Aspirant Academy

Science and Technology

Digital Currency and Financial Technology

Computer Science: Networking, Telecom, AI/ML, Big Data, Cloud/Edge Computing, IoT, Blockchain, Digital Currency, VR/AR, OTT, Social Media

Paper II · Unit 2 Section 7 of 12 0 PYQs 31 min
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Digital Currency and Financial Technology

6.1 Cryptocurrency

Cryptocurrency is a digital/virtual currency secured by cryptography, operating on a decentralised blockchain network — no central authority (no government, no bank controls it).

Key cryptocurrencies:

Cryptocurrency Launch Blockchain Key Feature
Bitcoin (BTC) 2009 Bitcoin blockchain First crypto; 21 million max supply; PoW mining
Ethereum (ETH) 2015 Ethereum blockchain Smart contracts; DeFi; ERC-20 tokens
Solana (SOL) 2020 Solana Fast (65,000 TPS); low fees
Ripple (XRP) 2012 XRP Ledger Cross-border payments; banks use it

Market context (2024): Total crypto market cap ~$2 trillion at peak (November 2021: $3 trillion). Bitcoin: ~$60,000–70,000 (2024). Highly volatile.

Regulation in India: RBI has repeatedly expressed concerns about cryptocurrencies' risks. Virtual Digital Assets (VDA) Tax introduced in Budget 2022: 30% tax on profits + 1% TDS on transactions. No outright ban but no legal tender status.

6.2 Central Bank Digital Currency (CBDC) — The Digital Rupee

CBDC is a digital form of a country's fiat currency, issued and regulated by the central bank — legal tender.

Digital Rupee (e₹) — India's CBDC:

  • Wholesale e₹ (e₹-W): Launched November 1, 2022 — for interbank settlement of government securities transactions; participating banks: SBI, Bank of Baroda, Union Bank, HDFC Bank, Kotak Mahindra Bank
  • Retail e₹ (e₹-R): Launched December 1, 2022 — for everyday retail transactions by citizens; available via digital wallets on mobile phones
  • Difference from UPI: UPI is a payment system linking bank accounts (money still in bank); e₹ is actual digital currency (like a digital banknote in your wallet)
  • Difference from cryptocurrency: e₹ is centralised, issued by RBI, legal tender; crypto is decentralised, no issuer, not legal tender
Feature Cryptocurrency UPI Digital Rupee (e₹)
Issuer None (decentralised) NPCI (facilitator) RBI (central bank)
Legal tender No No (payment gateway) Yes
Volatility Highly volatile N/A (₹ value) Stable (pegged to ₹)
Blockchain Yes (public) No Private/Permissioned blockchain
Anonymity Pseudonymous Low (KYC-linked) Medium (designed with privacy)