Confusion surrounding the legality of Bitcoin and other cryptocurrencies is at an all-time high in India following a recent report that suggested the Modi government is looking to ban all cryptocurrencies in the country. So will the proposed crypto ban go through? Is cryptocurrency (Bitcoin, etc.) legal in India? Will Bitcoin become illegal following the rumored ban? Can you be penalized for owning and trading in digital assets? In this article, we try to clear up the confusion over the legality of crypto assets in India.

The RBI (Reserve Bank of India) once reportedly considered launching its own digital currency a few years ago. However, nothing came of it, and many believed that the central bank nixed the idea for good. As it turns out, though, the Indian government reportedly continues to harbor ambitions of introducing its own digital token. Here, we will tell you more about those plans and about the status of cryptocurrencies in the country. We will also answer the burning question: Is Bitcoin legal in India?

  • Are Cryptocurrencies (Bitcoin, Ethereum, etc) Legal in India?
  • Controversy and Confusion Surrounding Impending Legislation
  • So Bitcoins are Legal in India but for How Long?
  • Blockchain is OK but Bitcoin is Not?

Bitcoin and other cryptocurrencies exist in legal limbo in India, whereby they are neither authorized nor regulated by any government agency in the country. However, the RBI did issue a directive a few years ago, instructing regulated financial institutions to exit relationships with crypto companies. That said, digital tokens are not explicitly banned, so they are technically legal in the country. That means you can buy, sell, own, and store digital assets without violating any law in India.

The government has dragged its feet on the matter thus far. The legal vacuum means that no rules, regulations, or guidelines exist for resolving disputes that could arise while dealing with Bitcoins. However, a report suggests that work on the controversial cryptocurrency regulation bill is nearing completion, and it can be introduced in Parliament by the end of 2021.

The government’s impending legislative efforts and the lack of clarity surrounding the legal status of Bitcoin are only adding more confusion, with a report (link above) suggesting that India will soon propose a law banning all cryptocurrencies.

She further acknowledged the advantages of blockchain technology, saying that it holds significant promise to add to the growth of technology in the country. “A lot of fintech companies have made a lot of progress on it. We have got several presentations. Much work at the state level is happening, and we want to take it in a big way in IFSC or Gift City in Gandhinagar,” she added.

The careful wording of Ms. Sitharaman’s denial, however, raises more questions than it answers. Her statements suggest that researchers might still be able to research cryptocurrencies, but it’s not immediately clear whether Bitcoin (or other cryptocurrency) trading would remain legal for regular citizens. Further, the Finance Ministry will spend more time on the impending bill once the Parliament sessions are over, she added.

Globally, a large number of leading enterprises have embraced blockchain-based digital tokens over the past few years. The latest to join the bandwagon is PayPal, which announced support for Bitcoin, Ethereum, and other cryptocurrencies last October. The company announced a new service that will enable customers to buy, sell and hold bitcoin and other digital currencies in its online wallets. You can also use digital money as a funding source for purchases at its 26 million merchants worldwide.

Digital currencies remain in a legal twilight zone in India without any rules and regulations governing them. While any move to regulate the sector is welcome, we hope that the proposed legislation will facilitate the orderly trading of cryptocurrency trading in the country rather than criminalizing such activity. That said, many crypto enthusiasts in India find the recent report disconcerting. The so-called denial from the Finance Minister has done little to assuage their fears.