Editorials/Opinions Analysis For UPSC 04 July 2023

Editorials/Opinions Analysis For UPSC 04 July 2023

Contents

1. Preserving Ocean Biodiversity and High Seas
2. Latin America’s Crypto Market and CBDCs: IMF’s View

Preserving Ocean Biodiversity and High Seas

Context

By 2030, the UN High Seas Treaty seeks to protect 30% of international waters. Oceans make up 71% of the surface of the Earth, serving as a crucial carbon sink and preventing climate change. In addition, three billion people rely on marine ecosystems for their economic and nutritional security. Less than 7% of the ocean, notably the high seas, which are mostly ungoverned, are protected.

Relevance: 

GS-3: Economic Development, Biodiversity, and Environment

Mains Question

Two-thirds of the world’s ocean is made up of high seas, which are mainly ungoverned and unprotected. Why is it important to create marine protected zones (MPAs) in the high seas? What role do MPAs play in preserving marine biodiversity? (250 Words)

Features of the High Seas Treaty and the Marine Biodiversity of Areas Outside National Jurisdiction (BBNJ) Treaty

1. Offering financial support to assist developing nations in treaty implementation.
2. The establishment of a clearinghouse mechanism.
3. The draught further states that no State may assert its ownership of marine genetic resources in regions outside of its national borders.
4. It states that access to marine resources held by indigenous people and local communities in places outside of national authority is only permitted with their “free, prior, and informed consent or approval and involvement”.
5. Prior to the use of marine resources, environmental impact analyses must be performed.
6. It is in the best interests of all States to use and engage in activities involving marine genetic resources in high seas. It ought to be for the good of mankind.
7. Form a committee to share access and benefits and develop rules.
8. Marine protected areas (MPAs) should be clearly defined and preserved.
9. Equitable distribution of benefits resulting from the sustainable exploitation of marine genetic resources.
10. EIA for all significant oceanic operations.
11. Technology transfer and capacity building.

Vast Ocean

High seas are ocean regions that are outside the purview of any one nation. They provide vital habitat and migratory routes for whales, sharks, turtles, and seabirds, and they are home to a diverse range of iconic species and rich marine biodiversity. The high seas are home to extraordinary ecosystems like deep-water coral gardens and seamounts.

The 3030 Target

For healthy marine ecosystems and global biodiversity, at least 30% of the ocean must be preserved by 2030. Less than 1% of the ocean is protected by marine protected areas (MPAs), which are already in place. In order to preserve marine life, scientists emphasise the necessity for increased protection.

Climate Change Impact

Marine protection via MPAs promotes biodiversity while also being essential for regulating the climate. The oceans regulate temperatures and have an impact on the world’s weather patterns by absorbing CO2 and extra heat. By safeguarding blue carbon habitats, we can ensure that the oceans continue to play their vital role in the climate.

Declining Whale Population

Whales play a crucial role in phytoplankton activity and carbon sequestration, both of which are necessary for oxygen production and CO2 capture. Industrial whaling, on the other hand, has significantly decreased whale populations, which has an impact on phytoplankton activity and the ocean’s carbon cycle.

Biodiversity Preservation and Restoration

Establishing MPAs shields fragile species and ecosystems from overfishing and human activity, preserving and restoring biodiversity. While reducing greenhouse gas emissions lessens the effects of climate change on the oceans, reducing plastic trash protects marine creatures from harm. Bycatch is reduced when sustainable fishing methods are promoted.

Conclusion

A major step forward in ocean preservation, the Biodiversity Beyond National Jurisdiction accord will help biodiversity and the environment. Governments must remain committed if it is to be implemented successfully. In the coming decades, maintaining the health of our planet and its ecosystems will depend on prioritising high seas preservation.

Latin America’s Crypto Market and CBDCs: IMF’s View

Context–

The International Monetary Fund (IMF) has revised its stance on cryptocurrency use in Latin America and its viewpoint on blockchain-based central bank digital currencies (CBDCs). The world over, this change in posture has drawn criticism.

Relevance 

GS Paper 3: Digital economy

Mains Question

Talk about how the IMF’s position on cryptocurrencies and central bank digital currencies (CBDCs) in Latin America is changing. Examine the causes of this shift in viewpoint and the effects it will have on the monetary stability and economic growth of the area. (150 Words)

The IMF’s Initial Position on Cryptocurrencies:

• The IMF had previously taken a cautious stance towards cryptocurrencies, voicing worries about potential fiscal risks and challenges with consumer protection.It argued against El Salvador’s decision to accept Bitcoin as legal cash and urged the government to withdraw this decision. Concerns regarding El Salvador’s proposed Bitcoin-backed bonds were also voiced by the IMF.
• Latin American countries, including Argentina, Chile, and Colombia, have experienced currency devaluation against the U.S. dollar, which has prompted residents to look into alternative means of preserving the value of their savings, such as converting assets to stablecoins or cryptocurrencies. Latin American countries are also demonstrating an increasing interest in CBDCs, which exposes more people to blockchain-based infrastructure.

El Salvador’s acceptance of Bitcoin:

• El Salvador made history by becoming the first nation to accept it as legal tender, but there were difficulties along the way, including problems with the Chivo digital wallet that made money vanish and allowed for identity theft.
• Despite ambitious intentions to use Bitcoin, such as creating a “Bitcoin City” and issuing Bitcoin bonds, the government’s attention was diverted by market crashes and other issues.

