What is Cryptocurrency? How does it affect global society? Has it been affecting Indian society also? (UPSC 2021)

Cryptocurrency is a digital asset secured by cryptography and usually based on blockchain or other distributed ledgers. It is decentralised, so it is not issued or controlled by a central bank, and users can transfer it directly.

Global impact

• Financial innovation: Enables fast, borderless and often low-cost transfers, including remittances.
• New asset class: Bitcoin, Ethereum and similar tokens are treated by many as speculative investments or stores of value.
• Inclusion: Can provide an alternative channel for the unbanked and underbanked.
• Risks: High volatility, fraud, money laundering, terrorist financing, ransomware and tax evasion.
• Policy and environment: Forces states to balance innovation with consumer protection, taxation and AML rules, while energy-intensive mining raises ecological concerns.

Impact on India

• India has a large youth-driven retail crypto market and ranks among the major crypto-using countries.
• Many small investors have suffered losses due to sharp price swings and misleading schemes.
• Regulation has tightened through 30% tax on gains, 1% TDS on transfers, and AML obligations for exchanges.
• No single comprehensive law yet exists, so oversight is spread across agencies; the RBI’s digital rupee reflects support for a sovereign digital payment option.

Thus, cryptocurrency is reshaping payments, investment and regulation globally and in India, while also raising concerns over safety, legality and economic stability.