CAPF AC 2022 Q93: Science & Technology – Computer & Information Technology
- (a) digital assets on a blockchain
- (b) operations of 'banking correspondents' in rural areas
- (c) multifactor authentication security requirement in banking transactions
- (d) transactions through 'small finance banks'
Answer: (a) digital assets on a blockchain
Explanation
Non-fungible tokens (NFTs)
How to think: fungible means interchangeable.
One ₹100 note is as good as any other ₹100 note, so money is fungible.
Non-fungible means unique; it cannot be swapped one for one.
An NFT is a unique digital certificate of ownership recorded on a blockchain.
| Feature | Cryptocurrency (e.g. Bitcoin) | NFT |
|---|---|---|
| Fungible? | Yes, every coin is the same | No, each token is unique |
| Stored on | Blockchain | Blockchain (mostly Ethereum) |
| Represents | Money-like value | Ownership of a digital asset: art, music, video clip, game item |
In India: the Budget of 2022 brought in a 30% tax on income from virtual digital assets, which include NFTs, and a 1% TDS on their transfer.
Answer: (a) digital assets on a blockchain.
Why each option is right or wrong
- (a) CORRECT. NFTs are unique digital assets recorded on a blockchain.
- (b) Incorrect. Banking correspondents are agents who take banking to villages.
- (c) Incorrect. Multifactor authentication is about OTPs and passwords, not NFTs.
- (d) Incorrect. Small finance banks are a category of banks licensed by the RBI.
Key point
NFT: non-fungible token, unique digital asset on a blockchain, proves ownership of digital art, music or collectibles. Budget 2022: 30% tax on virtual digital assets (crypto and NFTs) under Section 115BBH, 1% TDS under Section 194S.
Remember
NFT = unique digital asset on a blockchain.
Common mistakes
- Treating NFTs as just another cryptocurrency; a coin is fungible, an NFT is not.
- Reading token as a banking token or OTP device.
- Thinking buying an NFT always gives copyright over the artwork.
Exam tip
Educated guess: three options are about ordinary banking in India. Only one mentions blockchain, the technology all the token talk is about.
Sources
- Ministry of Finance — Finance Act, 2022: taxation of virtual digital assets (Section 115BBH and Section 2(47A) of the Income-tax Act)
- Reserve Bank of India — Report on Currency and Finance 2021-22 (digital assets and blockchain)