Welfare (MoHFW), and partner banks, has launched an innovative digital solution – ‘e-RUPI’.

Table of Contents

e-RUPI is a completely cashless and no-contact electronic payment instrument that will be sent to recipients’ mobile devices as either a QR code or an SMS-based e-voucher.

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This includes mobile devices that are neither Android nor iOS. Simply put, it works like a voucher that may be used to access certain services without the need for further confirmation or paperwork.

Given that a sizable portion of the Indian population lacks banking services or has restricted internet connection, e-RUPI offers a simple and practical way for beneficiaries to access government services.

Without a card, without installing a digital payment app, and even without having a bank account, you may use the e-RUPI coupon.
The pre-allocated amount will be connected to the QR codes or SMS vouchers, which can only be used once by the person in whose name they were issued.
Importantly, the beneficiary must first use the appropriate service or services before the payment may be finalized.
Even the private sector can leverage these digital vouchers as part of their employee welfare and Corporate Social Responsibility (CSR) programs.

NPCI has partnered with 11 banks for e-RUPI transactions. They are:

Axis Bank, Bank of Baroda, Canara Bank, HDFC Bank, ICICI Bank, Indian Bank, IndusInd Bank, Kotak Mahindra Bank, Punjab National Bank, State Bank of India, and Union Bank of India.\

Also read: Payments Infrastructure Development Fund (PIDF) scheme

Services That e-RUPI Covers

Fertilizer Subsidies .
Nutritional assistance is provided through the Child and Mother Welfare Scheme.
Programs for TB eradication .
Ayushman Bharat Pradhan Mantri Jan Arogya Yojana Schemes for Diagnostics and Drugs.

For example, if the Government wants to cover a particular treatment of an employee in a specified hospital, it can issue an e-RUPI voucher for the determined amount through a partner bank. The employee will receive an SMS or a QR Code on his feature phone/smartphone. He/she can go to the specified hospital, avail of the services and pay through the e-RUPI voucher received on his phone.

How is e-RUPI Different From UPI?

The electronic rupee (e-Rupee) is a type of government money, however alternative ways to transmit money or payment instruments include UPI programs like PhonePe, Google Pay, NEFT, and IMPS.

The main difference between the two is that UPI transactions are fully guaranteed by real money, whereas the digital rupee is a kind of legal cash that is not backed by real money.
Bank intermediation is a part of every UPI transaction. Your bank account gets debited when you use a UPI app, and money is then transferred to the recipient’s bank.
When using paper money, you may take out a set amount from the bank, save it in your wallet, and use it anyplace without the bank knowing.
The digital money will be withheld in e-RUPI similarly, and you will store it in your mobile wallet.
The funds travel from your digital wallet to the recipient’s when you send a transfer to an organization or another person. There is no intermediation by banks or routing.

Benefits of e-RUPI

The e-RUPI transfer does not need the use of money, credit or debit cards, online banking, or a mobile app for making payments.
Every e-RUPI transaction is one-time only since the transfer is person- and purpose-specific. As a result, it is unusual to worry about benefits being stolen.
Additionally, queues, middlemen, and touts are avoided. The intended beneficiary will mostly continue to be in control because an OTP will be required to advance with the e-RUPI payment at the moment of use.
Security encryption is better since the beneficiary is not needed to submit any personal information.
The recipient can perform financial transactions using the e-RUPI payment system even if they don’t have an account. This system’s flexibility might lead to higher take-up in rural areas and among those who are financially vulnerable.
There is also a great chance for small enterprises to gain directly from different government programs. This would help the poor achieve their long-term economic goals and means of subsistence.
It will facilitate the country’s citizens’ financial integration. Additionally, it will guarantee that public services are delivered to lists-mile customers effectively, openly, and without leakage.
The e-RUPI system is user-friendly addition to being secure. As a consequence, this technology will be helpful to illiterate individuals.

Benefits for Corporates

Corporates can enable the well-being of their employees by distributing the UPI Prepaid Vouchers
It is an end-to-end digital transaction and does not require any physical issuance (card/voucher) hence leading to cost reduction
Visibility for voucher utilization – Voucher redemption can be tracked by the issuer
Quick, safe & contactless voucher distribution

Benefits for Hospitals

Easy & Secure – The voucher is authorized via a verification code shared by the beneficiary
Hassle-free & Contactless payment collection – Handling of cash or cards is not required
Quick redemption process – The e-voucher can be redeemed in a few steps and lesser decline due to the pre-blocked amount.

Benefits for End-users

Contactless – Beneficiary need not carry a printout of the e-voucher
Easy redemption – It is a 2-step redemption process
Safe and Secure – Beneficiaries do not need to share personal details and hence their privacy is maintained
Only mobile phone and e-voucher required – Users redeeming the voucher need not have a digital payment app or a bank account

RBI has expanded the reach and scope of the e-RUPI by:

Permitting non-bank Prepaid Payment Instrument (PPI) issuers to issue e-RUPI vouchers.
Enabling issuance on behalf of individuals.
Facilitating more use by reloading vouchers, authentication process, issuance limits, etc.

Way forward

The e-RUPI Digital Payment Solution is a wise government initiative that offers many opportunities for success to the receivers.

In India, a sizable portion of the population lacks access to banking services, but with the implementation of e-RUPI, all of these citizens will also be able to benefit financially from all of the government’s programs in the areas of health, medications, fertilizers, child welfare, subsidiaries, and other things.

The government is already working on creating a Central Bank Digital Currency, and the introduction of e-RUPI may serve to highlight the infrastructural gaps in digital payments that must be filled for the future digital currency to succeed.

Also read: Payments Infrastructure Development Fund (PIDF) scheme

-Article written by Swathi Satish

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Welcome to the Free Digital SAT Online Mock Tests for Reading, Writing, and a few Math questions, which are brought to you by the experts at GeeksforGeeks. Our team of experienced educators and test-prep professionals have meticulously crafted these practice tests to help you prepare effectively for the SAT exam.

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SAT Exam Reading Practice Questions

Directions: each passage or pair of passages below is followed by several questions. after reading each passage or pair, choose the best answer to each question based on what is stated or implied in the passage or passages and any accompanying graphics (such as a table or graph)..

This passage is from Mary Shelley’s “Frankenstein.” The setting is late 18th-century Europe. Victor Frankenstein reflects on the consequences of his scientific experiments.

Victor Frankenstein: “I had worked hard for nearly two years to infuse life into an inanimate body. For this, I had deprived myself of rest and health. I had desired it with an ardor that far exceeded moderation; but now that I had finished, the beauty of the dream vanished, and breathless horror and disgust filled my heart. Unable to endure the aspect of the being I had created, I rushed out of the room, and continued traversing my bedchamber, unable to compose my mind to sleep.”

1. What does the passage suggest about Victor’s initial feelings towards his creation?

A) He is proud and satisfied.

B) He is indifferent and unemotional.

C) He is horrified and regretful.

