India’s central bank has forbidden all regulated entities from dealing with bitcoin.
In its bimonthly monetary policy issued today, the Reserve Bank of India (RBI) stated that financial agenciesand banks regulated by it will not “deal with or provide services to any individual or business entities dealing with or settling VCs (virtual currencies).” “Regulated entities which already provide such services shall exit the relationship with a specified time,” the policy stated. The bank cited concerns related to consumer protection, market integrity and money laundering as reasons for its decision.
The measure could significantly drive down cryptocurrency trading in the country since it means that Indians will not be able to transfer funds from their bank account to crypto e-wallets for purchase or sale transactions. But the bank has not completely washed its hands ofdigital coins. It stated that virtual currencies have “the potential to improve the efficiency and inclusiveness of the financial system.”
Regulatory Warnings
The legal status of cryptocurrencies is unclear in India. They are not banned, but regulatory authorities have repeatedly cautioned users and traders about their risks and disassociated themselves from transactions involving the financial instruments. For example, the RBI clarified that “no regulatory approvals, registration or authorization is stated to have been obtained by the entities concerned for carrying on such activities” in a December 2013 circular. (See also: India's Central Bank Issues Warning About Cryptocurrencies.)
During his speech to present the budget earlier this year, IndianFinance Minister Arun Jaitley said cryptocurrencies were not legal tender and that the government would take all efforts to eliminate their use in “financing illegitimate payment systems or as part of the payment system.” The government’s income tax division also sent notices to individuals in January this year after a survey showed that $3.5 billion worth of transactions involving the cryptocurrency had taken place in the last year.
India is home to approximately 1% of bitcoin miners. While crypto trading volumes at exchanges are nowhere near their counterparts in China or South Korea, they have witnessed stratospheric growth in the last year due to rising media chatter about cryptocurrencies. Zebpay, India’s largest cryptocurrency exchange, claimed to have added 200,000 users per day in January.
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FAQs
After the RBI's 2018 orders were challenged by the industry and struck down by the Supreme Court, the central bank asked financial institutions to strictly comply with tough money laundering and foreign exchange rules, effectively keeping cryptocurrencies out of India's formal financial system.
Why Indian banks are not supporting cryptocurrency? ›
Crypto currencies cannot be referred to as "currencies" as they have no underlying value, a central bank official said. The Reserve Bank of India (RBI) has been critical of new-age currencies like bitcoins, saying they pose systemic risk to the financial systems.
Is crypto trading legal in India in 2024? ›
First off, owning and trading Bitcoin (and other cryptocurrencies) is legal in India. The Reserve Bank of India (RBI) classifies cryptocurrencies as "virtual digital assets" (VDAs). This indicates recognition for tax purposes, but they are not considered legal tender.
Why are central banks against cryptocurrency? ›
Bitcoin Cannot Be Regulated
This means that governments promise to make a currency borrower whole in case of a default. The U.S. government relies on the Federal Reserve, a central bank on which Congress only has partial authority, to manage the supply of circulating money.
Is it legal to buy Bitcoin in India? ›
Investors need to submit important documents such as Aadhaar card and PAN card. After this, they should also complete the KYC process thoroughly. To buy bitcoins in India, investors are required to place an order on a cryptocurrency exchange.
Is it safe to invest in cryptocurrency in India? ›
The Indian government and the Reserve Bank of India (RBI) have had fluctuating stances on cryptocurrency. Although there isn't an outright ban, there have been instances of regulatory scrutiny. Always ensure you are compliant with local laws and regulations when investing in cryptocurrencies.
What is the current legal status of cryptocurrency in India? ›
Is Cryptocurrency In India Legal or Not? Cryptocurrencies as a payment medium in India are not regulated by any central authority. There are no rules and regulations or any guidelines laid down for settling disputes while dealing with cryptocurrency.
How much crypto is tax free in India? ›
Individual Income Tax Slab Rates India
| Existing Tax Regime | | |
|---|
| Up to RS250,000 | 0% | 0% |
| RS250,001 - RS500,000 | 5% above RS250,000 | 5% above RS300,000 |
| RS500,001 - RS1,000,000 | RS12,500 + 20% above RS500,000 | RS15,000 + 10% above RS600,000 |
| Above RS1,000,000 | RS112,500 + 30% above RS1,000,000 | RS45,000 + 15% above RS900,000 |
3 more rowsKey Takeaways. As of March 2024, bitcoin was legal in the U.S., Japan, the U.K., and most other developed countries. In general, it is necessary to look at laws in specific countries. In the U.S., the IRS considers bitcoin and other cryptocurrencies property, issuing appropriate tax treatment guidelines for taxpayers.
Will crypto replace the dollar? ›
Will Cryptocurrency Replace Fiat Money? It's unlikely that cryptocurrency, in its current form, will replace fiat currency in developed countries. However, it is possible in financially struggling nations.
Bitcoin is not controlled by any single group or person. Instead, it is governed by multiple stakeholders — including developers, miners, and users. Developers write the code that makes Bitcoin run; miners validate transactions; and users put the software to work by trading, transacting, holding, and more.
Will digital currency replace cash? ›
Will a U.S. CBDC replace cash or paper currency? The Federal Reserve is committed to ensuring the continued safety and availability of cash and is considering a CBDC as a means to expand safe payment options, not to reduce or replace them.
Can I trade cryptocurrency in India? ›
CoinSwitch is a leading cryptocurrency exchange in India, offering competitive rates by aggregating liquidity from top exchanges. With a simple KYC process and emphasis on security as a non-custodial platform, it has gained popularity among users.
Why crypto is not popular in India? ›
Industry experts attribute a wide number of factors to this, including apprehension among retail investors triggered by a lack of regulatory clarity, India's crypto taxation policy, and statements against the cryptocurrency sector by senior government officials.
Which crypto exchange is legal in India? ›
In conclusion, the best crypto exchanges in India include Mudrex, CoinDCX, CoinSwitch, WazirX, ZebPay, and BitBNS based on several factors like ease of use, security, fees, coin availability, and more. Each crypto exchange has its strengths and weaknesses, catering to various needs and preferences.
How is 30% tax on cryptocurrency in India? ›
30% tax on Crypto in India income for FY 2022-23: 30% of ₹1 lakh = ₹30,000 (plus surcharge and cess). Selling: A 30% tax is payable on selling any crypto asset with a profit margin. Selling: A 30% crypto tax is levied when trading crypto. Exchanging: A similar 30% tax is also applied on such occasions.
