The transition from traditional banking systems to cryptocurrency has marked a pivotal shift in the financial world, driven by the impact of demonetization trends and the surge in digital transactions. This evolution, explored in depth by researchers Aashi Rawal, Santosh Gopalkrishnan, Dhanashree Tharkude, and Pallavi Deshpande, highlights the challenges and opportunities that cryptocurrencies present to global financial frameworks.
A comprehensive study presented at the 2024 International Seminar on Application for Technology of Information and Communication (iSemantic) examines how demonetization and the rise of digital currencies are reshaping the financial landscape. The researchers analyzed trust in cryptocurrencies, particularly Bitcoin, in the absence of regulatory oversight, using data from 183 participants across varied regions. Their findings underscore the growing reliance on digital currencies as viable alternatives to traditional monetary systems, although the study also notes limitations in available data for empirical validation.
The study highlights how demonetization policies, aimed at curbing illicit financial activities and boosting digital transactions, have inadvertently elevated cryptocurrencies. As conventional cash faces scrutiny, individuals and businesses increasingly turn to decentralized digital assets, viewing them as more secure and accessible. However, this trend raises critical questions about regulatory oversight, financial stability, and transaction security in the evolving digital economy.
Cryptocurrencies such as Bitcoin have emerged as prominent players in the global financial system, offering transparency and decentralization while bypassing traditional banking structures. The research explores whether these digital assets can sustain their growth and secure trust without regulatory frameworks. Participants expressed mixed sentiments: while many viewed cryptocurrencies as the future of transactions, concerns about safety, volatility, and legal uncertainties persist.
Data collected from the survey reveals varying degrees of acceptance and skepticism. Urban participants demonstrated a higher inclination toward adopting digital currencies, attributing their trust to the ease of transactions and minimal dependency on central authorities. Conversely, participants from rural and semi-urban regions cited apprehensions regarding technical accessibility and the potential misuse of cryptocurrencies. These disparities underscore the need for financial literacy and infrastructure development to bridge the gap in understanding and trust.
The researchers delved into the operational dynamics of cryptocurrencies during demonetization, identifying key factors driving their adoption. Enhanced security features, rapid transaction capabilities, and the absence of physical handling are among the significant advantages that appeal to users. Additionally, the decentralized nature of cryptocurrencies ensures they remain immune to policy-induced disruptions, making them attractive during economic upheavals.
However, the study also brings to light the potential risks of unregulated cryptocurrency usage. Without oversight, issues such as fraud, tax evasion, and money laundering could proliferate. Participants voiced the need for robust regulatory measures to mitigate these risks while preserving the innovative aspects of digital currencies. Governments worldwide are grappling with the challenge of striking a balance between fostering innovation and maintaining financial integrity.
Bitcoin, the most recognized cryptocurrency, was a focal point of the research. Participants’ perceptions of Bitcoin’s future ranged from optimistic to cautious, reflecting the digital currency’s dual status as a revolutionary financial tool and a speculative asset. Advocates argue that Bitcoin’s limited supply and decentralized model position it as a hedge against inflation and economic instability. Critics, however, point to its price volatility and susceptibility to market manipulation as significant drawbacks.
The study emphasizes the importance of addressing these challenges to unlock the full potential of cryptocurrencies. It calls for collaborative efforts between governments, financial institutions, and technology developers to create frameworks that promote secure and transparent digital transactions. The researchers suggest that regulation should not stifle innovation but rather enhance user trust and market stability.
As the global financial ecosystem continues to evolve, the integration of cryptocurrencies presents both opportunities and obstacles. Their potential to redefine financial systems is immense, but the path forward requires careful consideration of technological advancements, policy implications, and societal readiness.