D) He is curious and intrigued.

Answer: C) He is horrified and regretful. Explanation: Victor describes his feelings as “breathless horror and disgust,” indicating his regret and revulsion towards the creature he created.

2. Which of the following best describes Victor’s state of mind at the end of the passage?

A) Calm and composed

B) Restless and agitated

C) Joyful and relieved

D) Focused and determined

Answer: B) Restless and agitated Explanation: Victor is “unable to compose [his] mind to sleep,” showing his agitation and inability to find peace

3. The phrase “the beauty of the dream vanished” most likely means that Victor:

A) lost his creative inspiration.

B) realized his work was incomplete.

C) found his creation repulsive.

D) achieved his goal successfully.

Answer: C) found his creation repulsive. Explanation: The “beauty of the dream vanished” implies that the dream turned into a nightmare, leading to Victor’s feelings of horror and disgust.

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This passage is from Charles Dickens’s “Great Expectations.” The setting is early 19th-century England. Pip, the protagonist, visits Miss Havisham’s house.

Pip: “I entered the room where Miss Havisham sat, and found her seated in the same chair, by the same dressing table, with her back to the window, and her face towards it, as I had seen her before. She spoke of herself as being tired, and the daylight was almost gone; so, upon the whole, it was easier to see her by the fireside light. The dark lines on her face, the sunken eyes, and the once white dress, now faded and yellow, all told of a life wasted in seclusion and regret.”

1. What can be inferred about Miss Havisham’s life from the passage?

A) She has lived a content and fulfilled life.

B) She has spent her life in isolation and sorrow.

C) She has recently begun to enjoy social gatherings.

D) She is actively seeking new opportunities.

Answer: B) She has spent her life in isolation and sorrow. Explanation: The description of her “once white dress, now faded and yellow” and her life “wasted in seclusion and regret” indicate a life of isolation and sadness.

2. The passage suggests that the room where Miss Havisham sits is:

A) Bright and cheerful.

B) Dim and shadowy.

C) Well-lit and spacious.

D) Modern and stylish.

Answer: B) Dim and shadowy. Explanation: The room is described with “the daylight was almost gone” and Miss Havisham is easier to see “by the fireside light,” suggesting it is dim and shadowy.

3. Which word best describes Pip’s reaction upon seeing Miss Havisham?

B) Indifferent

C) Disinterested

D) Observant

Answer: D) Observant Explanation: Pip notices details about Miss Havisham’s appearance and surroundings, indicating he is observant.

This passage is from Charlotte Brontë’s “Jane Eyre.” The setting is early 19th-century England. Jane Eyre reflects on her feelings after a conversation with Mr. Rochester.

Jane Eyre: “I had not intended to love him; the reader knows I had wrought hard to extirpate from my soul the germs of love there detected; and now, at the first renewed view of him, they spontaneously arrived, green and strong! He made me love him without looking at me.”

1. What does Jane Eyre’s reflection reveal about her feelings towards Mr. Rochester?

A) She feels indifferent towards him.

B) She feels a deep, spontaneous love for him.

C) She is determined to keep her distance from him.

D) She feels a sense of resentment towards him.

Answer: B) She feels a deep, spontaneous love for him. Explanation: Jane describes her feelings as spontaneously arriving “green and strong,” indicating a deep, spontaneous love for Mr. Rochester.

2. The phrase “extirpate from my soul the germs of love” most nearly means that Jane:

A) tried to nurture her love for Mr. Rochester.

B) sought to remove all traces of love from her heart.

C) wished to confess her love for Mr. Rochester.

D) hoped to understand her feelings better.

Answer: B) sought to remove all traces of love from her heart. Explanation: “Extirpate” means to remove or destroy completely, indicating Jane tried to remove her feelings of love.

3. Which of the following best describes the change in Jane’s feelings when she sees Mr. Rochester again?

A) Her feelings remain unchanged.

B) Her feelings grow stronger.

C) She feels more indifferent.

D) She feels angered.

Answer: B) Her feelings grow stronger. Explanation: Jane’s feelings “spontaneously arrived, green and strong,” suggesting that her feelings for Mr. Rochester have grown stronger upon seeing him again.

SAT Exam Writing Practice Questions

Each passage below is accompanied by a number of questions. for some questions, you will consider how the passage might be revised to improve the expression of ideas. for other questions, you will consider how the passage might be edited to correct errors in sentence structure, usage, or punctuation. a passage or a question may be accompanied by one or more graphics (such as a table or graph) that you will consider as you make revising and editing decisions. some questions will direct you to an underlined portion of a passage. other questions will direct you to a location in a passage or ask you to think about the passage as a whole. after reading each passage, choose the answer to each question that most effectively improves the quality of writing in the passage or that makes the passage conform to the conventions of standard written english. many questions include a “no change” option. choose that option if you think the best choice is to leave the relevant portion of the passage as it is..

The influence of technology on education is undeniable, revolutionizing how students learn and interact with information. Digital tools and online resources have made education more accessible and engaging, breaking down traditional barriers to learning.

[1] One significant change is the introduction of interactive e-books and digital textbooks, which offer multimedia content and interactive features that traditional textbooks cannot match. [2] These resources enhance understanding by providing animations, videos, and interactive quizzes. [3] However, the reliance on digital resources can also pose challenges, such as the need for reliable internet access and the potential for digital distractions. [4] Online learning platforms have also transformed education by offering a wide range of courses that students can take from anywhere in the world. [5] These platforms provide flexibility and convenience, catering to diverse learning styles and schedules.

1. Which sentence best introduces the main topic of the second paragraph?

A) Sentence [1]

B) Sentence [2]

C) Sentence [3]

D) Sentence [4]

Answer: A) Sentence [1] Explanation: Sentence [1] introduces the main topic by highlighting the introduction of interactive e-books and digital textbooks, which sets the stage for further discussion about their impacts.

2. Which choice best maintains the logical flow of the paragraph?

A) [4], [1], [2], [3], [5]

B) [1], [3], [4], [2], [5]

C) [2], [4], [1], [5], [3]

D) [1], [2], [3], [4], [5]

Answer: D) [1], [2], [3], [4], [5] Explanation: The sentences in their original order provide a logical progression from introducing digital textbooks, their benefits, potential challenges, and the role of online learning platforms.

3. Which sentence, if deleted, would least affect the overall meaning of the passage?

B) Sentence [3]

C) Sentence [4]

D) Sentence [5]

Answer: D) Sentence [5] Explanation: Deleting Sentence [5] would have the least impact because it provides a specific detail about the flexibility and convenience of online learning platforms, whereas the other sentences introduce broader concepts and transitions.

The impact of technology on the healthcare industry has been transformative, enhancing patient care and streamlining administrative processes. Electronic health records (EHRs) have become a cornerstone of modern healthcare, replacing paper records with digital files that are easily accessible and updatable.

