Is Cryptocurrency legal in India?

Highlights :

• In 2018, RBI banned Cryptocurrency. 
• In March 2020, the Supreme Court struck down the RBI circular. 
• In January 2021, the Indian government proposed a bill to issue an official digital currency by the RBI. 
• Now, Cryptocurrency is considered a digital asset. 
• A tax rate of 30% has been imposed on it.

Cryptocurrency has been a topic of controversy and debate in many countries, including India. The question of whether or not cryptocurrency is legal in India has been a topic of discussion for many years, with the government and regulatory bodies taking different stances on the matter.

In 2018, the Reserve Bank of India (RBI) issued a circular that banned all financial institutions under its jurisdiction from providing services to individuals or businesses in cryptocurrencies. This effectively shut down cryptocurrency exchanges operating in India and made it difficult for individuals to buy or sell cryptocurrencies using traditional banking channels.

However, in March 2020, the Supreme Court of India struck down the RBI circular, stating that it was unconstitutional and in violation of the fundamental right to carry on any trade or business. This decision paved the way for the resurgence of cryptocurrency trading in India, and since then, the cryptocurrency market in India has grown significantly.

In January 2021, the Indian government proposed a bill called the Cryptocurrency and Regulation of Official Digital Currency Bill, which aims to create a regulatory framework for cryptocurrency in India. The bill proposes to ban all private cryptocurrencies and create a framework for developing an official digital currency issued by the Reserve Bank of India.

The proposed bill has faced criticism from the cryptocurrency community in India, which argues that a ban on private cryptocurrencies would stifle innovation and growth in the sector. They also argue that a ban would push cryptocurrency trading underground and make it more difficult to regulate.

Despite the uncertain legal status of cryptocurrency in India, the market continues to grow. Cryptocurrency exchanges in India have reported a significant increase in trading volumes since the Supreme Court’s decision in 2020, and more and more individuals are investing in cryptocurrencies.

Legal Position of Cryptocurrency in India

Cryptocurrencies are considered virtual digital assets and are taxed as such. The Indian government recognizes that these assets are part of the global and domestic economy and cannot be banned outright. However, a tax rate of 30% has been imposed on cryptocurrencies in India as announced in the 2022 union budget. Despite the taxation, cryptocurrency remains without a clearly defined legal framework for its use and mining in India. The lack of rules and regulations leaves traders and investors in the cryptocurrency market waiting for the government to release a bill outlining the specifics of how transactions and mining of cryptocurrencies should be conducted in India.