Digital currencies have become an increasingly popular topic in recent years, and their potential impact on the banking sector is a subject of great interest. This theme has appeared in several IELTS Writing Task 2 questions, reflecting its relevance in today’s technological landscape. Based on past exam trends and the growing importance of digital finance, it’s likely that questions related to digital currencies and banking will continue to be featured in future IELTS tests.

Let’s examine a sample question that addresses this topic:

Some people believe that digital currencies will completely replace traditional banking systems in the future. To what extent do you agree or disagree with this statement?

Analysis of the Question

This question requires candidates to consider the potential impact of digital currencies on traditional banking systems. Key points to address include:

1. The current state of digital currencies and traditional banking
2. Advantages and disadvantages of digital currencies
3. The likelihood of complete replacement vs. coexistence
4. Potential challenges in transitioning to a fully digital currency system

Now, let’s look at sample essays for different band scores, starting with a high-scoring response.

Sample Essay 1 (Band 8-9)

Digital currencies, such as Bitcoin and Ethereum, have gained significant attention in recent years, leading some to predict that they will eventually supersede traditional banking systems. While I agree that digital currencies will play an increasingly important role in the future of finance, I believe that a complete replacement of traditional banking is unlikely in the foreseeable future.

Undoubtedly, digital currencies offer several advantages over traditional banking systems. They provide faster and cheaper international transactions, greater financial inclusion for the unbanked population, and enhanced privacy and security through blockchain technology. Moreover, digital currencies are not subject to the same inflationary pressures as fiat currencies, which can make them attractive as a store of value. These benefits have led to growing adoption and interest from both individuals and institutions.

However, there are significant obstacles that prevent digital currencies from completely replacing traditional banking systems. Firstly, the volatility of many cryptocurrencies makes them unsuitable for everyday transactions and long-term financial planning. Traditional banks offer stability and government-backed deposit insurance, which are crucial for maintaining public trust in the financial system. Additionally, the regulatory framework for digital currencies is still evolving, and many governments are hesitant to fully embrace them due to concerns about money laundering and tax evasion.

Furthermore, traditional banks provide a wide range of services beyond simple transactions, such as loans, mortgages, and investment products. While some of these services are being developed in the realm of decentralized finance (DeFi), they are not yet as comprehensive or widely accessible as those offered by established banks. The expertise and infrastructure of traditional banking institutions will likely remain valuable for complex financial operations and risk management.

In conclusion, while digital currencies will undoubtedly transform the banking landscape, it is more probable that they will coexist with and complement traditional banking systems rather than replace them entirely. The future of finance is likely to be a hybrid model that leverages the strengths of both digital currencies and traditional banking to provide more efficient, inclusive, and diverse financial services.

(Word count: 310)

Digital currencies vs traditional banking systems

Explanation of Band 8-9 Score

This essay demonstrates the characteristics of a high-scoring response:

1. Task Achievement: The essay fully addresses all parts of the task, presenting a clear position and discussing both the potential for digital currencies to replace traditional banking and the reasons why a complete replacement is unlikely.

2. Coherence and Cohesion: The essay is well-organized with clear progression throughout. Each paragraph focuses on a specific aspect of the argument, and linking words are used effectively to connect ideas.

3. Lexical Resource: The writer uses a wide range of vocabulary accurately and appropriately, including topic-specific terms like “blockchain technology,” “fiat currencies,” and “decentralized finance (DeFi).”

4. Grammatical Range and Accuracy: The essay displays a wide range of grammatical structures used accurately and flexibly, including complex sentences and various tenses.

5. Critical Thinking: The response demonstrates sophisticated critical thinking by considering multiple perspectives and potential long-term implications.

Now, let’s examine a sample essay for a lower band score.

Sample Essay 2 (Band 6-7)

In recent years, digital currencies have become more popular, and some people think they will replace traditional banks in the future. While I believe digital currencies will be important, I don’t think they will completely replace traditional banking systems.