[1] EHRs allow healthcare providers to access patient information quickly and efficiently, leading to better coordination of care. [2] These records can include a comprehensive history of patient interactions, test results, and treatment plans. [3] However, the implementation of EHRs can be costly and requires significant training for healthcare staff. [4] Telemedicine is another technological advancement that has improved healthcare accessibility. [5] Through telemedicine, patients can consult with healthcare professionals remotely, reducing the need for in-person visits and saving time for both patients and providers.

1. Which sentence best supports the idea that EHRs improve patient care?

A) “These records can include a comprehensive history of patient interactions, test results, and treatment plans.”

B) “EHRs allow healthcare providers to access patient information quickly and efficiently, leading to better coordination of care.”

C) “The implementation of EHRs can be costly and requires significant training for healthcare staff.”

D) “Telemedicine is another technological advancement that has improved healthcare accessibility.”

Answer: B) “EHRs allow healthcare providers to access patient information quickly and efficiently, leading to better coordination of care.” Explanation: Sentence B directly supports the idea that EHRs improve patient care by explaining how they enhance coordination of care.

2. What is the main purpose of this paragraph?

A) To discuss the challenges of implementing EHRs

B) To highlight the benefits of telemedicine

C) To explain how technology has transformed healthcare

D) To describe the cost implications of technological advancements in healthcare

Answer: C) To explain how technology has transformed healthcare Explanation: The paragraph discusses various technological tools that have transformed healthcare, including EHRs and telemedicine.

3. Which sentence would best introduce the main idea of this paragraph?

A) “Technology has become an integral part of the healthcare industry.”

B) “Healthcare has evolved significantly with the advent of new technologies.”

C) “EHRs and telemedicine are now essential tools for healthcare professionals.”

D) “Technological advancements have improved patient care and administrative processes.”

Answer: D) “Technological advancements have improved patient care and administrative processes.” Explanation: This sentence effectively sets the stage for the discussion of specific tools that have improved patient care and administrative processes.

Related More Practice Papers: Digital SAT Practice Tests Free Digital SAT Reading and Writing Test SAT Maths Practice Free Digital SAT Practice Test 4 (2024) – Full-Length Download PDF Free SAT Mock Practice Tests Questions | Based on Latest Pattern

The entertainment industry has undergone a significant transformation due to technological advancements, changing how content is produced, distributed, and consumed. Streaming services have revolutionized the way people watch movies and TV shows, offering on-demand access to a vast library of content.

[1] One of the key advantages of streaming services is their convenience. [2] Users can watch their favorite shows and movies anytime, anywhere, without the need for physical media. [3] Additionally, streaming platforms often offer personalized recommendations based on viewing habits, enhancing the user experience. [4] However, the rise of streaming has also posed challenges for traditional cable and satellite providers, who struggle to compete with the flexibility and affordability of streaming services. [5] Moreover, the production of original content by streaming services has increased competition and driven innovation in the industry.

1. Which sentence best explains the impact of streaming services on traditional media providers?

A) “One of the key advantages of streaming services is their convenience.”

B) “Users can watch their favorite shows and movies anytime, anywhere, without the need for physical media.”

C) “Additionally, streaming platforms often offer personalized recommendations based on viewing habits, enhancing the user experience.”

D) “However, the rise of streaming has also posed challenges for traditional cable and satellite providers, who struggle to compete with the flexibility and affordability of streaming services.”

Answer: D) “However, the rise of streaming has also posed challenges for traditional cable and satellite providers, who struggle to compete with the flexibility and affordability of streaming services.” Explanation: Sentence D directly explains the impact of streaming services on traditional media providers, highlighting the challenges they face.

2. Which sentence could best serve as a conclusion for the entire passage?

A) “Streaming services have transformed the entertainment industry in numerous ways.”

C) “Technological advancements have significantly changed how we consume entertainment.”

D) “Moreover, the production of original content by streaming services has increased competition and driven innovation in the industry.”

Answer: A) “Streaming services have transformed the entertainment industry in numerous ways.” Explanation: Sentence A provides a comprehensive conclusion that summarizes the key points discussed in the passage.

3. Which word, if replaced, would change the meaning of the sentence “Moreover, the production of original content by streaming services has increased competition and driven innovation in the industry.” the least?

A) production

B) original

C) increased

Answer: C) increased Explanation: Replacing “increased” with a synonym like “boosted” or “raised” would change the meaning the least, as it refers to the overall effect on competition and innovation

SAT Maths Practice Questions (1-5)

What is the solution to the equation 3x – 4 = 11?

A) 3 B) 5 C) 7 D) 15

Answer: B) 5 Explanation: To solve for x, first add 4 to both sides of the equation: 3x – 4 + 4 = 11 + 4 3x = 15 Next, divide both sides by 3: x = 15 / 3 x = 5 So, the solution is x = 5.

A triangle has sides of lengths 5, x, and 12. If the perimeter of the triangle is 30 units, what is the value of x?

A) 10 B) 13 C) 15 D) 17

Answer: A) 10 Explanation: The perimeter of a triangle is the sum of its side lengths: 5 + x + 12 = 30 Combine the known side lengths: 17 + x = 30 Subtract 17 from both sides: x = 30 – 17 x = 13 Therefore, the value of x is 13.

If y = 2x – 1 and x = 4, what is the value of y? A) 5 B) 7 C) 8 D) 9

Answer: A) 7 Explanation: Substitute x = 4 into the equation y = 2x – 1: y = 2(4) – 1 y = 8 – 1 y = 7 Therefore, y is 7.

The average of five numbers is 18. If four of the numbers are 10, 20, 15, and 25, what is the fifth number? A) 10 B) 15 C) 20 D) 30

Answer: C) 20 Explanation: The average of five numbers is 18, so the sum of the five numbers must be: 5 × 18 = 90 Summing the four known numbers: 10 + 20 + 15 + 25 = 70 Subtract this sum from the total sum to find the fifth number: 90 – 70 = 20 Thus, the fifth number is 20.

Solve for x in the equation 4x + 6 = 3x + 12. A) 2 B) 4 C) 6 D) 8

Answer: A) 6 Explanation: First, subtract 3x from both sides of the equation: 4x + 6 – 3x = 3x + 12 – 3x x + 6 = 12 Next, subtract 6 from both sides: x + 6 – 6 = 12 – 6 x = 6 Therefore, x = 6 is the solution.

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CBSE Digital Education

Essay on Cryptocurrency in English for Students 500, 1000 Words

Today, we discuss an important topic in the Essay on Cryptocurrency in English for Students and Children. In this article, there are written two different types of essays regarding Cryptocurrency. The first essay is a long essay on cryptocurrency in India 1000 words.

This long Essay on Cryptocurrency in English is suitable for students of classes 9 and 10, 11, and 12, and also for competitive exam aspirants (SSC CGL CHSL MTS, High Court, and UPSC Exam).

The second is a short essay on Cryptocurrency in English 500 words. These are suitable for students and children in classes 3, 4, 5, and 6,7,8.

