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APSC Answer Writing (Daily) based on Assam Tribune – 04/03/2025

For APSC CCE and other Assam Competitive examinations aspirants, practicing Daily Answer Writing is vital. This blog covers the most important Main question and its model Answer from the Assam Tribune today (04-03-2025).

Mains Question

The rise of cryptocurrency in India presents both opportunities and regulatory challenges. Analyze the risks associated with digital currencies and suggest a balanced approach for India’s crypto regulation. (GS Paper 3: Economy, Cybersecurity, Financial Regulation)

Model Answer

Introduction

Cryptocurrencies like Bitcoin, Ethereum, and Ripple have emerged as a disruptive force in the global financial system, offering decentralized transactions, financial inclusion, and investment opportunities. However, their unregulated nature, volatility, and misuse in illicit activities pose significant challenges for policymakers. India, being a major player in the digital economy, must strike a balance between innovation and financial security while formulating its cryptocurrency regulations.

Opportunities and Benefits of Cryptocurrency in India

1. Financial Inclusion & Digital Economy Growth

Cryptocurrencies provide banking access to unbanked populations, allowing peer-to-peer (P2P) transactions without intermediaries.
Can integrate with India’s Digital India and fintech ecosystem, enhancing digital payments.

2. Technological & Economic Advancements

Encourages blockchain innovation in supply chain management, healthcare, and governance.
India can become a global blockchain hub, attracting investments in Web3 technologies.

3. Potential for Cross-Border Transactions

Reduces transaction fees for remittances, benefiting India’s diaspora sending money home.
Eliminates the need for traditional banking intermediaries, enabling faster international payments.

Risks and Challenges of Cryptocurrency Adoption

1. Financial & Economic Risks

High volatility: Cryptocurrencies experience price fluctuations of up to 50% in days, making them risky for retail investors.
Potential for financial instability: Large-scale crypto adoption can disrupt the Indian rupee’s stability.

2. Money Laundering & Terror Financing Risks

Anonymity in crypto transactions makes them vulnerable to illicit activities, including terror funding and drug trafficking.
Hawala networks can exploit cryptocurrencies for untraceable cross-border transactions.

3. Regulatory & Legal Challenges

Lack of a clear regulatory framework: The absence of laws creates uncertainty for investors and businesses.
Enforcement difficulties: Crypto operates on decentralized networks, making it difficult for regulators to track illegal transactions.

4. Cybersecurity Threats & Fraud

Crypto exchanges are vulnerable to hacking, phishing attacks, and Ponzi schemes.
Cases like the ₹1,200 crore crypto scam in India highlight the need for stronger consumer protection laws.

Current Government Initiatives on Crypto Regulation

1. Union Budget 2022-23: Taxation Measures

30% tax on crypto gains and 1% TDS on transactions to track trading activity.
Recognized crypto as a “Virtual Digital Asset” (VDA) under Income Tax laws.

2. RBI’s Stance on Cryptocurrencies

The Reserve Bank of India (RBI) favors a complete ban due to financial stability risks.
Introduced Central Bank Digital Currency (CBDC – Digital Rupee) as a regulated alternative to crypto.

3. International Cooperation & FATF Guidelines

India is working with the Financial Action Task Force (FATF) to strengthen Anti-Money Laundering (AML) measures for crypto.
G20 framework discussions focus on global crypto regulations to prevent financial crimes.

Way Forward: A Balanced Approach for India’s Crypto Regulation

1. Implementing a Comprehensive Crypto Law

Establish a Crypto Regulatory Authority under SEBI or RBI.
Introduce licensing requirements for exchanges and mandate KYC norms for users.

2. Strengthening Investor Protection & Cybersecurity

Set up dedicated grievance redressal mechanisms for crypto fraud victims.
Mandate cybersecurity audits for exchanges to prevent hacking incidents.

3. Promoting Blockchain Innovation & Responsible Crypto Use

Encourage Web3 startups and blockchain-based government services.
Promote “sandbox regulations”, allowing limited crypto experiments before full-scale adoption.

4. Global Collaboration & Standardization

Align India’s policies with FATF, IMF, and G20 guidelines for crypto regulations.
Work with Interpol and financial watchdogs to monitor international crypto transactions.

Conclusion Cryptocurrencies present a transformative opportunity for India’s digital economy but require a well-regulated framework to mitigate risks. Instead of an outright ban, India must adopt a balanced approach—combining regulation, investor protection, and technological advancement. A transparent and globally aligned policy will ensure that India remains competitive in the emerging digital financial ecosystem while safeguarding economic stability and security.

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