Confusion surrounding the legality of Bitcoin and other cryptocurrencies is at an all-time high in India following a recent report that suggested the Modi government is looking to ban all cryptocurrencies in the country. So will the proposed crypto ban go through? Is cryptocurrency (Bitcoin, etc.) legal in India? Will Bitcoin become illegal following the rumored ban? Can you be penalized for owning and trading in digital assets? In this article, we try to clear up the confusion over the legality of crypto assets in India.
Are Bitcoin, Ethereum, and Other Cryptocurrencies Legal in India?
The RBI (Reserve Bank of India) once reportedly considered launching its own digital currency a few years ago. However, nothing came of it, and many believed that the central bank nixed the idea for good. As it turns out, though, the Indian government reportedly continues to harbor ambitions of introducing its own digital token. Here, we will tell you more about those plans and about the status of cryptocurrencies in the country. We will also answer the burning question: Is Bitcoin legal in India?
Are Cryptocurrencies (Bitcoin, Ethereum, etc) Legal in India?
Bitcoin and other cryptocurrencies exist in legal limbo in India, whereby they are neither authorized nor regulated by any government agency in the country. However, the RBI did issue a directive a few years ago, instructing regulated financial institutions to exit relationships with crypto companies. That said, digital tokens are not explicitly banned, so they are technically legal in the country. That means you can buy, sell, own, and store digital assets without violating any law in India.
Meanwhile, the Supreme Court of India suggested in 2019 that the central government should come up with cryptocurrency regulation policies. Last year, the court also ruled that the unregulated status of digital assets does not make it illegal in India. So at least for now, Bitcoins and other digital currency are legal, which means you can trade, own, and store them without any legal repercussion. If that sounds interesting, read our detailed guide on how to buy and sell Bitcoin and other cryptocurrencies in India.
The government has dragged its feet on the matter thus far. The legal vacuum means that no rules, regulations, or guidelines exist for resolving disputes that could arise while dealing with Bitcoins. However, a report suggests that work on the controversial cryptocurrency regulation bill is nearing completion, and it can be introduced in Parliament by the end of 2021.
Controversy and Confusion Surrounding Impending Legislation
The government’s impending legislative efforts and the lack of clarity surrounding the legal status of Bitcoin are only adding more confusion, with a report (link above) suggesting that India will soon propose a law banning all cryptocurrencies.
Quoting an unnamed government official, the report claims that the new legislation will have provision to “(fine) anyone trading in the country or even holding such digital assets. The bill, one of the world’s strictest policies against cryptocurrencies, would criminalize possession, issuance, mining, trading and transferring crypto-assets.”
On its part, the government has denied that it is looking to fully ban blockchain and cryptocurrencies in India. Speaking at a media event last month, India’s Finance Minister Nirmala Sitharaman said: “From our side, we are very clear that we are not shutting all options. We will allow certain windows for people to do experiments on the blockchain, bitcoins, or cryptocurrency.”
She further acknowledged the advantages of blockchain technology, saying that it holds significant promise to add to the growth of technology in the country. “A lot of fintech companies have made a lot of progress on it. We have got several presentations. Much work at the state level is happening, and we want to take it in a big way in IFSC or Gift City in Gandhinagar,” she added.
So Bitcoins are Legal in India but for How Long?
The careful wording of Ms. Sitharaman’s denial, however, raises more questions than it answers. Her statements suggest that researchers might still be able to research cryptocurrencies, but it’s not immediately clear whether Bitcoin (or other cryptocurrency) trading would remain legal for regular citizens. Further, the Finance Ministry will spend more time on the impending bill once the Parliament sessions are over, she added.
On the other hand, the report is seemingly in line with a government announcement last January which called for a ban on private virtual currencies, such as Bitcoin. The government, however, seems interested in building a framework for a digital currency of its own, on the lines of an earlier RBI announcement. According to Vikram Subburaj, Co-Founder and CEO of Giottus Cryptocurrency Exchange, reports about the RBI releasing its digital token is welcome news for cryptocurrency enthusiasts in India.
Talking to Republic World on the subject, Subburaj said: “It is a welcome move by the RBI to work on a CBDC (Central Bank Digital Currencies). (However), it cannot be a replacement for all the cryptocurrencies that are addressing myriad use cases. The power of cryptos come from their ability to have decentralized governance and being nurtured by an open-source community, similar to how a Linux or Wikipedia, or Android works. CBDCs and Cryptocurrencies can co-exist and even complement each other in the future.”
So Blockchain is OK but Bitcoin is Not?
Globally, a large number of leading enterprises have embraced blockchain-based digital tokens over the past few years. The latest to join the bandwagon is PayPal, which announced support for Bitcoin, Ethereum, and other cryptocurrencies last October. The company announced a new service that will enable customers to buy, sell and hold bitcoin and other digital currencies in its online wallets. You can also use digital money as a funding source for purchases at its 26 million merchants worldwide.
Even in India, the National Payments Corporation of India (NPCI) has announced a blockchain-based payments platform called ‘Vajra‘, or lightning. According to the agency, the new technology will bring real-time visibility into transactions, thereby reducing disputes and improving back-end operations at banks. The decentralized platform will also help reduce the pain of reconciliation across all the participants, it said. At launch, the Vajra project was supported by 56 private and public sector banks in India, including the SBI, ICICI, HDFC, Citibank, and HSBC.
Will the Proposed Legislation be a Boon or Bane for Bitcoin Traders in India?
Digital currencies remain in a legal twilight zone in India without any rules and regulations governing them. While any move to regulate the sector is welcome, we hope that the proposed legislation will facilitate the orderly trading of cryptocurrency trading in the country rather than criminalizing such activity. That said, many crypto enthusiasts in India find the recent report disconcerting. The so-called denial from the Finance Minister has done little to assuage their fears.
With confusion surrounding cryptocurrencies in India, especially when they are trading at an all-time high, it will be interesting to see how things work pan out in the future. But if you are trading in Bitcoin, buying goods via Bitcoin, or hold other cryptocurrencies in the country, there’s nothing to worry about right now. So, do you buy and sell Bitcoins in India? What are your thoughts on the government’s outlook towards Bitcoin? Let us know your opinion in the comments below.