Investments in cryptocurrency have gained a lot of momentum recently. At the beginning of the second quarter of FY’21-22, there were approximately 15 million crypto investors in India. As the conversation regarding the government’s cryptocurrency bill is underway, Indian investors have many questions about the legal implications of cryptocurrency investments. In this article, we will answer some critical questions about investing in cryptocurrency in India, any legal implications, and more.
Is Investing Cryptocurrency Legal In India?
Let’s address the elephant in the room first – is investing and buying cryptocurrency in India legal? The short answer is yes, since there are no defined regulations about it (so far). There are no current laws that prohibit investments. Cryptocurrencies right now are not issued or controlled by any government or regulatory body. Currently, if you buy cryptocurrency, the investment is treated like a commodity or asset class, much like gold or real estate trading.
What Will the New Crypto Bill Mean for Crypto Investments – What We Know So Far
As crypto gained popularity in 2018, the Reserve Bank of India barred banks and financial institutions from dealing in cryptocurrencies. The curb was overruled by the Supreme Court in March’20. RBI also issued a statement asking banks not to refer to their 2018 circular to ban crypto transactions, a move that was hailed by crypto investors.
As the conversation around tabling the crypto bill is underway, a lot of reports talk about what the next course of action could be. According to an Economic Times report, some cryptocurrencies like Bitcoin, Ethereum, Tether, etc. will be considered as assets or commodities. These will be treated likewise for taxation and other utilities like payments, investment, and more. Former RBI deputy governor R Gandhi has advocated classifying cryptocurrencies as an asset to make it easier to have regulations around them.
Another important aspect of the report is that after the bill comes into effect, only government-approved cryptocurrencies will be allowed to trade. Many investors are also hopeful that the bill will be able to clear the air about tax implications around cryptocurrencies.
Is Cryptocurrency a Valid Currency in India?
Cryptocurrency is not a standard or valid currency in India. The currency of a country is a legal tender that is regulated and controlled by a sovereign guarantee. In India, only the RBI can issue a currency. What this means is that if you buy bitcoin in India or any other cryptocurrency for that matter you cannot exchange or use it to buy anything in return. Having said this, cryptocurrencies can be minted and traded online within the country. Cryptocurrencies are digital currencies and are considered a valid asset class.
Is It Safe to Trade in Cryptocurrencies?
Buying cryptocurrency in India or trading in cryptocurrencies is as safe as trading in any other investment class. It is definitely subject to related market risks much like mutual funds, stocks, real estate, gold, etc. However, right now, the trading of cryptocurrencies isn’t regulated by a government body (like share trading and mutual funds), something which might come in place with the crypto bill.
The Future of Cryptocurrency Investments in India
The crypto bill can be a game-changer for investors planning to invest in bitcoin, ether, or any other cryptocurrency. One of the positive changes that we might see are innovations in applications where digital assets can be created. Regularization of cryptocurrencies will ensure optimizing the volatility of crypto investments.
Crypto investments have given good returns in the past. However, cryptocurrency has been subjected to market conditions as well. So, it might make sense to plan your investment portfolio in cryptocurrency by studying the market and understanding the risks. Bitcoin has been the most popular and stable cryptocurrency so far. Therefore, investing in bitcoin might be beneficial (subject to market). Zebpay is a one-stop shop that can help you securely invest in Bitcoin and other digital currencies. You can start your crypto investment journey with Zebpay with Rs. 100/- only. To know more about how to buy Bitcoin in India or and start your crypto trading journey – sign up.