Cryptocurrency in India has always been something that’s not understood by many individuals. India has one of the foremost important economies within the world, would always fear something which has the potential to exchange their primary currency because it doesn’t have the know-how to curb the wrong practices which can result from crypto trading. But exactly what is Cryptocurrency? What are various sorts of Cryptocurrencies? Are Cryptocurrencies banned in India? What are the Regulations to trade them? Let us try to get answers to all these questions.
What is Cryptocurrency?
Cryptocurrencies are digital currencies that utilize encryption to secure transactions. A cryptocurrency (also mentioned as “altcoins”) uses decentralized control instead of the traditional centralized electronic money or centralized banking systems.
The cryptocurrency was introduced by a group of pseudonymous developers by the name of Satoshi Nakamoto named Bitcoin. Though the introduction of cryptocurrencies and creating a presence within the market wasn’t easy. Bitcoin was introduced within the market in 2008 and took quite a year to possess its first transaction, the primary transaction proceeded in January 2009. Later, various cryptocurrencies were introduced within the market like Litecoin, Namecoin, and Swiftcoin, etc.
Is Cryptocurrency Banned in India?
RBI had earlier stopped all the banks from encouraging the cryptocurrency traders and platforms from operating a checking account in India. The banks had therefore stopped their operations with cryptocurrency traders and platforms after giving them a window. After getting these regulations, the crypto platforms had closed their practices in India and shifted to other jurisdictions that are more crypto-friendly. This had even led to the loss of many such jobs.
Amid such actions, the trades/ platforms of such cryptocurrency had received notices from other departments like tax and GST to elucidate the transactions and loss of revenue to the Indian Government. Many such responses were submitted by all such assesses, however, no further communications are thus far received by such assesses primarily since there’s no clarity or treatment specified for crypto trades/ profits in these acts/ rules. Subsequently, early this March, Supreme Court had accompanied its ruling wherein it ordered RBI to get rid of its curbs which were put in situ for crypto traders/ platforms.
After this ruling, RBI had filed a review petition with the SC which was scheduled for hearing in April 2020, but during this lockdown, it is often expected to urge prolonged. It’s also expected that the RBI may get regulations in situ to manage the crypto market which is proposed to limit the cryptos to be used for payment systems. Having said that, only trades between the cryptocurrencies would be allowed which might probably be required to be reported regularly to the regulator. This can curb tons of regulations on the platforms and exchanges.
Cryptocurrency itself isn’t banned in India, Citizens of India are allowed to have them. However, the matter is that access to several cryptocurrency exchanges is restricted in India.
Many people who own Cryptocurrencies have cryptocurrency wallet that’s hosted by an exchange like Kraken or Coinbase. These wallets are the place where these currencies are often stored. It’s a safer manner of keeping cryptocurrency, users can access their tokens from anywhere within the world employing a computer, mobile, or tablet.
History of Cryptocurrency in India:
From 2012 to 2017 cryptocurrency in India possesses massive popularity. India is one of the steadily uplifting crypto markets and dealing in currencies like Zebpay, Coinsecure, Unocoin, Koinex, Pocket Bits, and Bitxoxo. Where trading in India is increasing because of an increase in popularity, the cryptocurrencies were shooting prices which are notified by the people around the borders.
In 2013 the RBI issued a handout after monitoring the trading in Bitcoin India and Cryptocurrency market. This handout was to exhort people regarding dealing in virtual currencies.
In 2016 Indian economy had fore-fronted the demonetization with the government declaration. The demonetization leads to more emphasis on digital transactions which was the foremost important opportunity for online banking alternatives like cryptocurrencies. The demonetization of 2016 eventually shifted people to deal in virtual currencies and towards the digital platform i.e. towards the cryptocurrencies. This instance drove up the exchanges of the cryptocurrencies. This increased engagement of Indians forced RBI to issue a second handout in February 2017 with strict orders mentioning the concerns raised within the handout of 2013.
In 2017, two public interest petitions were raised within the Supreme court in February 2017 by Siddharth Dalmia and Dwaipayan Bhowmick regarding the restrictions on trading cryptocurrencies. Eventually, both the Petitions are still pending with the Supreme court.
In 2017 only, the govt. of India embodies a high-level Inter-ministerial committee headed by Shri Subhash Chandra Garg comprising of Shri Ajay Prakash Sawhney (Secretary, Ministry of Electronics and knowledge Technology), Shri Ajay Tyagi (Chairman, Securities, and Exchange Board of India), and Shri B.P. Kanungo (Deputy Governor, Federal Reserve System Bank of India). This committee was formed to remotely study the issues regarding virtual currencies and to return up with the precise actions to be taken during this regard. The committee has submitted its report in July 2019 and said to need the required actions regarding the ban on private cryptocurrencies in India.