IMF’s Response to El Salvador’s Adoption of Bitcoin

• El Salvador adopted Bitcoin, while the IMF expressed its disapproval of the decision, expressing worries about consumer protection and budgetary risks. Additionally, it issued a warning that the use of Bitcoin might affect the nation’s loan request.
• Many people were shocked by the IMF’s recent blog article on cryptocurrency and CBDCs in Latin America and the Caribbean. It placed a strong emphasis on the necessity of enhancing financial infrastructure, assisting people who adopted cryptocurrencies, and regulating crypto assets to ensure transparency.

Understanding Cryptocurrencies and CBDCs:

• Cryptocurrencies, such as Bitcoin, are unregulated digital currencies that are privately operated and subject to high price volatility.CBDCs, on the other hand, are fiat-tied, blockchain-based digital currencies that are governed by a nation’s central bank and not meant to be used as investment vehicles. Some nations, like China, have actively marketed their CBDC, the digital renminbi (e-RMB), while simultaneously cracking down on unregulated virtual assets.
• The changing IMF position on cryptocurrencies in Latin America is a reflection of the need for more user support, regulation, and financial infrastructure.
• Despite difficulties, El Salvador’s decision to accept Bitcoin as legal cash has influenced the current debate about cryptocurrencies and CBDCs.
• The balance between innovation, financial stability, and regulatory measures becomes more crucial as Latin American nations investigate blockchain-based digital currencies.

Understanding India and cryptocurrencies

As digital assets that serve as a medium of trade, cryptocurrencies have attracted a lot of attention. In contrast to conventional forms of money, cryptocurrencies use robust cryptography to safeguard transactions, regulate the production of new coins, and confirm ownership transfers. They provide an alternative to centralised digital money systems because they function on decentralised control.

Availability of cryptocurrencies:

• Ease of Funds Transfer: Cryptocurrencies make it possible for parties to transfer money directly to one another without the use of middlemen like banks or credit/debit cards. This improves convenience and streamlines transactions.
• Cost-effectiveness: When compared to conventional online transactions, cryptocurrencies offer a less expensive option with lower processing costs, saving users money.
• Security and Anonymity: By using cryptography to safeguard transaction records, cryptocurrencies offer anonymous and safe payment methods. Additionally, they provide a degree of anonymity, guaranteeing users’ privacy.

Cryptocurrencies’ importance

• Corruption Check: By tracing the movement of money and transactions, cryptocurrencies can help fight corruption thanks to their peer-to-peer network and transparent transaction records.
• Time and Cost Savings: Since transactions with cryptocurrencies are totally online, they save both senders and recipients time and money thanks to low transaction costs and nearly instantaneous transfers.
• Potential Savings: By lowering reliance on middlemen like banks and payment gateways, integrating blockchain technology, which powers cryptocurrencies, into several sectors might result in significant savings.

Cryptographic currency worries

• Absence of governmental Guarantee: Cryptocurrencies are not regarded as legal cash and lack a governmental guarantee. This puts customers at risk and casts doubt on their acceptance as a widely used form of money.
• Market Volatility: Due to the speculative nature of cryptocurrencies, there are frequent and severe price movements. Investors are at danger due to this volatility, and there are stability issues with the financial system.
• Security risks: Users risk permanently losing access to their cryptocurrency holdings if they misplace their private key. Additionally, third-party service providers who store private keys are at risk of malware and cyber attacks.
• Money Laundering and Criminal Activity: Because cryptocurrencies are more anonymous than conventional payment systems, they may be subject to money laundering and other illegal activity. As a result, precautions must be taken to maintain regulatory compliance.
• Regulatory Difficulties: Because cryptocurrencies function outside of central banks, financial regulation is difficult. Without adequate regulation, their broad acceptance could compromise the stability of national economies.
• Environmental Impact: A nation’s energy security and carbon footprint may suffer as a result of the energy-intensive process of validating cryptocurrency transactions, notably in the case of bitcoin mining.
• Indian banks were originally prohibited from dealing with cryptocurrencies by a Reserve Bank of India (RBI) circular, however the Supreme Court of India lifted this prohibition in 2020.
• A bill to outlaw private cryptocurrencies and institute a national digital currency has now been put forth by the government. However, there are problems and difficulties with this strategy.

Objections to the Prohibition of Decentralised Cryptocurrencies

• Blanket Ban: The proposed law ignores the distinction between private and decentralised currencies and attempts to outlaw all private cryptocurrencies.
• Brain Drain and progress Stagnation: An embargo might cause enterprises and talent to leave India, hindering blockchain progress and depriving the nation of game-changing technology.
• Inconsistent Policies: Banning cryptocurrencies runs counter to the Draught National Strategy on Blockchain, which highlights openness and efficiency and acknowledges the advantages of blockchain technology.

Steps to Take:

• regulated Approach: To address concerns about investor protection, market volatility, and transparency, the government should create a regulated framework rather than a total ban.
• Clear Definitions and Strict Know Your Customer (KYC) Norms: Defining cryptocurrencies in accordance with current financial legislation and enforcing strict KYC standards can help control their trading and reduce risks.
• Transparency and Consumer Protection: Setting up systems for information access, record-keeping, inspections, independent audits, and dispute resolution can improve transparency and safeguard customers.
• Supporting entrepreneurship: Blockchain technology and cryptocurrencies can foster entrepreneurship and the creation of jobs in a variety of industries, establishing India as a player in the Fourth Industrial Revolution.

Conclusion

The ability to leverage the revolutionary potential of cryptocurrencies and blockchain technology exists in India. A thoughtful regulatory strategy that acknowledges the advantages and handles issues is required. India can actively participate in the global digital revolution and open up economic growth and job prospects by embracing innovation and creating a welcoming atmosphere.