Cryptocurrency has rapidly gained popularity in recent years, with many people seeing it as a revolutionary form of currency that challenges traditional legal tenders. As countries around the world grapple with the implications of this new technology, India finds itself at a crossroads. This article will explore the current state of cryptocurrency in India, examining the legal landscape, the history of cryptocurrency in the country, and the types of cryptocurrencies available to Indian investors.
Table of Contents
Is Cryptocurrency Legal in India?
The legality of cryptocurrency in India has been a topic of debate, and at the time of writing, it remains in a state of flux. While private cryptocurrencies are not outright banned, they are also not recognized as legal tender. This means that cryptocurrencies cannot be used as an alternative to the Indian Rupee (INR) for payments or transactions. However, trading and investing in cryptocurrencies are allowed, and the government has been taking steps to draft regulations for the sector.
Crypto Regulation in India
India has been slow to adopt clear regulations surrounding cryptocurrency. It wasn’t until February 2021 that the government introduced the Official Digital Currency Bill in Parliament, which aims to create a legal framework for digital currencies in the country. The bill proposes the creation of a central bank digital currency (CBDC), the Digital Rupee, backed by the Reserve Bank of India (RBI).
In the meantime, the RBI and the Securities and Exchange Board of India (SEBI) are working together to create a regulatory framework for cryptocurrencies as an asset class. This includes defining norms for Initial Coin Offerings (ICOs), taxation, and Anti-Money Laundering (AML) and Know Your Customer (KYC) requirements.
Until these regulations are finalized, financial institutions in India are not allowed to deal with cryptocurrency exchanges or provide services to customers trading in cryptocurrencies. However, individuals can still trade and invest in cryptocurrencies through peer-to-peer (P2P) platforms and other international exchanges.
How Is Crypto Taxed in India?
There is indeed a tax on cryptocurrencies in India. Before 2022, there wasn’t a specific income tax act for the crypto sector. In 2022, however, the central government of India officially recognized all digital coins and tokens as VDAs — Virtual Digital Assets — and implemented the applicable tax framework.
According to it, all profits from trading, selling, or spending any virtual asset are taxed at a 30% rate, and a 1% TDS tax is levied on the sale of crypto assets exceeding RS 50,000 (RS 10,000 in certain cases) in a single financial year. Furthermore, if you receive income in crypto through activities like staking or mining, you may be subject to income tax at your individual tax rate.
The History of Cryptocurrencies in India
The journey of cryptocurrency in India has been a rollercoaster ride, with several milestones marking its growth and setbacks. Here’s a brief overview of the timeline of crypto developments and regulations in the country.
2013–2016: The Early Years
The early years of cryptocurrency in India were marked by curiosity and skepticism. Bitcoin, the first and most popular cryptocurrency, made its way into the Indian market in 2013. Entrepreneurs and tech enthusiasts started exploring the potential of blockchain technology, the backbone of cryptocurrencies, and the first crypto exchanges emerged.
2017: The Boom
2017 was a landmark year for cryptocurrencies worldwide, and India was no exception. The value of Bitcoin skyrocketed, and other cryptocurrencies like Ethereum and Ripple also gained traction. The Indian market saw a surge in trading volumes, with new exchanges and blockchain startups emerging.
2018: The Crackdown
Concerned about the potential misuse of cryptocurrencies for illegal activities, in April 2018, the RBI issued a circular prohibiting banks and other financial institutions from providing services to cryptocurrency exchanges and related businesses. This move led to a significant downturn in the Indian crypto market, with many exchanges shutting down or relocating to more crypto-friendly jurisdictions.
2019: The Draft Banning Bill
In July 2019, a high-level government committee recommended a complete ban on cryptocurrencies in India, except for the proposed Digital Rupee. The draft bill, titled “Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019,” proposed heavy penalties for those dealing in cryptocurrencies. However, the bill was never tabled in Parliament, and the recommendations were not implemented.
2020: The Supreme Court Verdict
In a landmark judgment on March 4, 2020, the Supreme Court of India overturned the RBI’s circular, stating that the central bank’s actions were “disproportionate” and unconstitutional. This decision paved the way for the resurgence of the cryptocurrency market in India, with many exchanges resuming operations and renewed interest in digital currencies among the public.
2021 – Present: The Cryptocurrency Bill
The Indian Parliament has been planning to introduce a new cryptocurrency bill since 2021, but there have been numerous delays due to the complexity of crypto as a financial instrument. The Indian government has recently announced that any effective legislation on crypto assets has to involve significant international collaboration due to the borderless nature of virtual assets. This suggests that we won’t see the finished cryptocurrency bill in the near future.
Types of Cryptocurrencies That Are Available in India
There are thousands of cryptocurrencies available globally, and Indian investors have access to a wide range of options. Some of the most popular cryptocurrencies in India include:
- Bitcoin (BTC) – The first and most well-known cryptocurrency, Bitcoin remains the largest and most widely traded digital currency in the world.
- Ethereum (ETH) – Ethereum is a decentralized platform that enables developers to create and deploy smart contracts and decentralized applications (dApps) on its blockchain.
- Ripple (XRP) – Ripple is a digital payment protocol that facilitates fast and low-cost cross-border transactions between banks and other financial institutions.
- Litecoin (LTC) – Litecoin is a peer-to-peer cryptocurrency that aims to provide faster and cheaper transactions compared to Bitcoin.
