Introduction of Digital Currency:
Digital Currency means electronic currency or electronic money. Now in the modern era, people start earning from the internet via investing in the market. The raising of the cryptomarket and share market has grown in a few span of years.This makes people invest in cryptomarket, for this they need digital currency. This automatically increases the demand for digital currency. The government also wants other sources of currency, so that the government can easily deal in International and National issues like: Trade, Economics Projects, Investment projects. This also increases the demand for digital currency.
The digital currency is known as the digital money, which is an alternative source of paper currency. It is controlled by the central banks of countries like [CBDC] is introduced by the governments of the U.S.A and BAHAMAS, CHINA now INDIA has also started digital currency in metropolitan cities.
This is introduced to make payment safe and secure with reducing the rooting of money from one channel to another channel. To reduce the Corruption and duplicacy of money, digital currency is being introduced. It is also known as the intangible source of money.
Another type of currency is Stable Coins. People also invest in Stable Coins, which make it easy to deal in the cryptomarket. It mainly balances the volatility in cryptocurrency.
Why do we require Digital Currency?
In the growing stage of the economy, everything gets digitised. The new online payment apps are introduced in the market for income generating. There are a lot of chances of fraud transactions. The government has no legal records of these transactions. To control the fraud, digital currency is required. More reasons are their which we will discuss below:
1. Alternative source:
- The digital currency is an alternative source of money. As many people invest in the market in digital form, which can help them as a reserve in any kind of situation.
- The recent example is covid pandemic, where many transactions are done from the banking system digitally. The citizens of a country get a lot of benefits in transferring and saving money.
2. Proper Control:
- The government wants proper control on the digital payment systems and wants to have an eye on digital finance of each person to collect each and every record of an account.
3. Safety Measures:
- Digital currency is also needed because it provides safety from misuse of money, scams, fraud, corruption, black and white money etc. and the government also wants to record each transaction. So that they can access the culprit.
4. Stability in Economy:
- The government gets a first mover advantage, that it will directly provide stability to the economy.
- The government can easily control their Fiscal policy and Monetary policy.
- The government can check how digital currency can improve the stable economy with domestic and international payment systems.
5. International Payments:
- Digital currency makes efficient payments at (cross borders) international level.
- The government can easily pay and receive money without any Red Tapism and so much rooting of currency.
- Although, it benefits the regular trading between different countries by a fast and easy payments system.
6. Industries and MNC’s:
- Industries and MNC’s get benefits in abroad payments and receiving cash during trading and investments. They do not need any physical security to carry paper currency for trade.
- As it is the fast mode of payment and receiving of cash digitally, it directly helps the citizens, now they don’t need to carry paper cash in their pocket or wallet. They will use a card or some voucher that they keep in their pocket and purchase the goods.
TYPES OF DIGITAL CURRENCY:
There are mainly two type of digital currencies: cryptocurrencies and central bank digital currency
Crypto currency is called crypto or digital currency. It was established in 2009. The users do not carry money physically rather than the users use a specific mode for transaction. When the transaction is made, it is directly stored in a public ledger.
The users do digital trading between traders with the system of peer to peer, where traders and sellers buy and sell the cryptocurrency on the official website or app of crypto currency. It is named because it verifies the transaction with full encryption.
The crypto currency is based on public ledger known as blockchains. Mining is also a process in which users solve mathematical situations and generate coins, computers can also be used in this process. The users can also take help of some agents to raise coins funds Some examples of the crypto currency are: bitcoins, ethereum, ripple etc.
(C.B.D.C) Central Bank Digital Currency:
Central bank digital currency is also a digital currency, which was launched by the governments of CHINA, NIGERIA, USA now INDIA has also started digital currency in metropolitan cities. This currency is controlled by the central bank.
In INDIA also digital currency was started by the government. The new currency is launched in 4 cities- Mumbai, New Delhi, Bangalore and Bhuveneshwer. In the year 2022 to 2023, the project will be started by the government of digital currency.
The government also started with a new currency which can be managed by digitised apps on the internet. The government wants to reduce pressure or other liabilities which were raised in management of paper currency. This make government to introduced with new innovative currency i.e. C.B.D.C [Central Bank Digital Currency].
It is different from the other online payments apps available for the general public. As it would be a liability of the federal reserve not on a commercial bank. It is a new alternative source of paper currency. It is introduced for fast transaction and safety options not for replacement of other currency.
Some Challenges in Digital Currency:
To start the new system, there are some challenges which have arised and need more focus of the inventors and government, which are to be reduced for safety of the system. Some challenges are:
1. Large size of infrastructure:
It is very difficult for inventors and the government to establish a large infrastructure digital payment system. It has become so tricky and complicated that it is not easy to control. If any mis-happening occurs, the whole country will have to suffer.
It is not easy, it is very riskier to handle all kinds of situations that can arise at any time. Any situation can generate risk and uncertainty for the banking system. Other currencies face up and down in the market which can affect the financial system of the country.
3. Cyber Attacks:
Another challenge that occurs is cyber attacks or crimes, here the inventors and controllers have to provide more safety to the system. The more safer the system will be, it will be more protected from cyber attacks and function smoothly. Hacking and cyber attacks can steal all data and records from system.
4. Government Interference:
The digital currency system increases the government intervening in private things, which is not a positive sign. The government will dominate in each sector. It can also implement restricted policy for citizens, which can generate problems for the country
Some Pros and Cons:
|It is faster to perform transaction.
|It can be hacked.
|This system does not require physical manufacturing.
|It is very uncertain and fluctuates in the market and loses its value.
|It reduces costs and transportation security.
|It is difficult to control and regulate.
|It provides privacy to individuals.
|It is more risky.
|Benefits to lower level household.
|It increase government interventions
The digital currency is the new innovation for the world. It becomes another source of income generation for the individual and also becomes secondary currency for the different countries. It is faster and efficient in trading. But some challenges are to be reduced by inventors and controllers for smooth functioning. Although it is the new payment and trading system for individuals and country in modern era.