While crypto is termed as the currency of the third millennium, the confusion related to it is never ending. The legal position of crypto including its classification is still confusing due to the inherent nature of blockchain currency.
The purpose of this article is to answer the question “Is cryptocurrency legal in India” We have compiled and interpreted all the existing laws, government notifications, RBI guidelines and supreme court judgements related to Cryptocurrency to analyze the legal position of cryptocurrency in India.
At the end, we will also discuss the status of crypto in countries like the USA, China, and the rest of Europe. Before we jump directly into the legal concept, we must understand what qualifies as cryptocurrency.
Cryptocurrency is a digital or virtual currency that uses blockchain technology for security. A cryptocurrency is impossible to tamper with because of the distributed ledger technology or DLT.
The defining feature of cryptocurrency is its organic nature. It is not issued by any central authority and is free from government interference or manipulation.
Cryptocurrencies by nature have many advantages over any other form of currency or digital assets. However, there are a few constraints in legalizing cryptocurrencies.
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Cryptocurrency in India has a short but tumultuous history. Here is the complete flow of events around Cryptocurrency in India with different judgments and regulations related to cryptocurrency transactions.
2009
2010
2013
2017
April 2018
May 2018
March 2020
February 2022
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There has been multiple discussion in the parliament, courts, RBI, and IT department related to the stand of government of India on the growing crypto trade and investment.
Indian government has accepted the fact that VDAs are the undeniable fate of Indian economy and IT sector, and it cannot be banned or termed illegal. Therefore, the FM imposed a 30% flat tax rates on all cryptocurrency gains in India in the Union Budget 2022.
Although, the Union Budget for the financial year 2022 has brought good news for cryptocurrency investors in India, cryptocurrency is way behind in terms of legalization. Merely the taxation of cryptocurrency gains can’t be considered as legitimization.
The bill is yet to be introduced in parliament regarding cryptocurrency and crypto transactions, in which Government will clear its stand on the legal status of Cryptocurrency in India.
We need to understand the concept of Legal Tender first.
A legal tender is a medium of exchange that can be used to settle a debt or conduct transactions. The legal tender status of a currency allows it to be used in transactions and for the settlement of debts. Currencies that have legal tender status are backed by the government that issues them. This means that the government will accept the currency as payment for taxes and other debts owed to the government.
Although, investors and traders in India can trade and invest in cryptocurrencies, such as Bitcoin freely, it’s not a legal tender. Therefore, using cryptocurrency like bitcoin to settle payments for exchange of goods and services, payment of government dues or settling transactions is not recognized and might have legal implications.
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Different countries have taken different approaches to the legal status of cryptocurrency. Broadly, the legal status of Crypto could be categorized into four types:
Here are some major countries with their legal stand on Cryptocurrency
In general, there is no one answer to the question of whether cryptocurrency is legal. The legality of cryptocurrency depends on the laws of the specific country in which you are doing business.
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The legal status of cryptocurrency in India is inclining towards an unsettling acceptance. While the RBI, Finance ministry and IT department are completely on backfoot with regularization and tracking of cryptocurrencies, the Supreme Court of India restricted government from banning the entire class of assets.
The Reserve Bank of India (RBI) has issued several warnings about the risks associated with investing in cryptocurrency and has made it clear that it does not consider crypto to be legal tender. However, the RBI has also said that it is investigating the possibility of using blockchain technology for financial transactions. And while the Indian government has not yet put forward any concrete plan or regulations regarding cryptocurrency, it seems likely that they will eventually do so.
In the meantime, investors and traders are free to buy and sell cryptocurrencies like Bitcoin and Dogecoin freely in India. However, using cryptocurrency to settle payments for goods and services, or to pay government dues, could have legal implications.
Looking further ahead, it’s difficult to say exactly what the future holds for cryptocurrency in India. It seems probable that the government will eventually regulate – and treat cryptocurrency and other VDAs as capital assets or property. However, the acceptance of cryptocurrency as legal tender seems unlikely.
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FAQs Section
Yes, Bitcoin is legal in India. The Supreme Court of India has ruled that citizens are allowed to buy and sell cryptocurrencies in a judgment in 2020. However, paying or receiving Bitcoin for exchange of Good or Service could have legal penalty, especially for foreign transactions.
The tax rate on income from cryptocurrencies in India is 30%. This applies to both gains made from buying and selling cryptocurrencies, as well as to income earned from using them to pay for goods and services.
No, cryptocurrency is not currently banned in India. Although, RBI banned the entire class of asset in India in 2018, The Apex court of India overturned the ruling in 2020 allowing citizens to trade and invest in cryptocurrency.
Indian citizens can buy Bitcoin, Ethereum, Luna and other cryptocurrencies using crypto-exchange apps like WazirX, CoinDCX and CoinBase.
Investing in Bitcoin can be done in many ways. The most common way is to buy Bitcoin on a cryptocurrency exchange like ZebPay, CoinDCX or Unocoin. You can also earn Bitcoin by mining it or through trading derivatives on a cryptocurrency futures exchange.
Investing in Bitcoin means buying and holding it for the long term, while trading means buying and selling it frequently to make profit from short-term price movements.
Yes, cryptocurrency trading is legal in India. The Supreme Court of India has ruled that citizens are allowed to buy and sell cryptocurrencies in a judgment in 2020.
The most common way to invest in crypto in India is through cryptocurrency exchanges like ZebPay, CoinDCX or WazirX.
Currently, there is no indication that the Indian government will ban cryptocurrencies. Reversely, Indian government is working on Cryptocurrency and other VDA bill for its regulation and management.
Yes, crypto mining is legal in India. There are no law, rules or judgement that prohibits crypto mining in India.
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