DAW 19th November 2025, Mains Answer Writting 2026

DAW 19th November 2025, Mains Answer Writting 2026

Question

What is Cryptocurrency? How does it affect global society? Has it been affecting Indian society also? (250 Words, 15 Marks).

Model Answer

Approach: Introduction:

  • Define cryptocurrency in 1–2 lines.

  • Mention global relevance and India’s growing exposure.

Body:

  • Global Impact

  • Economic integration & fast transactions

  • Threat to monetary sovereignty

  • New asset class with high volatility

  • Illicit activities & security risks

  • Digital divide and inequality

  • Impact on Indian Society

  • Rise of crypto ecosystem

  • Changing youth investment patterns

  • Cheaper remittances

  • Cyber risks and ransomware

  • Widening digital inequality

Conclusion:

  • Emphasise need for a balanced regulatory framework.

  • Highlight role of global cooperation & responsible innovation.

Introduction:

  • Cryptocurrency is a decentralised digital currency that uses blockchain technology and cryptography to secure transactions and verify ownership without central authority control. With a global market crossing $2 trillion, it has become a major financial innovation influencing global finance, investment behaviour, and regulatory debates. Its growing adoption and policy discussions show that India too is experiencing its economic and social impact.

Body:

  • RBI describes cryptocurrency as a virtual digital asset (VDA) that is not issued by the central bank and has no underlying intrinsic value but can be traded or exchanged.

  • According to the Ministry of Finance (2022), crypto is classified as a Virtual Digital Asset (VDA) under the Income Tax Act for taxation purposes.

Potential Impacts of Cryptocurrency on Global Society: Positive impacts:

  • Economic Integration & Faster Transactions:

  • Cryptocurrencies reduce dependence on intermediaries and enable fast, low-cost cross-border transfers, deepening globalisation.

  • For instance, Ukraine received millions in crypto donations during the 2022 conflict due to its speed and borderless nature.

  • New Asset Class but High Volatility:

  • Crypto has emerged as a popular investment avenue, sometimes compared to gold due to limited supply.

  • However, extreme volatility has “made both kings and beggars,” demonstrating its speculative nature and impact on household wealth globally.

  • Technological Advancement:

  • Pushes adoption of blockchain across supply chains, health, and finance

Negative impacts:

  • Threat to Monetary Sovereignty & Policy Control:

  • Widespread crypto adoption may dilute the sovereign power of central banks to issue currency and manage monetary policy, weakening the state’s economic control.

  • This raises concerns that unregulated digital currencies can undermine macroeconomic stability.

  • Facilitation of Illicit Activities:

  • The anonymity of blockchain wallets makes crypto attractive for terrorist financing, drug cartels, and money-laundering networks.

  • Global agencies, including the FATF, have raised concerns about rising crypto-enabled financial crimes.

  • Social Inequality & Digital Divide:

  • Crypto ownership is highly concentrated- 0.01% of Bitcoin holders control around 27% of supply- widening global wealth inequality.

  • Further, the digitally illiterate and technologically excluded populations risk being left behind, intensifying social disparities.

Effect of Cryptocurrency on Indian Society:

  • Emergence of a New Crypto Ecosystem:

  • Crypto’s rise has led to the growth of a vibrant digital economy- new exchanges, start-ups, and specialised roles.

  • Platforms like WazirX, CoinDCX, and CoinSwitch Kuber have drawn millions of users and generated employment in blockchain development, cybersecurity, compliance, and fintech services.

  • Shift in Investment Behaviour, Especially Among Youth:

  • High returns in earlier years have made crypto a speculative fad among young Indians, contributing to the rise of the “enterprising teen investor.”

  • Over 1.5 crore Indians reportedly hold crypto assets, often without adequate understanding of volatility- reflecting a shift from traditional assets like gold and fixed deposits.

  • Lower Cost of Remittances for Indian Diaspora:

  • Being the world’s largest recipient of remittances, India stands to benefit from crypto-based transfers.

  • Crypto enables faster, cheaper cross-border payments, reducing losses from conversion and processing fees.

  • NRIs in the Gulf and US increasingly use digital currencies for small-value remittances

  • Rising Cyber Risks and Digital Extortion:

  • India has witnessed ransomware attacks such as WannaCry where payments were demanded in Bitcoin, encouraging a culture of digital extortion.

  • With increasing adoption, India faces heightened risks of phishing scams, fake crypto-investment schemes, and Ponzi tokens, making cybersecurity a national concern.

  • Widening Digital Inequality:

  • Crypto adoption is concentrated among the digitally literate urban population.

  • Those lacking smartphones, financial awareness, or secure internet access remain excluded, potentially deepening India’s existing digital and socio-economic divide, particularly in rural and marginalised communities.

Conclusion:

  • A balanced and forward-looking regulatory framework is essential to harness the revolutionary potential of blockchain and cryptocurrency while mitigating risks of volatility, security breaches, and misuse. As crypto becomes integral to the Fourth Industrial Revolution, India must actively engage through clear regulations, global cooperation, and responsible innovation to ensure economic security while enabling technological progress.