$6.3 billion Binance hack exposes risks for crypto investors

Sources

• Associated Press (via Los Angeles Times) · Blockchain intelligence firms link North Korea to $6.3-billion hack on Binance · 30 October 2026
• Binance · Security Incident Update #2: loss, wallet investigation, freezes and recovery commitment · 30 October 2026
• TRM Labs · North Korea Steals USD 6.36 Billion From Binance in the Largest Hack in History (research attribution) · 29 October 2026
• Chainalysis · North Korea Drives Record $2 Billion Crypto Theft Year · 18 December 2025
• Financial Intelligence Unit - India · Registration of Virtual Digital Asset Service Providers as Reporting Entities; March 7 notification · 4 July 2023
• Indian Computer Emergency Response Team (CERT-In) · CERT-In cybersecurity directions dated 28 April 2022; six-hour incident-reporting requirement · 28 April 2022
• Financial Action Task Force · Seventh Targeted Update on FATF Standards for Virtual Assets and VASPs · 16 July 2026

Syllabus

Topics

Related previous-year questions

Asked in earlier UPSC Prelims papers on this topic. Answer, then check.

1. UPSC Prelims 2018 · Science and Technology · Miscellaneous Science and Technology

   Consider the following pairs: Terms sometimes seen in news Context/Topic 1. Belle II experiment - Artificial Intelligence 2. Blockchain technology - Digital/Cryptocurrency 3. CRISPR-Cas9 - Particle Physics Which of the pairs given above is/are correctly matched?

   1. 1 and 3 only
   2. 2 only
   3. 2 and 3 only
   4. 1, 2 and 3
   Show answer

   Answer: B. Only pair 2 is correctly matched, so the answer is (b) 2 only. Pair 1 is INCORRECT. The Belle II experiment is a particle physics experiment designed to study the properties of B mesons, heavy particles containing a bottom quark. It succeeds the Belle experiment and is being commissioned at the SuperKEKB accelerator complex at KEK in Tsukuba, Japan. It has nothing to do with artificial intelligence. Pair 2 is CORRECT. The primary use of blockchains today is as a distributed ledger for cryptocurrencies, most notably bitcoin, and several central banks have studied issuing their own digital currencies. Pair 3 is INCORRECT. CRISPR-Cas9, short for clustered regularly interspaced short palindromic repeats and CRISPR-associated protein 9, is a genome editing tool, not a particle physics subject. SOURCE: The Hindu reports on the Belle II collaboration and on the use of blockchain. HOW TO CRACK IT: Notice that pairs 1 and 3 have simply been swapped, since Belle II is the particle physics item and CRISPR is the biology item. Detecting a swapped pair is faster than evaluating each independently, and once you see it both fall together, leaving only pair 2. Scan a matching set for exchanged contexts before working through it in order.

   Difficulty: easy · match

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2. UPSC Prelims 2023 · Indian Economy · Banking

   With reference to Central Bank digital currencies, consider the following statements: 1. It is possible to make payments in a digital currency without using US dollar or SWIFT system. 2. A digital currency can be distributed with a condition programmed into it such as a time-fame for spending it. Which of the statements given above is/are correct?

   1. 1 Only
   2. 2 Only
   3. Both 1 and 2
   4. Neither 1 nor 2
   Show answer

   Answer: C. Statement 1 – CORRECT: Alternatives to SWIFT and the U.S. dollar are coming from two directions: cryptocurrencies and central bank digital currencies. Countries will be able to directly exchange digital currencies in a bilateral way and without going through SWIFT or similar settlement systems. When the technology allows seamless and instantaneous convertibility from one sovereign currency into another, it changes the practical need for a dominant global reserve currency. Statement 2 – CORRECT: CBDC could be employed for fiscal transfers to households or firms, such as relief or stimulus payments. The transfer payments could also be 'programmable', with conditions such as expiration upon a certain date or a requirement to spend the funds at certain vendors. This means digital currency can be distributed with conditions programmed into it, such as a time-frame for spending. Both statements are correct → Option (c) Both 1 and 2.