CBSE Digital Education provides all the important information regarding the essay about cryptocurrency. Read the article till the end for all the important information regarding cryptocurrency.

Essay on Cryptocurrency in English 1000 Words

The term “cryptocurrency” derives from the encryption technology used to secure the network.

A cryptocurrency is a form of payment that can be exchanged for goods and services online. Many companies issue their own currencies, often called tokens, and can be traded exclusively for a good or service provided by the company.

A cryptocurrency is a digital or virtual currency that is secured by cryptography, making it nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized networks with a distributed ledger implemented by a separate network of computers based on blockchain technology.

A defining characteristic of cryptocurrencies is that they are generally not issued by any central authority, which makes them theoretically immune from government interference or manipulation.

What is Cryptocurrency?

Cryptocurrency is a type of currency that’s digital and decentralized. Cryptocurrencies can be used to buy and sell things, and their potential to store and grow value has also caught the eye of many investors.

There are thousands of different cryptocurrencies available today. The most popular and first cryptocurrency is Bitcoin, which was created in 2009. Other common cryptocurrencies include Ethereum, XRP, and Bitcoin Cash.

	Cryptocurrency
	Bitcoin
	2009
	Blockchain Technology
	Bitcoin, Ethereum, Litecoin, Cardano, etc

Each of these currencies serves different purposes, with some optimized for use in place of cash, and others designed for private, direct transactions.

How does Cryptocurrency Work?

Unlike centralized electronic money and central banking systems, cryptocurrencies use decentralized control. The decentralized control of each cryptocurrency works through a blockchain, which is a public transaction database, which acts as a distributed ledger.

Transactions are sent between peers using software known as cryptocurrency wallets (for storing, sending, and receiving digital currency). The person doing the transaction uses the wallet software to transfer funds from one account to another. To transfer funds, it is necessary to know the password associated with the account. Transactions made between peers are encrypted and then transmitted over a network of cryptocurrencies.

Advantages of Cryptocurrency

Cryptocurrencies are digital and therefore cannot be counterfeited or arbitrarily reversed by the sender. Cryptocurrency uses a ‘push’ mechanism that allows the cryptocurrency holder to send exactly what he/she wants to the merchant or recipient without any information. Decentralization is one of the main advantages of cryptocurrency as it is managed by its own network and not by any central authority.

Cryptocurrencies are gaining popularity because they offer privacy protection, cost-effectiveness, low entry barriers that can be used as an alternative to banking systems and fiat currencies, open-source methodologies and public participation, and also immunity to government-led financial retaliation. Every transaction is transparent, autonomous, and secure.

Since the cryptocurrency is not bound by the exchange rates, transaction fees, or other charges of any country and hence it can be used internationally without any problems. Being paperless, it is eco-friendly. Anonymity is one of the biggest benefits provided by cryptocurrency as one does not need to reveal their identity. Because of these benefits, cryptocurrency started gaining acceptance around the world.

Facebook has officially launched its virtual currency named ‘Libra’. It will be governed by the Libra Association, a Swiss group consisting of 28 members. It will run on a blockchain on which cryptocurrency payments take place.

Disadvantages of Cryptocurrency

Cryptocurrencies have their own associated risks. Most people have no idea how to use cryptocurrencies and hence are vulnerable to hacking. Cryptocurrencies are highly volatile in nature. The central issues are the lack of funds, which means there is no formal legal entity to give guarantees in any bankruptcy case.

There is no way to get a refund of the amount paid by someone by mistake. If a person has stored digital currency in his phone or computer, it is better to remember the password and not lose these devices. Losing your coin means that no one will be able to retrieve it.

Cryptocurrencies are being condemned in many countries due to their use in gray and black markets. There are two sets of interconnected risks, one for the development and expansion of these platforms in an uncertain policy environment and the other that these platforms pose a risk to the security of users and the state. They also have potential uses for illegal trade and criminal activities and can be used to finance terrorism.

Position of India in Cryptocurrency

India plays a relatively minor role in the global cryptocurrency market as it holds only 2% of the global cryptocurrency market capitalization. The Reserve Bank of India is monitoring the growing use of cryptocurrencies and issued an advisory in this regard in 2013, cautioning users, holders, and traders of virtual currencies about their potential financial, legal, and security risks. The Ministry of Finance also held a public consultation on regulating virtual currencies in May 2017.

In March 2020, the Supreme Court of India declared the RBI notification of April 2018, which had banned transactions through virtual currencies, as unconstitutional. This could lead to an increase in the use of cryptocurrencies in India.

If authorized as an electronic payment system or designated a legal instrument, cryptocurrencies will come under the purview of the RBI; Capital gains and business transactions would be liable to tax, and foreign payments would also come under the purview of the Foreign Exchange Management Act . Regulated cryptocurrencies will ensure strong consumer protection provisions.

Global Scenario of Cryptocurrency

The acceptability of cryptocurrencies as a legal instrument currently varies from country to country. While some laws and measures are in the process of being formulated, others are yet to respond to this disruptive change. Some countries like Algeria, Bolivia, Egypt, etc. have completely banned cryptocurrencies.

In other 15 countries like Bahrain, Bangladesh, China, etc an ‘implicit ban’ has been implemented. The Bank of Thailand announced plans to create its own cryptocurrency. UNICEF accepts cryptocurrency donations.

Cryptocurrencies are slowly coming under regulatory purview to prevent abuse. Japan became the first country to regulate cryptocurrencies, with the US preparing regulatory guidelines soon.

The UK and Australia continue to work on the formalities while China has recently banned Initial Coin Offerings (ICOs) for various reasons including various ICO scams around the world.

The increasing use of cryptocurrencies in terrorism financing, ransomware, illegal drug or weapons trade, and cybercrime has also raised red flags among security and law enforcement agencies. They may have the potential to displace existing financial systems that enable the electronic flow of money across different political boundaries.

Cryptocurrencies face criticism for a number of reasons, including their use for illegal activities, exchange rate volatility, and vulnerabilities of the infrastructure underlying them. However, they also have been praised for their portability, divisibility, inflation resistance, and transparency.

Due to this volatile and nascent stage of cryptocurrency and the low realization of its value due to limited use, it has been speculated that while the people of India are eager and eager for transparent, quick, and high-return currencies but the Indian Government has its own stand that believes in knowing and exploring more about the cryptocurrency.

Essay on Cryptocurrency in English 500 Words

This is a short essay on Cryptocurrency in English 500 words. These are beneficial for students and children of classes 3, 4, 5, 6,7,8.

A cryptocurrency is a digital asset designed to serve as a medium of exchange that uses cryptography to secure its transactions, control the creation of additional units, and verify the transfer of assets.

Cryptocurrencies are a type of digital currencies, alternative currencies & virtual currencies. The first cryptocurrency was Bitcoin, which was created in January 2009 and is still the most famous. Cryptocurrencies have proliferated over the past decade and there are now thousands available on the Internet, but Bitcoin is the most famous.