Digital currencies have some advantages over traditional banks. They can be faster and cheaper for sending money internationally, and they can help people who don’t have access to regular banks. Also, digital currencies use new technology like blockchain, which can be more secure than old banking systems.

However, there are problems that make it difficult for digital currencies to replace banks completely. One big issue is that the value of digital currencies can change a lot in a short time, which makes them risky for everyday use. Traditional banks are more stable and have government protection for people’s money. Another problem is that governments are still trying to figure out how to regulate digital currencies, which makes some people unsure about using them.

Also, banks do more than just hold money and make transfers. They give loans, help with investments, and offer other financial services that digital currencies don’t provide yet. These services are important for many people and businesses.

In conclusion, I think digital currencies will become more common and change how we use money, but they won’t completely replace traditional banks. Instead, we might see a mix of digital currencies and traditional banking in the future, with both systems working together to provide better financial services for everyone.

(Word count: 262)

Explanation of Band 6-7 Score

This essay demonstrates the characteristics of a mid-range response:

1. Task Achievement: The essay addresses the main parts of the task and presents a clear position. However, the ideas could be more fully developed and supported with specific examples.

2. Coherence and Cohesion: The essay has a clear structure with introduction, body paragraphs, and conclusion. Basic linking words are used, but the cohesion could be improved with more sophisticated connectors.

3. Lexical Resource: The vocabulary used is adequate for the task, with some attempt at using less common words (e.g., “blockchain”). However, the range is more limited compared to the Band 8-9 essay.

4. Grammatical Range and Accuracy: The essay uses a mix of simple and complex sentences with generally good control. There are some attempts at more complex structures, but the range is not as wide as in the higher band essay.

5. Critical Thinking: The response shows some critical thinking by considering both advantages and disadvantages, but the analysis is not as deep or nuanced as in the Band 8-9 essay.

Challenges in digital currency adoption

Key Vocabulary to Remember

1. Digital currency (n.) – /ˈdɪdʒɪtl ˈkʌrənsi/ – A form of currency that exists only in digital or electronic form.

2. Cryptocurrency (n.) – /ˈkrɪptəʊˌkʌrənsi/ – A digital or virtual currency that uses cryptography for security.

3. Blockchain (n.) – /ˈblɒktʃeɪn/ – A decentralized, distributed ledger technology that records transactions across many computers.

4. Volatility (n.) – /ˌvɒləˈtɪləti/ – The tendency to change quickly and unpredictably, especially for the worse.

5. Decentralized finance (DeFi) (n.) – /diːˈsɛntrəlaɪzd faɪˈnæns/ – Financial services built on blockchain technology that operate without centralized intermediaries.

6. Fiat currency (n.) – /ˈfiːæt ˈkʌrənsi/ – Government-issued currency that is not backed by a physical commodity.

7. Financial inclusion (n.) – /faɪˈnænʃl ɪnˈkluːʒn/ – The availability and equality of opportunities to access financial services.

8. Regulatory framework (n.) – /ˈrɛgjʊləˌtɔːri ˈfreɪmwɜːk/ – The system of regulations and the structures through which they are implemented.

9. Coexistence (n.) – /ˌkəʊɪɡˈzɪstəns/ – The state of existing together at the same time or in the same place.

10. Hybrid model (n.) – /ˈhaɪbrɪd ˈmɒdl/ – A system that combines elements of two different approaches or systems.

In conclusion, the topic of digital currencies and their potential to revolutionize banking is likely to remain relevant in IELTS Writing Task 2. Candidates should be prepared to discuss various aspects of this theme, including the advantages and disadvantages of digital currencies, their impact on traditional banking systems, and the potential for coexistence between the two.

To practice, try writing your own essay on this topic or related ones, such as:

• The impact of digital currencies on global economic inequality
• The role of governments in regulating digital currencies
• The potential benefits and risks of a cashless society

Remember to structure your essay clearly, use a range of vocabulary and grammatical structures, and provide well-developed arguments supported by examples. Feel free to share your practice essays in the comments section for feedback and discussion.