- Cardano (ADA) – Cardano is a blockchain platform with a focus on security and scalability; it supports smart contracts and dApps.
Many other types of virtual currency, like Chainlink (LINK), Polkadot (DOT), and Uniswap (UNI), are also available for Indian investors through various cryptocurrency exchanges and P2P platforms.
How to Buy Crypto in India
Despite the lack of clear regulations and the absence of support from financial institutions, there are several ways for Indian investors to buy, sell, and trade cryptocurrencies. Here’s a step-by-step guide on how to get started:
Step 1: Choose a cryptocurrency exchange
The first step is to choose a reputable cryptocurrency exchange that operates in India. Some popular options include:
- WazirX
- CoinDCX
- ZebPay
- Bitbns
These exchanges allow users to buy, sell, and trade various cryptocurrencies using Indian Rupees (INR) as well as other digital currencies.
Step 2: Complete the KYC process
To comply with AML and KYC regulations, users must provide personal information such as their name, address, date of birth, and PAN card number. They must also submit copies of their ID and proof of address.
Step 3: Deposit funds
After completing the KYC process, users can deposit fiat currency into their exchange account using various methods, such as bank transfers, UPI, or even P2P transactions.
Step 4: Buy and trade cryptocurrencies
Once the funds are deposited, users can buy and trade cryptocurrencies on the exchange. Most exchanges offer a range of trading options, from spot trading to futures and options trading.
Step 5: Store your cryptocurrencies securely
After acquiring cryptocurrencies, it is essential to store them securely. Although keeping them on the exchange is an option, it may not be the safest choice due to the risk of hacks and security breaches. Instead, consider using a hardware or software wallet to store your virtual digital assets. Some popular wallets include:
- Ledger Nano S (Hardware wallet)
- Trezor (Hardware wallet)
- Exodus (Software wallet)
- Trust Wallet (Software wallet)
These wallets ensure a higher level of security and enable users to manage their cryptocurrencies with greater control. Additionally, they make it easy to access your virtual currency in the future if you ever decide to try crypto trading.
Step 6: Stay informed and updated
Given the rapidly changing landscape of cryptocurrency in India, staying informed about new developments, regulations, and market trends is crucial. Follow reputable news sources, engage with the cryptocurrency community, and consider joining forums or social media groups to stay updated and make informed decisions.
The Best Crypto Exchanges in India
While there are numerous cryptocurrency exchanges operating in India, it is crucial to choose a platform that combines security, ease of use, and competitive fees for crypto transactions. With these factors in mind, we made a list of the top five crypto exchanges in India.
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1. WazirX
WazirX is one of the most popular and well-established cryptocurrency exchanges in India. Acquired by Binance, one of the world’s largest cryptocurrency exchanges, WazirX is notable for its broad range of cryptocurrencies, including Bitcoin, Ethereum, Ripple, and many more. The platform lures users with various trading options, such as spot, margin, and futures trading, and boasts a user-friendly interface. WazirX also has its native WRX token, which users can earn or use to pay trading fees at a discounted rate.
2. CoinDCX
CoinDCX is another leading cryptocurrency exchange in India with a comprehensive range of digital assets and trading options under its belt. With a sleek and easy-to-use interface, CoinDCX allows users to trade over 200 cryptocurrencies using Indian Rupees (INR) or other digital currencies. The platform offers margin trading, futures trading, and lending services. Additionally, CoinDCX shares educational resources and trading tutorials through its DCX Learn platform.
3. ZebPay
ZebPay is one of the oldest and most trusted cryptocurrency exchanges in India. Initially launched in 2014, ZebPay has made a strong comeback after the Supreme Court verdict in 2020. The platform supports multiple cryptocurrencies, including Bitcoin, Ethereum, Litecoin, and Ripple. ZebPay can hardly go unnoticed due to its user-friendly interface, competitive fees, and robust security features, making it a popular choice for both beginners and experienced traders.
4. Bitbns
Bitbns is an Indian cryptocurrency exchange founded in 2017. It lists an impressive array of cryptocurrencies, including major coins like Bitcoin, Ethereum, and Ripple, as well as lesser-known altcoins. Bitbns has a simple and intuitive interface, making it easy for new users to navigate. The platform also offers margin trading and lending services along with innovative features like “bracket orders” and “trailing stop loss” for advanced traders.
5. Unocoin
Unocoin is another well-known cryptocurrency exchange in India. Primarily focused on Bitcoin, the platform allows users to buy, sell, and store Bitcoin using INR, promising a simple and user-friendly experience to beginners. Unocoin also provides a Bitcoin wallet, a Systematic Investment Plan (SIP) feature for regular investments, and a Bitcoin merchant gateway for businesses to accept Bitcoin payments.
Conclusion
Cryptocurrency in India has had a tumultuous history, and its future remains uncertain as the government works to establish a clear regulatory framework. Despite the challenges, cryptocurrencies continue to attract a growing number of investors in the country, fueled by the promise of innovation, decentralization, and potential financial gains. As India continues to navigate the complexities of this emerging technology, investors should stay informed and exercise caution while investing in digital assets.
Disclaimer: Please note that the contents of this article are not financial or investing advice. The information provided in this article is the author’s opinion only and should not be considered as offering trading or investing recommendations. We do not make any warranties about the completeness, reliability and accuracy of this information. The cryptocurrency market suffers from high volatility and occasional arbitrary movements. Any investor, trader, or regular crypto users should research multiple viewpoints and be familiar with all local regulations before committing to an investment.