CRYPTOCURRENCY (Syllabus: GS Paper 3 – Economy)

Context: Recently, the Union Finance & Corporate Affairs Minister of India said cryptocurrencies (crypto), drug mafias, tax havens and cyber threats among others posed major threats to the global financial ecosystem and a global collaborated effort was needed to counter such challenges.

Cryptocurrency

• About: Cryptocurrency refers to a digital or virtual currency that employs cryptography for security measures.
• Decentralization: One of the defining features of cryptocurrencies is their decentralized nature, which means they are not under the control of any government or institution.
• Examples: Prominent examples of cryptocurrencies include Bitcoin, Ethereum, and Litecoin.
• How Does Cryptocurrency Work: It operates through a decentralized digital ledger called the blockchain, where transactions are publicly recorded and verified by a network of computers worldwide. 
• This system relies on cryptographic techniques to secure transactions and prevent manipulation, enabling peer-to-peer, trustless, and borderless digital transactions.

Tax Heaven

• Any nation or territory that imposes the least amount of taxes possible on foreign citizens and corporations is referred to as an "Offshore Financial Center" or "Tax Haven."