Is crypto banned in India? The chronicle starts in 2018, when the RBI banned banks and financial institutions from accepting crypto transactions. However, the order didn’t say much about people owning cryptos. And in 2020, the RBI order was struck down by the Supreme Court.
Recently, there have been talks about introducing crypto regulations in consultation with stakeholders. In his address to the World Economic Forum, Prime Minister Narendra Modi stressed the need for a uniform global approach toward crypto. So, where does that leave the legal status of crypto?
Crypto is unregulated In India and is not accepted as legal tender. Their legal status is complicated, but they aren’t banned. All of this is confusing to many. So this is us clearing things up.
Differences between cryptocurrencies and legal tenders
In most countries, the legal tender is the fiat currency. So in India, the legal tender is the Indian National Rupee. It is the currency issued by the government and used by the citizens to buy goods and services.
Crypto, on the other hand, is not issued by the government. It operates independently of governments to a large extent. Bitcoin, the most famous example, emerged in 2009 during the global financial crisis.
Since crypto is not a legal tender, it is not accepted as an official mode of payment in India.
Is crypto banned in India 2022?
Is Cryptocurrency banned in India? The answer to this question is not simple. There’s no law in the country that bans cryptos or says that trading in such digital assets is illegal. But crypto is not a legal tender in India—so you cannot buy goods and services with it in this country.
In December 2021, India’s Prime Minister Narendra Modi has said emerging tech such as blockchains should be used to “empower democracies, not undermine” them. There is no crypto bill in the country yet, but in April 2022, the government imposed a tax on crypto earnings, which is seen by some as a tacit way of accepting crypto assets.
Is crypto mining legal in India?
Unlike China, India has not brought in regulations to ban the mining of crypto. Also, given that public cryptos may be mined using one’s own computing equipment, it doesn’t break or interfere with any of the current laws.
Can crypto earnings be taxed?
Yes, from 1 April 2022, a flat slab of 30% plus 1% TDS has been imposed on crypto earnings. That’s applicable to the current financial year.
The move has attracted its share of criticism: 30% is too high a tax; taxation could have been slab-wise, with 30% being at the high end; and so on.
However, there is at least one upside to the government ruling: it applies only to gains from crypto investments. No tax is to be paid if one were to lose money on investments or if one chooses to hold on to the cryptos.
Is blockchain technology legal in India?
Blockchain technology is as legal as artificial intelligence (AI), machine learning (ML), or any other emerging technology. In fact, the Andhra Pradesh government is reported to have built a blockchain-based platform for managing land records a couple of years ago. The government of Maharashtra is also taking a close look at blockchains to ascertain their efficacy for e-governance.
Would a ban on crypto hamper blockchain technology in India?
Yes, a ban would negatively impact the technology to some extent.
To enable developers to build applications on a blockchain, transaction fees have to be paid. Now, these transaction/gas fees have to be paid in the respective token of that blockchain. So, for example, to build on the Ethereum blockchain, the transactions would have to be validated using the native token Ether (ETH). Banning an entire cryptocurrency, or payments in a particular cryptocurrency, would mean not being able to build on the platform—at least not from the Indian banking sector standpoint.
Are CBDCs going to replace crypto?
To answer this, one must first understand the difference between the two.
|Crypto is a decentralized digital asset, operating without any intermediaries such as banks, financial institutions, and central authorities.||CBDCs are digital tokens similar to crypto, but issued by a central bank and set against the value of the country’s fiat currency. It’s like a physical rupee but in a digital form.|
|It is not linked to any commodities, nor is it legal tender, unlike CBDCs, and its value is dependent on free-market forces.||They are not a private currency; they are centralized. Backed as they are by the government, CBDCs will have intrinsic value.|
|The legal status of crypto, as we have seen above, is complicated. It is not banned, but it is not a legal tender either.||Many countries are developing CBDCs and some have implemented them. India’s Finance Minister Nirmala Sitharaman has said that Central Bank Digital Currencies (CBDCs) will be introduced in the country by 2023 and that they would be based on blockchain and backed by the RBI.|
The only similarity is that both are based on blockchain technology.
Given the differences between cryptocurrencies and CBDCs, it is clear that one cannot replace the other anytime in the near future. Both have different roles to play, and most importantly, they have different statures and are perceived differently by the government.