Digital currency can take 2 avatars. One, by converting conventional fiat money into a digital format, something that has expanded trade and commerce worldwide since globalisation. Two, creating a new official digital currency such as cryptocurrency. RBI and Indian government are working towards a new act to regulate both and create an official digital currency of India. The move is meant to magnify the advantages of digital currencies and minimise the threats.
Digital currencies will enable peer to peer digital transactions. They are faster, convenient and trackable. It is expected to reduce tax evasion, improve experience of dealing in currencies for people and expand financial inclusion further.
Forex barriers are expected to reduce with onset of digital currencies. The result would be enhanced Global trade and thus more integration of economies around the world. Corruption and black money are an outcome of cash transactions. Digital currencies and digitisation of official currency leads to digital footprint of every transaction, making it impossible to indulge in corruption and generate black money.
However, digital currencies are creating their own unique threats-
Digital currencies have created their own black market where terrorist and criminal activities are carried out. It makes it easier for non-state actors to transact through digital currencies as they are not controlled or regulated by any country. Just like there are no rules governing the internet, there are no rules governing the digital currencies. This makes them vulnerable to a lot of exploitation and fraud. There is no clarity regarding the responsibility for Anti money laundering compliance, supervision and enforcement for transactions involving digital currencies that are segmented across several countries.
Despite all the threats, digital currencies are the future for the world. However, it is important for state actors to regulate them effectively so that the world can move on in peace and security. The threats posed by digital currencies threaten stability of the entire world