A cryptocurrency is a form of digital asset based on a network that is distributed across a large number of computers. This decentralized structure allows them to exist outside the control of the government and central authorities.

Cryptocurrencies work using a technology known as the blockchain. Blockchain is a decentralized technology spread across multiple computers that manage and record transactions. Part of the appeal of this blockchain technology is its security. Technology has changed the way people work, communicate, shop, and even pay for goods.

The future appeal of cryptocurrencies lies in allowing fast, secure global transactions and our ultimate control over our money with lower transaction fees than all current currencies. But given the risks posed by the potential use of cryptocurrencies in terrorism financing, money laundering, and tax evasion, the government will have to take considerable action.

We hope that after reading this article you must have got detailed information about how to write a long & short Essay on Cryptocurrency in English. I hope you like this article about the Essay on Cryptocurrency in English for Students.

If you want to ask any queries regarding the Essay on Cryptocurrency in English then message us in the comment section, and we will reply to you soon. For More Updates Join Our Telegram Channel and Click here for More Educational News

My Name is Mukesh Kumar. I am a Teacher, Blogger, Educational Content Writer, and Founder of CBSE Digital Education.

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Central Bank Digital Currency (CBDC)

General Studies- Paper III , Science & Technology
Sapana Saxena

The Reserve Bank of India plans to launch pilot projects to evaluate the viability of employing digital currency for both wholesale and retail transactions. These initiatives aim to refine the central bank’s approach towards potentially implementing a comprehensive framework for central bank digital currency (CBDC) .

About Central Bank Digital Currency (CBDC)

CBDCs are a form of digital currency issued by a country’s central bank.
Examples of central banks include the Reserve Bank of India (RBI), the US Federal Reserve System, the Bank of Japan.
CBDCs are similar to stablecoins , except that their value is fixed by the central bank and equivalent to the country’s fiat currency.

Implementing an official digital currency would significantly diminish currency management expenses while facilitating instantaneous transactions devoid of inter-bank settlements. India’s relatively elevated currency-to-GDP ratio presents an additional advantage of Central Bank Digital Currency (CBDC) adoption. By replacing substantial cash transactions with CBDC, the expenditure on printing, transporting, and storing physical currency could be significantly curtailed. The requirement for inter-bank settlements would become obsolete as CBDC would function as a liability of the central bank transferred directly between individuals.

What is the CBDC or National Digital currency?

A Central Bank Digital Currency (CBDC) , also known as a national digital currency , represents the electronic rendition of a nation’s fiat currency. Rather than relying on physical printing or minting, the central bank administers digital tokens. These tokens derive their value from the complete trust and creditworthiness of the government.

SC Garg Committee recommendations (2019)

The panel suggests a complete ban on all activities related to cryptocurrencies, including mining, holding, transacting, or dealing.
Exchange or trading in digital currencies would be punishable by a jail term ranging from one to 10 years.
The authorities may impose a monetary penalty of up to three times the amount lost by the exchequer or gained by the cryptocurrency user.
However, the panel recommends that the government remain open to the possibility of the Reserve Bank of India issuing its own cryptocurrencies.

Challenges in rolling out National Digital Currency

Cybersecurity Vulnerability : The populace’s insufficient digital literacy heightens susceptibility to cyber threats.
Challenges of Digital Currency : The adoption of digital currency introduces complexities in regulation, monitoring investments, tracking purchases, and taxation.
Privacy Concerns : Digital currency necessitates the collection of personal information for verification, posing a threat to individual privacy.
It provides businesses and consumers with privacy, transferability, convenience, accessibility, and financial security.
It also decreases the cost of maintenance that a complex financial system requires.
It reduces cross-border transaction costs.
It would also reduce the risks associated with using digital currencies, or cryptocurrencies, in their current form. CBDCs, backed by a government and controlled by a central bank, would give households, consumers, and businesses a secure means of exchanging digital currency.

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Essay On Digital Currency In India | Advantages & Disadvantages

Hello Friend, In this post “ Essay On Digital Currency In India | Advantages & Disadvantages “, we will read about “ Digital Currency and its advantages and Disadvantages as an Essay ” In Detail. So…

Let’s Start…

Essay On Digital Currency In India

Introduction .

Digital Currency available in digital or electronic form and not in physical form. It is also known as electronic money, cyber-cash, electronic currency, or digital money . They are accessible with computers or cell phones. Digital currencies do not require an intermediary for a transaction. All digital currencies are not cryptocurrencies but all cryptocurrency is 100% digital currency .

What Are digital currencies?

Digital currencies are intangible. Transactions can be done only through computers, cell phones, or electronic wallets. Like any other fiat currency, it can also be used to purchase goods and pay for services.

Digital currency mainly worked for instantaneous transactions, When it linked to supported devices and networks, it can be seamlessly executed to make payments across borders.

As payments in digital currencies are made directly between the parties without the need for intermediaries the transactions are usually instantaneous and low cost. Transactions involving brings in necessary record-keeping and transparency in dealings.

David Chaum introduced the idea of digital cash through a research paper in 1983. In 1989, he founded Digicash an electronic cash company to commercialize the ideas in his research.

E-gold was introduced in 1996. In 1998 Paypal came into the picture. In 2009, bitcoin was launched which is a decentralized blockchain-based digital currency with no central server and no tangible assets held in reserve.

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Advantages Of Digital Currency

Lower transaction costs and ability to make payments any time.
Receiving funds more efficiently than by legacy financial institutions.
It is easier for international customers to do business with you.
Fraud protection, for e.g. In Cryptocurrency Trading, you don’t require to show your personal information.
The cost of making currency becomes decreased due to digital currency
Anyone can easily receive or send payment anywhere, anytime.

Disadvantages Of Digital Currency

For Digital Currency strong technical mechanism required.
lack of proper Internet connection across the country
Lack of skilled users
Lack of electronics, gadgets, such as mobile, laptop, etc. between poor’s person.
Reduces the number of jobs in the banking sector.

Digital Currency in India

If a digital currency is regulated by a central bank. it is known as central bank digital currency( CBDC ).

Unlike crypto-currencies which are issued without a central bank backing and are issued and traded on exchanges, a CBDC is a digital currency that holds the same value as fiat currencies issued by a country’s central bank.

Conclusion

At the end of the day, digital currencies have the potential to change the world of business as we know it. In other words, the obstacles that digital currencies must overcome in order to become ‘mainstream’ are not just economic but mental, as well.

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Due to Digital currency, there is possible of unemployment in India.

Central Bank Digital Currency (CBDC)

Last Updated on Sep 6, 2023

Context: Fourth edition of the G20 TechSprint, a global technology competition to promote innovative solutions for improving cross-border payments is jointly organised by the RBI and the Bank for International Settlements’ BIS Innovation Hub (BISIH).

What is a Central Bank Digital Currency (CBDC)?