In December 2017 the Government of India and thus the RBI has issued another handout to warn the general public regarding the investments in virtual currencies like cryptocurrencies and to affect the uncertainties of the crypto market. By March 2018, the Finance Ministry and RBI have issued various press releases to cautious people regarding the danger involved.
On 6th April 2018, the RBI passed the circular concerning to prevent all the commercial and other banks in India and clearly ordered to stop providing services and dealing in cryptocurrencies. The Circular was issued to all or any of the commercial banks, non-cooperative banks, Payments Banks, Small Finance Banks, NBFCs, and Payment System Providers. This circular was passed in effect that any bank won’t be able to provide any banking services in India and eventually, dealing in virtual currencies will come to a stake during this example automatically. Though this affected the crypto market largely where people aren’t able to exchange through banks and were unable to transfer their currencies. Without access to the banking services even the regular operation wasn’t accessible within the least, this was great trouble for the investors and traders of virtual currencies.
Though due to this action by the Government of India and RBI the crypto market was affected brutally and had an enormous hit eventually. The stakeholders and therefore the investors with cryptocurrencies need to forcefully sell their cryptocurrencies and encash them during a fear in touch heavy loss. Due to this hit sustaining was not that easy as one side crypto market was crashed in the heavy sale and reduces transactions and on another side due to loss over all the banking services. Bearing this treat a petition was filed within the Supreme court by the members of the web and Mobile Association of India on May 15, 2018, against the Federal Reserve Bank of India for the legalization of virtual currencies within the country.
In January 2020, the RBI and government of India had unauthorized the ban on cryptocurrencies and legalized the trading of virtual currencies within the country. The cryptocurrency market was reopened for all the traders and investors and presently people restarted to point out their interest in virtual currencies due to the pandemic. Though pandemic had shown a boom within the crypto market where people were now digitalizing their time.
Top Bitcoin Exchanges in India
Since banking institutions have banned cryptocurrency trading in India, popular exchanges like ZebPay have had to pack up. Nevertheless, the subsequent top exchanges are still currently utilized in India:
Unocoin: Unocoin was founded in 2013 and is that the leading bitcoin exchange in India. It’s backed by investment from the USA and maybe a regulated company offering low 1% fees which fall to 0.7% with increased trading volumes. It’s a comparatively easy exchange platform, allowing users to shop for cryptocurrency with any Indian checking account
WazirX: One of India’s most reliable exchange platforms, WazirX was founded in 2018. It focuses on exchange-escrowed P2P services to enable customers to still withdraw INR. WazirX follows the KYC norms, features a mobile application for both Android and iOS users, and also claims to supply multiple hundred transactions per second.
Paxful: Paxful may be a peer to see marketplace founded in 2015 that permits buyers and sellers to satisfy themselves online and trade directly Bitcoin with one another. Sellers on Paxful accept over 300 payment methods, including the main Indian payment methods like PayTM, Bheem, Phonepe. As a result, many Indians use Paxful thanks to simple access and payment. There’s also no fee for ht site itself since Bitcoin is traded at a premium.
Local Bitcoins support the foremost popular payment methods and allow individuals from different countries to get Bitcoin for their local currency. Local Bitcoins presently operates in various Indian cities like Mumbai, Hyderabad, Kolkata, Delhi, Ahmedabad, Chandigarh, Pune, Guwahati, etc.
The 2019 Supreme Court Proposal should be appreciated, many exchanges and marketplaces are cautious of the Indian government’s attitude towards cryptocurrency generally. As of September 2019, there are not any Bitcoin ATMs in India.
For those that mine cryptocurrency, profits won’t be treated as a capital asset. As such, there’s no capital gains tax. However, if it’s sold then the Bitcoin is going to be taxed and thought of as “income from other sources.”
There is currently no statewide ban on Cryptocurrency in India. This suggests that if you reside or add India you’re allowed to have and use them. However, you’ll not be ready to access or use cryptocurrency exchanges within the country. That can make it hard to access your digital assets.
Shreya has completed her Graduation in Statistics and currently pursuing her Master’s in Finance from the University of Mumbai. Shreya is a founder of askfinanceguru.com where she posts content related to Finance and management where her motto is to make people financially literate. She has also worked with Finlatics for Financial markets research and Portfolio management live project. She is a learner, She loves to connect with people and seek knowledge from them. She is a hardworking and determined person.