×

UPSC Courses

DNA banner

DAILY NEWS ANALYSIS

GS-III :
  • 03 September, 2019

  • Min Read

Cryptocurrencies could constrain a country’s choices

GS-III: Cryptocurrencies could constrain a country’s choices

CONTEXT

Facebook announced launching a cryptocurrency called Libra, designed to appeal to its global user base of over 2 billion.

Libra

  • It will be backed by a basket of fiat currencies.
  • It is supported by a consortium of large-scale corporate houses, financial services firms, and venture capitalists.
  • Millennials have little patience for expensive traditional banking methods for cash transactions. They would likely flock to alternatives like Libra.

Impossible trinity

  • It is the “trilemma” of monetary policy. It states that it is impossible to have all three of the following conditions fulfilled at the same time:
  • A fixed foreign exchange rate
  • Free capital movement
  • An independent monetary policy
  • Even before cryptocurrencies, governments looking to control the monetary aspects of their economies have been subject to this trilemma, and have been forced to implement only two of the three conditions.
  • If you want control over both your exchange rate and monetary policy, you would have to impose controls on free capital movement.
  • Hence the existence of capital controls such as India’s Foreign Exchange Management Act.
  • The trilemma is a theory based on the “uncovered interest rate parity condition”.
  • It is supported by evidence-based studies where governments that have tried to simultaneously pursue all three goals have failed.
  • Strong capital controls have meant that other means of payment have been in use before, such as the infamous “hawala” system.
  • The ease of use and the scope of new Big-Tech cryptocurrencies are about to create global currencies of a completely different class.
  • Economists argue that such currencies will affect the exchange rates and monetary policies of traditional currencies. This is because the introduction of a global digital currency removes the capital control levers that sovereign nations have today.

Conclusion

Thus the advent of Big Tech cryptocurrencies means that countries would have one less lever to pull.

Source: Live Mint


World bank logistic performance index 2023

India is now ranked 38th out of 139 nations in the Logistic Performance Index (LPI) 2023 of the World Bank. From its previous rankings of 44th in 2018 and 54th in 2014, this is a notable improvement. Earlier, the Logistics Ease Across Different States (LEADS) Report 2022 was published by the Ministry of Commerce and Industry. About Logi

Smuggling of Gold

Airports discovered more than 63% of this illegal gold. The Department of Revenue Intelligence recently conducted the Golden Dawn Operation across India, seizing 101.7 kg of illegal gold valued at Rs 51 crore. Despite the fact that India receives a legal import of about 800-1,000 tonnes of gold each year, the illicit market is thought to be

India-Thailand Relations

Both parties expressed satisfaction with the ongoing bilateral defence cooperation at the 8th India-Thailand Defence Dialogue, which was held in Bangkok, Thailand. Cultural ties and mutual cooperation that have been shaped by thousands of years of lasting historical and cultural ties characterise India and Thailand relations. Highlight

Translocation of Elephants

The Kerala government's appeal of the order of the Kerala High Court is rejected by the Supreme Court. The Kerala government's appeal against the Kerala High Court's directive to move Arikomban (Wild Elephant), the "rice tusker" of Munnar, to the Parambikulam tiger reserve was recently dismissed by the Supreme Court.

Global Buddhist Summit

Global Buddhist Summit In order to improve diplomatic and cultural ties with other nations, the Ministry of Culture recently organised the First Global Buddhist Summit 2023 in collaboration with the International Buddhist Confederation (IBC). About the summit "Responses to Contemporary Challenges: Philosophy to Praxis" is

Toppers

Search By Date

Post Feed

Newsletter Subscription
SMS Alerts