Nowadays people are making huge investments in Bitcoin (BTC) and other cryptocurrencies. There is no regulatory body to govern the various cryptocurrency exchanges in India. It is merely working on the demand-supply forces. The audience is surely fearing the losses due to the absence of governing body, but the returns are so tempting that they are very much desiring to invest in these digital currencies. So let’s try to dig in a bit more into the legality of Bitcoin.
But before we discuss about the legality of Bitcoin in India, let’s us consider few other basic talks.
Bitcoin is one of the digital currencies, very commonly known as cryptocurrency today. It is traded on the worldwide market. It is the first decentralized cryptocurrency and has no regulating authority. The founder of the Bitcoin is Satoshi Nakamoto, who is anonymous. Bitcoin works on blockchain network, which is a widely growing technology. The blockchain network is secured by miners, who log every transaction of the Bitcoin.
Yes, in India, Bitcoin can be bought and sold but cannot be enforced upon anyone to be used as the payment mode. The legality of trade in Bitcoin in India has not yet been clarified. Trading in Bitcoin is not yet declared as illegal (this doesn’t mean that Bitcoin is a legal tender in India).
There are exchanges like Koinex, Pocketbits, Zebpay, Unocoin and many more where Bitcoin and all other altcoins are traded in India. These are online exchanges and have no regulating authority. RBI has thus warned the audience about the security issues and clearly mentioned that the people are trading at their own risks.
In a Press Release by RBI, it has been stated that RBI has not given license to any virtual currency operator, and any person dealing in the same will be doing so at his/her own risk. However, the press release nowhere claims trading in Bitcoins to be illegal.
RBI is the apex banking authority in India, which controls the monetary policies in India. Thus, when RBI states that it has not given any authorizations, then it should mean that authorization is not given to virtual currencies as a legal tender.
RBI has not mentioned that Bitcoins and other cryptocurrencies cannot be legally held as an investment/asset. Bitcoin is not yet banned in India.
Just that RBI is warning the traders of the security issues involved in virtual currencies. If the person is still dealing in the digital currencies, the person himself will be wholly responsible for any losses caused while carrying out such a trade.
Mr. Arun Jaitley, the Finance Minister of India on 29th December 2017 clearly stated in Rajya Sabha that Reserve Bank of India and Government of India both haven’t given any of virtual currencies including Bitcoins a recognition of legal tender.
For instance, if we are out for shopping we cannot make the payments of the bills with Bitcoin rather than paying rupees or making card payments. Here, Bitcoin couldn’t be used as payment mode as it is clearly declared that it is not a legal tender in India.
However, when we buy Bitcoins or other altcoins like NEO, ETH, XRP etc. with rupees via our bank account and sell Bitcoins to get Rupees in our bank account we aren’t using Bitcoin as a legal tender, we are simply trading with it online.
Many countries worldwide have started using bitcoin as a mode of payment for buying goods and services. Very few have made it a legal tender. Following is the list of few countries which have adapted to the virtual currencies/blockchain technology:
#1. In a recent video from CNBC, we could understand that Japan has accepted Bitcoin as a legal tender.
#3. Belarus has signed a Decree on the development of the digital economy, wherein it has mentioned that there will be tax exemption on mining, trading/capital gains etc.… for 5 years, until 1st January 2023.
#4. United States Government states that the digital currency may be used as a mode of payment like a real currency in the country. However, it will not have a legal tender status in any jurisdiction.
#5. Canadian Government has given clarity on using the digital currencies. Cryptocurrencies are not a legal tender in Canada. However, they can be used to buy/sell/invest etc.… and the transactions are liable to taxation.
In few countries, several prominent businesses like Dish Network (DISH), Dell and Overstock.com (OSTK) etc.… which welcome payment in Bitcoin. Subway franchise in Buenos Aires recently started accepting payments in Bitcoin for sandwiches!
The taxation of gains from trading of Bitcoin and other cryptocurrency is not yet clearly brought out in the statute books of India. However, from the understanding obtained from current statute, the gains from trading in Bitcoin or other Alt coins should be taxable under the head Capital Gains or under the head Business & Profession.
Recently there was a leaked image of a notice from Income Tax department, wherein they demanded several transaction details regarding the cryptocurrencies.
The above notice primarily looks for the concern of tax liability payment, on the profits derived from cryptocurrencies, and nothing to do with the legality issues.
Coming back to the main question – Is Bitcoin legal in India?
Bitcoins and all other cryptocurrencies are not a legal tender in India as clarified by our Finance Minister. However, trading in Bitcoin has still not been declared as illegal.
For the purpose of taxation & other legal issues on cryptocurrencies, we are awaiting more clarity in the upcoming Union Budget on 1st February 2018.
If you have any other view/news on legal terms of Bitcoin and other cryptocurrencies in India, then please do share them in the comments below!