Digital currencies and their influence on foreign investments have become increasingly relevant topics in IELTS Writing Task 2. Based on recent exam patterns and topic frequencies, questions related to digital currencies have appeared in approximately 15% of economic-themed essays. Similar to impact of international stock market fluctuations, this topic tests candidates’ ability to analyze modern financial trends.
Digital currencies reshaping global investment landscape and cross-border transactions
Analysis of Question Topic
Some people believe that digital currencies like Bitcoin will eventually replace traditional money in international investments. To what extent do you agree or disagree with this statement?
This question requires candidates to:
- Take a clear position on digital currencies’ future role
- Evaluate impacts on international investments
- Support arguments with relevant examples
- Consider both advantages and limitations
Sample Essay 1 (Band 8.5)
The increasing prominence of cryptocurrencies has sparked debate about their potential to revolutionize international investments. While I partially agree that digital currencies will play a significant role, I believe they will complement rather than completely replace traditional currency in global investment markets.
Digital currencies offer several compelling advantages for international investments. Their decentralized nature enables swift cross-border transactions without intermediary banks, significantly reducing transfer times and fees. Additionally, blockchain technology provides unprecedented transparency and security, making it attractive for investors seeking to minimize fraud risks. For instance, major investment firms like Fidelity now offer cryptocurrency investment options to institutional clients, demonstrating growing mainstream acceptance.
However, several factors suggest that traditional currency will retain its importance. Central bank oversight and government regulations provide stability and investor protection that cryptocurrency markets currently lack. Moreover, the extreme volatility of digital currencies makes them risky for conservative investment strategies. The 2022 cryptocurrency market crash, which wiped out over $2 trillion in value, illustrates these inherent risks.
Looking ahead, a hybrid system appears most likely. Digital currencies will likely capture a significant portion of international investments, particularly in tech-focused sectors and emerging markets. However, traditional currency will continue dominating conservative investment vehicles and government-backed securities. This complementary relationship would leverage the strengths of both systems while mitigating their respective weaknesses.
In conclusion, while digital currencies will transform aspects of international investment, they are more likely to integrate with rather than replace traditional currency entirely. This evolution will create a more diverse and flexible global investment landscape.
Sample Essay 2 (Band 6.5)
In recent years, digital currencies have become very popular in investment markets. I think they will partly replace traditional money but not completely take over international investments.
Digital currencies have some good points for investing. They are fast to transfer between countries and don’t need banks to help. Also, they use special technology called blockchain that makes them safe from fraud. Many big companies now accept Bitcoin for payment, showing that digital money is becoming normal.
But there are also problems with digital currencies. They can change value very quickly, making them dangerous for investors. Also, governments don’t control them properly yet, so people might lose their money. For example, when FTX exchange crashed in 2022, many investors lost everything.
I think in the future, people will use both digital and normal money for investments. Some investors will choose digital currencies for quick profits, while others will stay with traditional money for safety. This mix is better because it gives people more choices.
To conclude, digital currencies will become more important but won’t completely replace traditional money in international investments. Both types of money will be useful for different kinds of investors.
Key Vocabulary
- cryptocurrency (n) /ˌkrɪptəʊˈkʌrənsi/ – digital currency secured by cryptography
- decentralized (adj) /diːˈsɛntrəlaɪzd/ – not controlled by one central authority
- blockchain (n) /ˈblɒktʃeɪn/ – digital ledger technology
- volatility (n) /ˌvɒləˈtɪləti/ – tendency to change rapidly
- intermediary (n) /ˌɪntəˈmiːdiəri/ – person or organization acting as a link
- oversight (n) /ˈəʊvəsaɪt/ – supervision and monitoring
- complementary (adj) /ˌkɒmplɪˈmɛntri/ – combining in a way that enhances
Future Practice Topics
- The role of digital currencies in reducing global poverty
- Impact of cryptocurrency regulations on international trade
- Digital currencies and their effect on traditional banking systems
We encourage readers to practice writing their own essays on this topic and share them in the comments section for feedback and discussion.
