The IELTS Reading section is designed to assess a wide range of reading skills, including reading for gist, reading for main ideas, reading for detail, skimming, understanding logical argument, and recognizing writers’ opinions, attitudes, and purpose. One interesting and frequently debated topic in recent years is the impact of cryptocurrency on global finance. Given its increasing relevance and the complexity of financial systems, this topic is quite likely to appear in your IELTS Reading exam. This article will provide you with a detailed reading practice that replicates the format of an actual IELTS Reading test, centered around the topic: “What are the implications of cryptocurrency on global finance?”
Reading Passage
The Role of Cryptocurrency in Global Finance
In recent years, cryptocurrencies have emerged as a new asset class, attracting attention from investors, technologists, and regulators around the world. This digital form of currency, exemplified by Bitcoin, Ethereum, and others, operates on decentralized networks using blockchain technology. Unlike traditional fiat currencies, which are issued and regulated by central banks, cryptocurrencies are not bound by any single country’s monetary policies. This inherent decentralization has several implications for global finance.
First and foremost, cryptocurrencies offer a new way to transfer value across borders. Traditional international money transfers are often slow and expensive, involving multiple intermediaries and compliance with various regulatory requirements. Cryptocurrencies, on the other hand, can be transferred quickly and with minimal fees, making them an attractive option for remittances and international trade.
However, the anonymity and ease of use associated with cryptocurrencies also pose significant challenges. One major concern is their potential use in illegal activities, such as money laundering, drug trafficking, and terrorism financing. Regulators worldwide are grappling with how to monitor and control these activities without stifling innovation.
Moreover, the volatility of cryptocurrency prices can have substantial economic impacts. Bitcoin, for example, has experienced dramatic price swings, which can cause significant financial losses for investors and destabilize markets. This volatility makes it difficult for businesses to accept cryptocurrencies as a stable means of payment.
Central Bank Digital Currencies (CBDCs)
In response to the growing popularity of cryptocurrencies, some central banks are considering the issuance of their own digital currencies, known as Central Bank Digital Currencies (CBDCs). Unlike decentralized cryptocurrencies, CBDCs would be issued and regulated by central banks, providing a digital form of fiat currency that retains the stability and trust of traditional money. China’s digital yuan and Sweden’s e-krona are examples of CBDC initiatives currently being explored.
CBDCs could offer several benefits, including improving the efficiency of payment systems, reducing the costs associated with cash handling, and increasing financial inclusion. However, they also raise questions about privacy and the role of central banks in the economy. The introduction of CBDCs could fundamentally alter the financial landscape, potentially reducing the need for commercial banks and reshaping the global financial system.
Future Prospects
The future of cryptocurrencies and their impact on global finance remains uncertain. While they offer the potential for greater financial inclusion and innovation, they also pose risks that need to be carefully managed. As regulators and policymakers continue to navigate this evolving landscape, the balance between fostering innovation and ensuring financial stability will be crucial.
Reading Questions
True/False/Not Given
- Bitcoin is an example of a cryptocurrency.
- Cryptocurrencies are slower and more expensive for international transfers compared to traditional methods.
- One of the challenges of cryptocurrencies is their use in illegal activities.
- Central Bank Digital Currencies (CBDCs) are issued by decentralized networks.
- CBDCs could potentially reduce the need for commercial banks.
Multiple Choice
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What is one benefit of cryptocurrencies in international trade?
a) Increased regulatory requirements
b) High transaction fees
c) Quick and inexpensive transfers
d) None of the above -
What potential negative impact does the volatility of cryptocurrency prices have?
a) Economic stability
b) Legal frameworks
c) Central bank policies
d) Compliance costs
Matching Information
Match the following benefits to their corresponding financial system:
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Improving efficiency of payment systems
-
Reducing costs associated with cash handling
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Increasing financial inclusion
A) Cryptocurrencies
B) Central Bank Digital Currencies (CBDCs)
C) Both
Answer Keys
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True – Bitcoin is indeed an example of a cryptocurrency.
-
False – Cryptocurrencies can be transferred quickly and with minimal fees, contrary to traditional methods.
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True – Cryptocurrencies’ anonymity and ease of use pose challenges, including their potential use in illegal activities.
-
False – Unlike decentralized cryptocurrencies, CBDCs are issued and regulated by central banks.
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True – CBDCs could potentially reduce the need for commercial banks.
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c) Quick and inexpensive transfers – This is a major benefit of cryptocurrencies in international trade.
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a) Economic stability – The volatility of cryptocurrency prices can have substantial economic impacts.
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B) Central Bank Digital Currencies (CBDCs)
-
B) Central Bank Digital Currencies (CBDCs)
-
B) Central Bank Digital Currencies (CBDCs)
Common Mistakes
- Misinterpreting the distinction between cryptocurrencies and CBDCs.
- Overlooking the volatility aspect of cryptocurrencies and its implications.
- Confusing the regulatory challenges of decentralized cryptocurrencies with those of centralized digital currencies.
Vocabulary
- Volatility (noun) /vɒl.əˈtɪl.ɪ.ti/: Tính dễ biến động
- Fiat currency (noun) /ˈfaɪæt ˈkʌrənsi/: Tiền pháp định
- Blockchain (noun) /ˈblɒk.tʃeɪn/: Chuỗi khối
- Remittances (noun) /rɪˈmɪt.ənsɪz/: Kiều hối
- Financial inclusion (noun) /faɪˈnænʃəl ɪnˈkluːʒən/: Sự bao trùm tài chính
Grammar Point
Present Perfect Continuous
This tense is used to express actions that began in the past and are still continuing or have recently stopped, often emphasizing the duration of the activity.
Structure:
- Affirmative: Subject + have/has been + -ing form
- Negative: Subject + have/has not been + -ing form
- Question: Have/Has + subject + been + -ing form?
Example:
- Affirmative: I have been studying cryptocurrencies for three years.
- Negative: She has not been following the latest CBDC developments.
- Question: Have they been working on blockchain applications?
Advice for High Reading Scores
- Skim and Scan: Practice these techniques to quickly locate specific information.
- Time Management: Allocate your time wisely and don’t spend too long on any single question.
- Detailed Reading: For questions requiring comprehensive understanding, read the paragraphs carefully.
- Vocabulary: Build a strong vocabulary, focusing on academic and topic-specific words.
- Practice: Regularly practice with model tests and previous years’ papers.
By following these guidelines and regularly practicing, you will improve your reading skills and increase your chances of achieving a high score in the IELTS Reading test.