Cryptocurrencies are entirely legal in India. However, there is no regulatory framework to govern cryptocurrencies. The Centre had applied reservations around its misuse and wanted to put a temporary ban in India until a Committee is constituted to govern its use. Government fear that cryptocurrency may promote illegal activities, money laundering and circulation of black money in the economy. Although, cryptocurrencies may not face a complete ban, it is more likely that a proper code of conduct will be enacted in future. According to the report of Inter-Ministerial Committee (IMC), the use of digital currencies is suggested for various places like financial firms including banks and many more.
Several cryptocurrency exchanges urge the government to regulate and not to ban its usage. The Centre may soon set up a panel to regulate cryptocurrencies. Meanwhile, The Ministry of Corporate Affairs (MCA) has made it mandatory for companies to disclose crypto trading/investments during the financial year.
More than 15 million Indians have already invested over $2 billion into cryptocurrency and has already surpassed the crypto market in the United Kingdom, which has 2.3 million investors. The government has a tough task in making sure it’s done without safety concerns.
The lack of regulatory clarity has not prevented Indians from operating exchanges. It is undeniable that it is on its way of becoming a mainstream asset class.
Keeping all of this in mind, experts also informed that government is also trying to launch its own cryptocurrency in India next year after preparing the proper code of conduct. This will be a huge step towards promoting digital currencies in the country.
There are several questions in the minds of people related to these digital currencies. Here are the most asked queries of possible investors.
Are cryptocurrency taxable?
Yes. Cryptocurrency transactions are taxable in India but they are not mentioned in the Indian Income Tax act and no rules have been established. There is no legal tender status of cryptocurrency in India and hence no specific rules are mentioned as how they are going to be taxed. Currently, cryptocurrency sales are taxed as business income and if there redemption happens after 3 years then the income charged as capital gains at 20%.
Were cryptocurrencies ever banned in India?
In 2018, government committee forbid banks from facilitating cryptocurrency trades. In 2019, a government committee suggested banning all private cryptocurrencies. They also suggested a long jail term of up to 10 years and heavy penalties for anyone dealing in digital currencies. However, in March 2020, Supreme Court overturned RBI’s circular and permit banks to handle cryptocurrency transactions which gave those traditional lenders huge relief.
Currently government is also working on its digital currency. The government does not want to be left behind in the new age tech revolution and how to get utmost benefits of blockchain revolution. “The time has come to leverage its applications while at the same time strengthening the digital infrastructure,” said Reserve Bank of India (RBI) Governor Shaktikanta Das.
Why government didn’t want people to use cryptocurrency?
Government worried about illegal use of cryptocurrency, feared that it might be use in money laundering and promote circulation of black money in the economy. This will affect the country in the long run as Blockchain technology is entirely decentralised and hence it would difficult to find and penalise anyone who use it for illegal purposes. ‘’The RBI’s broader concerns and banks’ worries around money laundering should help to spur regulations and make the industry safer and stronger’’, said Sumit Gupta, CEO and co-founder of crypto exchange CoinDCX.
How do I buy cryptocurrency in India?
Buying and selling cryptocurrency is a complicated process. Not because of how hard the technicalities are but because it is highly unregulated and choosing a right crypto exchange is extremely important.
In July 2021, a crypto exchange Wazir X, got a notice from ED (Enforcement Directorate) over money laundering allegations. Later, there were further more reports over its illegal use. These create problems for the traders and distrust in the Blockchain industry.
Although the steps for opening an account in a crypto exchange is not a difficult task. To open a crypto trading account, first, sign up on a reputed and trustable crypto exchange, Then, fill out your personal information > Verify your email> and secure your account.
Finally, transfer money (INR) to your trading account, which you can use to purchase bitcoin or any other cryptocurrency of your choice.
4. Can I exchange cryptocurrency for cash in India?
You can convert your bitcoins/cryptocurrency into cash by selling them. And you can do it easily in India with the help of a reputable cryptocurrency exchange with a KYC-verified account.
5. Which cryptocurrency wallet is the best in India?
India is home to over 350 blockchain and crypto startups .These cryptocurrency wallets in India fulfil different needs of the investor. The most popular wallets include Binance, Coinbase, Coinswitch kuber, Zebpay, Wazir X(owned by Binance) and so on that cater to different needs and differ in security, convenience, accessibility, and other factors. Bitcoins and other cryptocurrencies can be received and safely stored in your wallet.
6. Can cryptocurrency reach to 0?
Yes, cryptocurrency offers holders no expectation of future earnings. Because of the absence of any expected dividend, reverse dilutions or buybacks that would provide earnings for holders in the future, the value of bitcoin will become zero in the following reasons:
- Once the miners of that particular cryptocurrency goes extinct. Miners are the people who make these digital currencies using various mathematical algorithms and formulas. The process of mining is getting tougher every day and people find this extremely complicated specially in the case of Bitcoin.
- If the government put a ban on the cryptocurrency. However the value of currency will get affected but chances are low that it reach to 0 levels.