Digital currency backed by the central bank of a country. Just like currency notes issued by the Central Bank, the CDBC is a legal tender and accepted for the payment of various transactions within a country.
It is akin to sovereign paper currency but takes a different form, exchangeable at par with the existing currency and shall be accepted as a medium of payment, legal tender and a safe store of value. CBDCs would appear as liability on a central bank’s balance sheet. That is, a central bank liability, denominated in an existing unit of account, which serves both as a medium of exchange and a store of value.
It is substantially not different from banknotes, but being digital it is likely to be easier, faster and cheaper. It also has all the transactional benefits of other forms of digital money.
CBDC, being a sovereign currency, holds unique advantages of central bank money viz. trust, safety, liquidity, settlement finality and integrity.

Features of CBDC

CBDC is sovereign currency issued by Central Banks in alignment with their monetary policy
It appears as a liability on the central bank’s balance sheet
Must be accepted as a medium of payment, legal tender, and a safe store of value by all citizens, enterprises, and government agencies.
Freely convertible against commercial bank money and cash
Fungible legal tender for which holders need not have a bank account
Expected to lower the cost of issuance of money and transactions


Issuer	Central Bank	Central Bank	Private Entity	Private Entity
Value	Derives its value from the guarantee provided by Central Bank	Derives its value from the guarantee provided by Central Bank	None	Value pegged to other currency such as Diem, TruelNR (Refer to Budget Video for more details)
Legal Tender	Yes	Yes	May be given status of Legal Tender Example: El Salvador	May be given status of Legal Tender
Medium of Payment	Yes	Yes	May be allowed	May be allowed.
Examples	Physical Currency Notes	eDINAR, Sistema, Petro, e-krona etc.	Bitcoin, Ethereum, dogecoin etc.	Diem, TruelNR, Tether etc.

Types of CBDC

Retail CBDC: CBDC that can be used for people for day-to-day transactions.
Wholesale CBDC: CBDC that can be used only by financial institutions such as Banks, NBFCs etc.

Legal Framework For Issuance of CBDC

Finance Act 2022 has amended the RBI Act, enabling it to introduce Central Bank Digital Currency. The definition of bank note was amended wherein RBI was allowed to issue both physical and digital currency by amending Section 2 of RBI Act, 1934.

Possible Designs of CBDC

Direct Model: In case of Direct model, the Central Bank issues CBDC and enables customers to directly open accounts with itself. So, in this case, the Central Bank engages with the public for opening accounts, facilitating payments through CBDC etc.
Indirect/Two-tiered model: In this case, the Central Bank issues CBDC and customers would maintain with the Central Bank. But it would not directly engage with the customers. It would outsource activities such as opening accounts, facilitating payments etc. to other Banks.

Benefits of CBDC

Subhash Chandra Garg Committee (2019) has recommended a ban on private cryptocurrencies on account of concerns such as volatility, instability, security risk and risk of funding illegal activities. However, the committee has highlighted that an official digital currency can have number of advantages such as:

Promote cashless economy by reducing Cash-to-GDP ratio.
Increase in Financial Inclusion
Stability and Resilience of payment system since CBDC would promote competition in the payment system and ensures that no single company dominates the payment ecosystem
Counter the Stable coins such as Diem which could be used for making payments.
Increase in effectiveness of Monetary Policy
Push to development of Fintech sector
Provide a real time picture of economic activity and hence better GDP estimates and efficient monetary policy formulation.
Traceability of transactions would crack down on corruption and money laundering.
As it being a sovereign currency, ensures settlement finality and thus reduces settlement risk in the financial system.
CBDCs could also potentially enable a more real-time, cost-effective seamless integration of cross border payment systems.
The e₹ system will bolster India’s digital economy , cashless economy, enhance financial inclusion, and make the monetary and payment systems more efficient.
Could ease current frictions in cross-border payments.
Counter the monopoly of private sector issued cryptocurrencies.

Challenges and Concerns

Potential Disintermediation of Banks as people may shift from depositing money in the bank to CBDC. This will lower the deposits with the banks which will force them to increase their deposit rates to attract customers. It may lead to an increase in the rate of interest on loans in the economy.
Accelerate Bank runs: By providing depositors a safe and liquid alternative to bank deposits, CBDCs may accelerate bank runs during a period of financial stress.
Security risks and financial system abuses: CBDC may be susceptible to cyber-attacks and other security breaches. Such attacks or breaches may be committed to misuse the CBDC for illicit activities.
Competition to private payment service providers: Introduction of CBDC could lead to direct competition with private payment providers (such as Paytm, Google pay etc). This may reduce their incentives to invest in innovation.
Higher Burden on the RBI: If the RBI adopts "Direct Model", it will have to directly engage with the public for opening accounts and hence overall burden on the RBI could increase. This may in turn lead to neglect of its core activities.
Reputation risk: Security breaches on the CBDC may dent public confidence in the RBI .
Data privacy issues: Traceability feature of CBDC would have impact on Right to Privacy of the Individuals. Hence, the need for strong data regulation law in India.

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With reference to Central Bank digital currencies, Consider the following statements.

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UPSC Prelims 2023 Question:

With reference to Central Bank digital currencies, consider the following statements:

It is possible to make payments in a digital currency without using US dollar or SWIFT system.
A digital currency can be distributed with a condition programmed into it such as a time-frame for spending it.

Which of the statements given above is/are correct?

a) 1 only

c) Both 1 and 2

d) Neither 1 nor 2

Correct Answer: Option c) Both 1 and 2

Learn more about the Central bank digital currencies in India.

Explanation:

Central bank digital currencies (CBDCs) are a form of digital currency issued by a country's central bank. They are similar to cryptocurrencies, except that their value is fixed by the central bank and equivalent to the country's fiat currency.
Countries will be able to directly exchange digital currencies in a bilateral way and without going through SWIFT or similar settlement systems. So, statement 1 is correct.
A CBDC is programmable to the point that the currency can be made to expire, thus forcing consumers to use it up to a certain date. So, statement 2 is correct.

Significance of Central Bank Digital Currency

It would reduce the cost of currency management while enabling real-time payments without any inter-bank settlement.
India’s fairly high currency-to-GDP ratio holds out another benefit of CBDC to the extent large cash usage can be replaced by (CBDC), the cost of printing, transporting and storing paper currency can be substantially reduced.
It will also minimize the damage to the public from the usage of private virtual currencies.
It will enable the user to conduct both domestic and cross border transactions which do not require a third party or a bank.
It has the potential to provide significant benefits, such as reduced dependency on cash, higher seigniorage due to lower transaction costs, and reduced settlement risk.
It would also possibly lead to a more robust, efficient, trusted, regulated and legal tender-based payments option.

Therefore, option (c) is the correct answer.

