I have been investing in cryptocurrencies, and I will continue to do so.
But at the onset allow me to make one thing clear:
No law in India makes mining, buying, selling, trading bitcoins, or alike cryptocurrencies illegal in India.
In the last two years, Bitcoin and cryptocurrencies have been in the news due to various reasons. From the RBI virtually banning financial institutions from servicing them in India to the government trying to ban them altogether, cryptocurrencies have been gathering a lot of attention.
Today, we are going to look at various aspects of the legality of bitcoins as well as alike cryptocurrencies in India.
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The Legality of Bitcoin & Cryptocurrencies In India
At the risk of repeating ourselves – Cryptocurrencies, including bitcoins, are legal in India. In April 2018, the Reserve Bank of India (RBI) issued a circular directing all entities regulated by it to not deal in virtual currencies or offer services to facilitate any person or entity dealing in them.
This was a massive setback to the Indian crypto community.
However, earlier in March this year, the Supreme Court of India passed a circular that strikes down RBI’s circular banning the same.
Here is a quick look at the history of bitcoins in India and the regulatory interjections:
December 2013 – The creation, trading, or usage of VCs, including Bitcoins, as a medium for payment, are not authorized by any central bank or monetary authority. No regulatory approvals, registration, or authorization are stated to have been obtained by the entities concerned for carrying on such activities.
February 2017 – The RBI released a notification confirming that it has not authorized or licensed any entity to operate schemes or deal in Bitcoin or any other virtual currencies. Hence, people should deal with virtual currencies at their own risk.
December 2017 – Despite its notifications, the RBI noticed a significant increase in the number of Initial Coin Offerings (ICO) and released a statement reiterating its concerns.
February 2018 – The Finance Ministry released a statement saying, “The Government does not consider Cryptocurrencies “as Legal Tender or Coin” and will take all measures to eliminate the use of these Crypto Assets in Financing “Illegitimate Activities” or a Part of the Payment System. This was misunderstood by a lot of people. What the statement meant was that the government wanted to crack down on the use of crypto assets in financing illegal activities. It DID NOT ban cryptocurrencies in India.
April 2018 – The RBI issued a circular directing all entities regulated by it to stop offering any kind of service to any entity associated with virtual currencies.
January 2020 – The RBI confirmed during a Supreme Court hearing that it has not banned cryptocurrencies in India.
March 2020 – The Supreme Court ruled down RBI’s ban as unconstitutional and legalized bitcoins in India.
Indian Supreme Court On Cryptocurrencies
After nearly two years of battle, the crypto-community in India won its battle against RBI’s circular banning regulated financial institutions, from offering services to crypto-related businesses.
In March 2020, the Supreme Court of India passed a judgment holding RBI’s circular unconstitutional.
As soon as the judgment was out, the National Association of Software and Service Companies (Nasscom), which is a major trade association of the Indian Information Technology and Business Process Outsourcing industry, welcomed the decision.
It tweeted that:
‘banning tech is not the solution, a risk-based framework must be developed to regulate and monitor cryptocurrencies and tokens.’
Before making this decision, the Court looked at the draft of Banning of Cryptocurrency & Regulation of Official Digital Currency Bill, 2019. However, the Court could not find enough reasons to gauge the legislature using this bill since it was still proposed but not passed.
When the proceedings began, the Court asked the reason behind the circular issued by the RBI. While the RBI’s explanation was that it had released the circular to prevent cryptocurrencies from disrupting the existing financial institutions, reduce the number of crypto-frauds, and curb illegal activities that were being financed using bitcoins.
After hearing arguments from both sides, the Court agreed that the RBI had taken a decision to issue the circular without any reasonable grounds that could prove that cryptocurrencies could hamper the financial industry in India.
Hence, it quashed the circular and permitted banks and financial institutions to resume offering services to individuals and entities dealing in cryptocurrencies.
Cryptocurrencies To Invest In India
There are hundreds of cryptocurrencies to choose from. Like any other investment, you must ensure that you choose the one that has high acceptability and probability of good returns. Here is a quick list of some popular cryptocurrencies in India that many are considering:
#1. Bitcoin (BTC) – This is the oldest and the most popular cryptocurrency. The supply of Bitcoin is scarce and is hence considered to be an asset. It has the highest adoption rate across cryptocurrencies.
#2. Ethereum (ETH) – This is the second-largest cryptocurrency and a popular choice among enterprise clients.
#3. Ripple (XRP) – The third-largest cryptocurrency in the world, XRP, is in high demand in India and the go-to blockchain for financial institutions and banks.
Also, before you invest, you can follow these tips to invest in cryptocurrency safely:
Research well about the trading app before investing
Store your cryptocurrencies in secure wallets
Invest in different cryptocurrencies (diversify)
The lack of regulation and clarity is keeping state-owned banks away from companies dealing with cryptocurrencies. Also, the lack of legal recourse is attracting a lot of fraudsters.
But after the Supreme Court’s decision, there has been a sudden spike in the trading volumes. Apart from old investors returning to the market, several new investors have started considering investing in cryptocurrencies too.
While the government seems comfortable with blockchain technology, it is not keen on permitting trading in cryptocurrencies. But for me, their interest in blockchain is a silver lining.
According to the latest reports, India is planning to introduce a new law that will ban trading in cryptocurrencies.
But I feel this is highly unlikely to pass as this would be contrary to the other Asian economies who have been working hard to regulate this booming market, and India wouldn’t decide to not participate in it.
Many, including myself, believe that instead of a ban, the country needs a comprehensive regulatory framework to ensure that uninformed investors are protected, and the government has adequate oversight over the cryptocurrency markets.
FAQs on Legality of Cryptocurrency in India
Q1. Can I buy Bitcoin in India?
Yes, you can buy Bitcoin in India. As of September 19, 2020, one bitcoin is worth INR815,696.
Q2. Where can I buy Bitcoins in India?
There are three ways to buy bitcoins in India:
Cryptocurrency Exchange – There are several apps and websites that offer exchange services to help investors buy bitcoins. Some such reliable trading apps are CoinSwitch Kuber (I use this), Giottus, Cashaa, Cex, etc.
P2P Directory – A Peer to Peer (P2P) Directory is a peered app or website that allows investors to trade in bitcoins directly without the need of any trusted third-party.
While governments worldwide are trying to determine the right place for cryptocurrencies in their economic landscapes and CBDCs (Central Bank Digital Currencies) or digital versions of fiat money being conceptualized, the revolution initiated by Bitcoin is likely to gather momentum in the future.
So I would say this is the right time to be a part of the global economy of the future but also invest in cryptocurrencies only based on your research !!
KuberVerse is an educational initiative. Anything expressed here directly or indirectly is not investment advice. And we ask you to do your own research before investing.