According to a recent study, more than 100 million people invest in cryptocurrencies in India. This number makes India the country with the highest absolute number of crypto investors anywhere in the world.
Unlike stocks, real estate, or bond investments, cryptocurrencies are very new. The oldest cryptocurrency, BTC, has only been around for the last decade. And it gained most of its value in the last couple of years or so. Moreover, the market for cryptocurrencies is minuscule compared to the global stock markets, amounting to less than 1% of its total share. Even in absolute terms, a very small percentage of the investing demographic is currently invested in crypto but that number is changing significantly over time.
With such a large percentage of people in India using their resources to invest in crypto, the question of legality inevitably comes to mind.
At this moment, no legislation covers cryptocurrencies, specifically in India. But the lack of laws regulating crypto is not an indication of illegality. It simply means that cryptocurrencies are still developing and the government hasn’t yet formulated laws to establish a robust legislative framework. This also means that in the absence of such safeguards, the owners of crypto resources might not be able to enjoy certain safeguards that investors in other asset classes might.
For instance, the RBI has appointed an ombudsman whom people can approach if they have issues relating to bank transfers or have a direct grievance with your bank. This is not yet possible or established in the crypto space. The regulation also includes the protocols using which the government is aiming to tax cryptocurrency returns. Since they’re an asset class, the profits from crypto are supposed to be counted and taxed as income. While most people have started filing their incomes from crypto corresponding to existing capital gain norms, the rules aren’t clear and distinct yet.
Cryptocurrency adoption has dramatically increased in India. In the past couple of years, the trading volumes for crypto on top Indian exchanges like CoinSwitch Kuber have increased from $200 million to more than $40 billion!
However, because there’s a lack of regulation and legislation in this space, some investors are still sceptical about investing their money in it. However, judging by the rate at which the industry is evolving, the day where crypto investments increase phenomenally isn’t very far away.
What’s the Government’s Stand on Crypto in India?
Right now, the government’s stance on crypto makes it abundantly clear that Bitcoin is not becoming legal tender anytime soon. That means that people cannot go into a restaurant and expect to pay with crypto. While some independent establishments might start doing so independently, this norm is something that cannot be imposed on others without their will. While investors would have profited immensely if Bitcoin became legal tender, they won’t be worse off if this does not happen.
Crypto can still continue to function even if the country does not recognize it as legal tender. As long as there are investor safety mechanisms, tax norms, and other regulations in place, investors’ money is secured and in good hands.
Countries like El Salvador have declared Bitcoin to be legal tender. They now accept Bitcoin at every merchant outlet and government establishment as a valid alternative to their fiat currency, the US Dollar.
Keeping in mind all the advantages and disadvantages of cryptocurrencies for a country like India, the government is taking steps to figure out what their next move is going to be. In a recent PM-level meeting on cryptocurrencies, the media reported that ministers have resolved to take steps concerning related issues and that the government will be ‘progressive and forward-looking’ about the whole thing.
These updates have surfaced after the huge development in 2020 when the Supreme Court overturned RBI’s ban on crypto, following which crypto trading and adoption began happening at a furious rate. The RBI has also instituted an internal panel to suggest a model of digital currencies for the country as well.
While the future sure looks hopeful, there are still no concrete developments in the way of regulation or adoption of cryptocurrencies by the Indian government. Answering the question again, the lack of regulation does not translate to illegality. Cryptocurrency trading and investing are not illegal in India right now. Trading volumes and the market cap of these coins keep growing every day with more and more institutional investors dipping their toes into crypto. Hopefully, with further deliberation into the issue, investors will have more leeway in terms of the legality of the issue and can place much more confidence in their trades. Until then, we hope you do your own due diligence and engage in a risk assessment before buying anything. Happy investing!
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Disclaimer : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered as investment/financial advice from CoinSwitch. Any action taken upon the information shall be at user's own risk.
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