Subject: Economics | Money and Banking

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Digital Rupee: Advantages and Challenges – Explained, pointwise

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1 Introduction
2 What is a Central Bank Digital Currency?
3 About the status of CBDC at the global level
4 About the steps announced by the Finance Minister on digital currency(Digital Rupee)?
5 Will other digital currencies be allowed in India?
6 What are the prerequisites before releasing the Digital Rupee?
7 What are the advantages of announcing a digital rupee or CBDC?
8 What are the challenges associated with issuing a digital rupee?
9 What should be done to improve the performance of the digital rupee?

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Introduction

The Union Minister for Finance & Corporate Affairs has tabled the Union Budget 2022-23 in the Parliament. One of the major highlights of this year’s budget is the announcement of Government’s decision to launch Digital Rupee – India’s version of a Central Bank Digital Currency (CBDC).

The announcement is a reiteration of the SC Garg Committee that had asked the RBI to introduce its own digital currency and ban private cryptocurrencies completely.

What is a Central Bank Digital Currency?

A Central Bank Digital Currency (CBDC), or national digital currency , is the digital form of a country’s fiat currency. Instead of printing paper currency or minting coins, the central bank issues electronic tokens. This token value is backed by the full faith and credit of the Government.

About the status of CBDC at the global level

Currently, 9 countries already use digital currencies. Among the nine countries with active CBDCs, eight are small island nations in the Caribbean. Currently, at least 87 countries are researching or developing CBDCs, including 14 who are running pilot programmes.

1) Sweden is conducting real-world trials of their digital currency (Krona) ; 2) The Bahamas has already issued their digital currency “ Sand Dollar ” to all citizens; 3) In October 2021, Nigeria became the latest country to introduce a digital currency, e-Naira . 4) China started a trial run of their digital currency e-RMB amid pandemic. They plan to implement pan-China in 2022. This is the first national digital currency operated by a major economy.

Countries like Japan, Singapore are currently examining the various facets of such a transition. A few days ago, the US Federal Reserve also released a report outlining the costs and benefits of issuing a central bank-backed digital dollar.

: CBDC is just a wallet or an electronic purse, issued by a central bank. There are many such wallets operating in the Indian financial system. The CBDC will be one of them, but with a difference that it will be issued by the nation’s central bank.

About the steps announced by the Finance Minister on digital currency(Digital Rupee)?

Reserve Bank of India will launch a Digital Rupee by 2022-23. The CBDC will be backed by the blockchain and other technologies. The digital rupee will be the digital form of the physical rupee and will be regulated by the RBI.

The budget announcement was made after consultations with the RBI, and the RBI will decide by when it is ready to launch the digital rupee.

According to the Prime Minister, the digital rupee could be exchanged for cash and will open new opportunities in the fintech sector.

Recently, RBI Deputy Governor has said that the central bank is “working towards a phased implementation strategy ” and will examine the CBDCs in the wholesale and retail segments.

Will other digital currencies be allowed in India?

According to the Secretary, Department of Economic Affairs, “ digital rupee will be the first and only digital currency in India.” He also explained that the taxation of crypto assets does not legitimize their usage, as crypto-assets do not mean cryptocurrencies alone. According to him, Crypto, in a general sense, is a digital asset that uses crypto technology.

The Budget has used the term “Virtual Digital Assets” (VDAs) . VDAs are a superset for all digital assets being transacted on the blockchain, such as cryptos, non-fungible tokens (NFTs), or any other virtual asset.

Note : The draft Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 aims to prohibit all private cryptocurrencies. The Bill also aims to lay down the regulatory framework for the launch of an “official digital currency”.

What are the prerequisites before releasing the Digital Rupee?

First , the design of the currency with regard to how it will be issued, the degree of anonymity it will have, the kind of technology that is to be used, etc., needs to be sorted out.

Second , CBDC would need an entirely new centralized payment system . This system has to be linked to electronic wallets that reside on prepaid cards, smartphones, or other electronic devices.

Third , the government has to develop an interoperable system between the other virtual digital assets (VDAs) and the digital rupee for seamless transfer of funds.

Fourth , digital money will be programmable money. Hence, the government has to come out with suitable products and services using the digital rupee, such as smart contracts.

What are the advantages of announcing a digital rupee or CBDC?

According to the Prime Minister, the Central bank digital currency or the digital rupee will make online payments more secure and risk-free and boost the digital economy in the years to come. He also mentioned that the digital rupee will lead to ease in the development of a global digital payment system .

Further, introducing the digital rupee will revolutionise the fintech sector by creating new opportunities and lessen the burden in handling, printing, logistics management of cash .

Digital Rupee will lead to a whole lot of improvement in terms of digitization of the economy, ease of transfer , not just within the country but across jurisdictions. Further, the Digital rupee will prevent counterfeiting of currency and a boost to the war on black money and corruption.

The Digital Rupee will accelerate financial inclusion, lower costs for financial transactions , especially in the case of cross-border transactions, the advantages of an alternate payments system , the creation of another instrument in the monetary policy arsenal of central banks.

Commercial banks sometimes fail, and depositors lose a big chunk of their money despite the deposit guarantee scheme, but when the money is parked with the central bank there is no risk of default .

CBDC will reduce the need for card networks, payment gateways . There are 1.2 billion mobile phone connections in India right now, but only 582 million bank accounts exist. The CBDC could help to bridge the disconnect.

The other advantages include,

Reducing systemic risk: There are about 3,000 privately issued cryptocurrencies in the world. According to IMF, the key reason for considering national digital currency is to counter the growth of private forms of digital money.

Industry estimates suggest there are 15 million to 20 million crypto investors in India, with total crypto holdings of around 400 billion rupees (US$5.37 billion). Most cryptocurrency exchanges are asking people to invest and trade in cryptos without providing basic information about the product and the inherent risks.

There is a possibility of these companies going bankrupt without any protection. But the digital rupee has government backing in case of any financial crisis.

Reduce volatility: The national digital currency will be regulated by the RBI. So, there will be less volatility compared to other digital currencies .

Negative interest rate : In tough times, a Central Bank might want people to spend money, hence the concept of negative interest rates. But, presently it can’t do so as people will simply withdraw their money from the banks. CBDCs will solve this problem. A negative interest rate could be easily mandated on CBDCs kept in the wallets.

Complement blockchain-led decentralised finance : All crypto assets’ final returns will be in sovereign currency, and therefore the digital rupee will aid the virtual digital asset(VDA) markets by bridging the gap between fiat money and decentralised finance.

What are the challenges associated with issuing a digital rupee?

Globally, pilot projects on CBDC have been underway since 2014. However, progress is slow because this seemingly simple innovation can have unforeseen consequences. These include,

Challenges to the entire banking system : The impact of the digital rupee on the banking system is not clearly understood e.g., if CBDCs are indeed efficient vehicles for retail savers, this could adversely affect bank deposits. Hence, there might be an impact on the role of banks in credit creation, RBI’s monetary policy, etc.

Further, Sweden’s Riksbank , which launched its e-krona project in 2017, is still studying the need and potential impact of e-krona on Sweden’s economy.