   Difficulty: medium · statement

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3. UPSC Prelims 2024 · Indian Economy · Banking

   Consider the following statements in respect of the digital rupee: 1. It is a sovereign currency issued by the Reserve Bank of India (RBI) in alignment with its monetary policy. 2. It appears as a liability on the RBI's balance sheet. 3. It is insured against inflation by its very design. 4. It is freely convertible against commercial bank money and cash. Which of the statements given above are correct?

   1. 1 and 2 only
   2. 1 and 3 only
   3. 2 and 4 only
   4. 1, 2 and 4
   Show answer

   Answer: D. Statement 1 – CORRECT: CBDC is sovereign currency issued by Central Banks in alignment with their monetary policy. Statement 2 – CORRECT: It appears as a liability on the central bank's balance sheet. Statement 3 – INCORRECT: CBDC like physical currency is not inherently insured against inflation. The data collected through CBDCs has the potential to be paired with strict reserve requirements for commercial banks, creating a theoretical framework for inflation control — but it is not insured against inflation by design. Statement 4 – CORRECT: CBDC is freely convertible against commercial bank money and cash. It must be accepted as a medium of payment, legal tender, and a safe store of value by all citizens, enterprises, and government agencies. Also, holders need not have a bank account — it is fungible legal tender. Statements 1, 2 and 4 are correct → Option (d) 1, 2 and 4.

   Difficulty: hard · statement

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4. UPSC Prelims 2026 · Indian Economy · Money Market

   Which one of the following statements about Unified Payments Interface (UPI) and Central Bank Digital Currency (Digital Rupee) is NOT correct?

   1. UPI is a real-time payment system but Digital Rupee is akin to sovereign paper currency.
   2. In case of UPI, settlement for end users happens instantly as the money gets immediately debited or credited but in the case of Digital Rupee, there is no settlement as the wallet balance gets transferred to another wallet.
   3. UPI transactions are recorded by banks and reflected in bank statements but in case of Digital Rupee, no data is captured in bank statements as transactions are from one wallet to another.
   4. In both the cases (UPI and Digital Rupee), the liability lies with the users and their respective banks.
   Show answer

   Answer: D. Unified Payments Interface (UPI) is a digital payment platform that enables real-time interbank transactions between individuals as well as between customers and merchants. Central Bank Digital Currency (CBDC) or Digital Rupee is a digital form of legal tender issued directly by the central bank. While UPI serves as a mechanism for transferring funds already held in bank accounts, the Digital Rupee functions as currency itself and represents a direct obligation of the Reserve Bank of India (RBI). Option (a) is correct: UPI acts as a payment channel for transferring funds between bank accounts, whereas the Digital Rupee is the digital counterpart of physical sovereign currency. Option (b) is correct: UPI transactions involve the transfer and settlement of money between bank accounts. In contrast, the Digital Rupee is transferred directly between digital wallets without requiring interbank settlement. Option (c) is correct: Since UPI transactions are linked to bank accounts, they are reflected in account statements. Digital Rupee transactions, however, take place between digital wallets and are therefore not shown in conventional bank statements. Option (d) is NOT correct: For UPI transactions, the liability rests with the commercial banks that maintain the deposits. However, the Digital Rupee is a direct liability of the Reserve Bank of India rather than commercial banks. Hence option (d) is the answer.

   Difficulty: medium · direct

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5. UPSC Prelims 2020 · Science and Technology · Information and Communication Technology

   With reference to 'Blockchain Technology', consider the following statements: 1. It is a public ledger that everyone we inspect, but which no single user controls 2. The structure and design of blockchain is such that all the data in it are about crypto currency only. 3. Applications that depend on basic features of blockchain can be developed without anybody's permission. Which of the statements given above is/are correct?

   1. 1 only
   2. 1 and 2 only
   3. 2 only
   4. 1 and 3 only
   Show answer

   Answer: D. Statement 1 – CORRECT: Blockchain technology is a structure that stores transactional records, also known as the block, of the public in several databases, known as the 'chain,' in a network connected through peer-to-peer nodes. It is a public ledger that anybody can see, but they cannot corrupt it. No single user controls it. Hence statement 1 is correct. Statement 2 – INCORRECT: The structure and design of blockchain is NOT limited to crypto currency only. Blocks store information about transactions like the date, time, and dollar amount of most recent purchases from any online site that works on a blockchain principle. Blockchain has wide applications beyond cryptocurrency. Hence statement 2 is not correct. Statement 3 – CORRECT: Public blockchain, typically permissionless (permissionless), is the type associated with Bitcoin, where access and validation are open to participants. Applications that depend on basic features of blockchain can be developed without anybody's permission. Hence statement 3 is correct. Correct statements: 1 and 3 → Option (d).

   Difficulty: hard · statement

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6. UPSC Prelims 2022 · Science and Technology · Information and Communication Technology

   With reference to Web 3.0, consider the following statements: 1. Web 3.0 technology enables people to control their own data. 2. In Web 3.0 world, there can be blockchain based social networks. 3. Web 3.0 is operated by users collectively rather than a corporation. Which of the statements given above are correct?

   1. 1 and 2 only
   2. 2 and 3 only
   3. 1 and 3 only
   4. 1, 2 and 3
   Show answer

   Answer: D. Statement 1 – CORRECT: The concept of Web 3.0, also called Web 3.0, is used to describe a potential next phase of the internet. Web3 will deliver a decentralized and fair internet where users control their own data. Statement 2 – CORRECT: The model, a decentralised internet to be run on blockchain technology, would be different from the versions in use, Web 1.0 and Web 2.0. There can be blockchain-based social networks in Web 3.0. Statement 3 – CORRECT: In web3, users will have ownership stakes in platforms and applications unlike now where tech giants control the platforms. Web 3.0 is operated by users collectively rather than a corporation. Correct statements: 1, 2 and 3 → Option (d).

   Difficulty: medium · statement

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7. UPSC Prelims 2026 · Indian Economy · Security Market in India

   Which of the following statements about Real-World Assets (RWA) Tokenization are correct? 1. Tokenization is the process of turning real world assets into digital tokens using blockchain technology. 2. Tokenization of real world assets offers 24x7 access, promoting financial inclusion. 3. Tokenization of real world assets will allow the access to high growth investment opportunities for individuals in India. Select the answer using the code given below:

   1. 1, 2 and 3
   2. 2 and 3 only
   3. 1 and 2 only
   4. 1 and 3 only
   Show answer

   Answer: A. Real-World Asset (RWA) tokenization involves transforming ownership rights of physical or conventional financial assets (such as real estate, commodities, or bonds) into digital tokens on a blockchain network. Blockchain-driven tokenization provides continuous 24x7 accessibility and trading, unlike traditional financial markets that operate within fixed hours. This helps improve financial inclusion by reducing entry barriers for investors. Tokenization also supports fractional ownership, enabling individuals in India to invest smaller amounts in expensive assets such as commercial properties or fine art. Statement 1 is correct: Tokenization is the process of converting real-world assets into digital tokens using blockchain technology. This accurately describes the concept of Real-World Asset tokenization. Statement 2 is correct: Tokenization of real-world assets offers 24x7 access, thereby promoting financial inclusion. Since blockchain systems operate continuously without fixed market timings, and fractional ownership lowers investment thresholds, accessibility is enhanced. Statement 3 is correct: Tokenization of real-world assets will provide individuals in India with access to high-growth investment opportunities. By enabling fractional ownership, tokenization expands access to asset categories that were traditionally available only to a limited group of investors. All three statements are correct, so the answer is Option (a).