Threat to financial stability : If the RBI offered interest rates on the digital rupee, then it will directly compete with banks. If the regulator ends up competing with the regulated entities, the banking system may see erosion in deposits, threatening the financial sector’s stability.

No incentive to switch to digital rupee for user: From a user’s standpoint, there is no real incentive to switch to a CBDC as a growing proportion of retail transactions are already done digitally or by using UPI-based fast payment systems .

Potential cybersecurity threat: India is already facing many cyber security threats . With the advent of digital currency, cyberattacks might increase and threaten digital theft like the Mt Gox bankruptcy case.

End of privacy : The digital currency must collect certain basic information of an individual so that the person can prove that he’s the holder of that digital currency. This basic information can be sensitive ones such as the person’s identity, fingerprints etc.

Further, CBDCs will leave a digital trail even with the phone turned off. For instance, trails such as paying for food, fare and lodging.

Operational issues : There will be many operational issues for the implementation of CBDC, including the KYC (know your customer) norms and privacy of data.

What should be done to improve the performance of the digital rupee?

The Government should work towards an interoperable system between the virtual digital asset and the digital rupee. It will unleash opportunities for not only those working or wanting to work in the decentralised finance space (VDAs), but also for traditional finance industry exponents.

Creation of adequate cybersecurity methods: Before the introduction of National Digital currency, the Government has to create certain important things, such as, training of the law enforcement agencies, creating a policy of basic information assessed while issuing, verifying someone’s digital currency.

The RBI needs to create a regulatory sandbox , with limited participants and pre-specified uses, before launching its own digital currency. Only then can the rupee hold its own against other currencies.

Preserving the financial sector stability : The digital rupee can be issued via a distributed ledger , synchronised between the banks and the RBI and not a centralised ledger, held solely by the RBI. This decentralised model will not end up in competition between RBI and other banks.

Though the introduction of a digital rupee provides various advantages for the government, the government has to create necessary safeguards before rolling it out and must bridge the digital divide.

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Cryptocurrency

01 Feb 2023
11 min read
GS Paper - 3
IT & Computers

For Prelims: Cryptocurrency, Blockchain Technology, Central Bank Digital Currency (CBDC).

For Mains: Impact of cryptocurrency on Indian economy.

What is Cryptocurrency?

A cryptocurrency is a digital or virtual currency that uses cryptography for security.
It is a decentralized currency , meaning it is not controlled by any government or institution.
Some examples of cryptocurrencies include Bitcoin , Ethereum , and Litecoin.

How Does Cryptocurrency Work?

This ledger is maintained by a network of computers around the world, and each new transaction is verified and added to the blockchain by these computers.
This decentralization and use of cryptography make it difficult for anyone to manipulate the currency or the transactions recorded on the blockchain.
These keys are used to send and receive cryptocurrency, and they are also used to verify transactions on the blockchain.
Users can acquire cryptocurrency through a process called "mining" which involves using computer power to solve complex mathematical equations , which validate and record transactions on the blockchain, in return for a certain amount of cryptocurrency.

What is Blockchain Technology?

Blockchain technology is a decentralized, digital ledger that records transactions across a network of computers.
The decentralized nature of technology ensures that no single entity can alter or delete previous transactions, providing a high degree of security and transparency.
Blockchain is the foundation of cryptocurrencies such as Bitcoin, but it has many potentials uses beyond digital currencies.


	, created in was invented by an unknown person or group of people using the name and was released as It is considered the , and the currency can be sent electronically from on the without the need for intermediaries. and recorded in a called a
	is a that enables the creation of and ther, as a means of and that enables developers to create and deploy their own decentralized applications on the
	is a and project. and a different hashing algorithm.
	is a and that is designed to facilitate fast and inexpensive international money transfers. a decentralized for facilitating . , and , and it can also be traded on
	is a that was created as a result of a hard fork from in . compared to , allowing for faster and cheaper transactions. , as it adheres more closely to the original vision of as a electronic cash system.

What is the Legal Status of Cryptocurrency?

The legal status of cryptocurrency in India is currently in a state of flux.
The Reserve Bank of India (RBI) has issued several warnings against the use of cryptocurrencies, stating that they pose risks to investors and are not legal tender.
In 2018 the Supreme Court struck down a circular of Reserve Bank of India, which bans financial institutions from dealing in digital or cryptocurrencies.
The Govt has also set up a panel to explore the potential use of blockchain technology and the possibility of issuing a Central Bank Digital Currency (CBDC).
At present, El Salvador and the Central African Republic (CAR) are the only two countries in the world where Bitcoin functions as a legal currency.
Some countries, such as Japan and South Korea , have issued regulations for cryptocurrency exchanges.
Nations like Germany and Switzerland, have recognized Bitcoin as a "legal means of payment."
Other countries, such as China and Russia, have taken a more cautious approach and have imposed restrictions on the use of cryptocurrencies.

What is India’s Central Bank Digital Currency?

The Central Bank Digital Currency (CBDC) pilot launched by the RBI in the retail segment has components based on blockchain technology.
CBDCs are a digital form of paper currency and unlike cryptocurrencies that operate in a regulatory vacuum, these are legal tenders issued and backed by a central bank.
It is the same as a fiat currency and is exchangeable one-to-one with the fiat currency.
Digital currency refers to the digital version of the Indian rupee, which is also known as the digital rupee or e-rupee.

What are the Challenges?

Volatility: Cryptocurrency prices are highly volatile, which makes it difficult for businesses to accept it as a form of payment.
Regulation: There is a lack of clear regulation around cryptocurrency, which makes it difficult for businesses and individuals to know how to legally use it.
Security: Cryptocurrency exchanges and wallets are susceptible to hacking attacks, which can result in the loss of funds.
Adoption: Despite its growing popularity, cryptocurrency still has low adoption rates, which makes it difficult for individuals to use it as a form of payment in everyday life.
Scalability: The scalability of cryptocurrencies is limited, which makes it difficult for the technology to handle a large number of transactions.
Energy consumption: The process of verifying transactions in a cryptocurrency network, known as mining, is energy-intensive, and contributes to climate change.

Way Forward

The examples of countries like El Salvador and the Central African Republic recognizing cryptocurrencies as legal tender show that it is possible for governments to embrace this new technology and create a favorable environment for it to thrive.
The RBI has started a blockchain-based Central Bank Digital Currency (CBDC) pilot program. The government should take this into consideration because cryptocurrency is based on blockchain technology as well.
Launching cryptocurrency with a strong regulatory framework can ensure its proper use, prevent fraud and illegal activities, and increase consumer protection. On the other hand, a complete restriction of cryptocurrency may stifle innovation and limit its potential benefits to society.
The classification of cryptocurrencies as either goods or asset classes is still unclear and subject to change in many countries, including India. Currently, software is considered a good and can be taxed as such under Indian law. Profits and earnings from the sale of cryptocurrencies are considered taxable income , but only after the legalization of cryptocurrencies.

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