   Difficulty: medium · statement

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8. UPSC Prelims 2026 · Science and Technology · Information and Communication Technology

   Which of the following statements regarding the features of blockchain technology are correct? 1. Records stored in the database may be made visible to relevant stakeholders without risk of alteration. 2. Copies of the entire database are stored on multiple computers on a network, syncing within seconds. 3. Consortium blockchain is a blend of public and private blockchains allowing selective data access. 4. Mathematical algorithms make it impossible to change or delete any data once recorded and accepted. Select the answer using the code given below:

   1. 1 and 3
   2. 2 and 4 only
   3. 1, 2 and 4
   4. 1 and 4 only
   Show answer

   Answer: C. Blockchain is a decentralized and distributed ledger technology that securely records transactions across many computers. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data, ensuring high security. The technology eliminates the need for a central authority, offering transparency, immutability, and traceability for various applications. Statement 1 is correct: Records stored in the database may be made visible to relevant stakeholders without risk of alteration. The use of cryptography and consensus mechanisms ensures that stakeholders can view records transparently while the data remains completely immutable. Statement 2 is correct: Copies of the entire database are stored on multiple computers on a network, syncing within seconds. Blockchain functions as a distributed ledger where every participating node on the network maintains a full, continuously synced copy of the database. Statement 3 is not correct: A hybrid blockchain is the exact blend of public and private networks. This statement is incorrect because it is describing a hybrid blockchain. A consortium network is a semi-decentralized ledger managed by a predefined group of organizations rather than being a structural blend of public and private features. Statement 4 is correct: Mathematical algorithms make it impossible to change or delete any data once recorded and accepted. Cryptographic hashing creates a unique digital fingerprint for each block, meaning any alteration attempts will invalidate the entire subsequent chain. Statements 1, 2 and 4 are correct, so the answer is Option (c). The question is also approachable by elimination: even if one does not know what a consortium blockchain is, knowing that 1 and 2 are correct leaves only option (c).

   Difficulty: easy · statement

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9. UPSC Prelims 2022 · Science and Technology · Information and Communication Technology

   With reference to Non-Fungible Tokens (NFTs), consider the following statements: 1. They enable the digital representation of physical assets. 2. They are unique cryptographic tokens that exist on a blockchain. 3. They can be traded or exchanged at equivalency and therefore can be used as a medium of commercial transactions. Which of the statements given above are correct?

   1. 1 and 2 only
   2. 2 and 3 only
   3. 1 and 3 only
   4. 1, 2 and 3
   Show answer

   Answer: A. Statement 1 – CORRECT: NFTs enable the digital representation of physical assets. Anything that can be converted into a digital form can be an NFT — including drawings, photos, videos, GIF, music, in-game items, selfies, and even tweets. Hence statement 1 is correct. Statement 2 – CORRECT: Non-fungible tokens are unique cryptographic tokens that exist on a blockchain and cannot be replicated — having a unique identification code and metadata. Hence statement 2 is correct. Statement 3 – INCORRECT: Unlike cryptocurrencies, NFTs are non-fungible, meaning the value of one NFT is not equal to another. Therefore they cannot be traded or exchanged at equivalency and cannot be used as a medium of commercial transactions. Hence statement 3 is not correct. Correct statements: 1 and 2 → Option (a) 1 and 2 only.

   Difficulty: medium · statement

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Practice questions

1. Since March 2023, virtual digital asset service providers in India must report to:

   1. RBI
   2. SEBI
   3. FIU-India under PMLA
   4. CERT-In only
   Show answer

   Answer: C. They are "reporting entities" under anti-money-laundering rules.

   Difficulty: medium · statement

2. The FATF "Travel Rule" for virtual assets requires:

   1. Crypto to be held in cold wallets
   2. Sender and receiver information to accompany transfers
   3. A ban on stablecoins
   4. Deposit insurance for crypto
   Show answer

   Answer: B. It extends wire-transfer rules to crypto.

   Difficulty: medium · statement

3. A "hot wallet" is:

   1. A wallet stored offline
   2. A wallet connected to the internet
   3. A government-issued digital currency
   4. A hardware device
   Show answer

   Answer: B. It is convenient but more exposed to attacks.

   Difficulty: easy · statement

Mains practice

Answer-writing practice on this article. Attempt it first, then open the hints.

1. GS3 · 250 words

   "State-sponsored crypto theft blurs the line between cybercrime and national security." Discuss with reference to recent exchange hacks and India's regulatory response.

   Show hints

   1. North Korean actors, laundering
   2. sanctions evasion, exchange custody risk
   3. PMLA and FIU
   4. CERT-In, FATF
   5. investor protection.