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Cryptocurrency Regulation in India

Cryptocurrency Regulation in India

Crypto regulation in India
Crypto regulation in India

With a huge pool of young and vibrant populations, India is an active participant in the cryptocurrency revolution. Young people are comparatively more open to newer technologies, investments, trading methods, etc. Therefore, they are investing and trading crypto aggressively during the last couple of months and years.

Though there is no government mechanism to measure the crypto in circulation, according to leading exchanges such as BuyUcoin, Indians have invested around 6.6 billion US dollars as of July’21. More than 1.5 crores Indians are trading cryptocurrencies and numbers are rising by leaps & bounds. This upward and confident trend is because people feel crypto is transparent, safe, and with good returns on investment. Several people are preferring crypto over physical assets such as gold, platinum, etc.

Given this surge in demand and government interventions through several platforms, it is essential to know cryptocurrency regulation in India, RBI’s stand, market share, etc to make an informed decision. Read through the passage and invest wisely.

The legality of Cryptocurrency in India – Is crypto legal in India? 

There are no straightforward yes or no types of replies to the question. The government is considering their options and observing the trends. On the legality of cryptocurrencies, there are no legal regulations regarding crypto trading in India currently. It is not illegal. If you want to buy, sell, and crypto trade, you can certainly do that with leading exchanges such as BuyUcoin.

According to the latest developments Government of India is considering a regulatory framework for managing the crypto market. Several notable exchanges such as BuyUcoin have urged the Government to not take drastic measures to discourage trade in crypto and put some regulatory measures to keep it organized. An organized market will encourage people for more investment and participation. 

People will feel safe and secure. After rounds of discussion, the Government is planning to constitute an expert panel to suggest cryptocurrency regulation in India. The legal status is unregularized and it will be regularised in the due course. Cryptocurrency is not illegal but also there is no central authority for its regulation. This is the cause of concern for the Government. However, blockchain is the most secured technology that government does not want to miss out on it.

The government’s think tank is considering on method to minimize investor’s risk, perform the role of the regulator, and utilizing blockchain technology. Currently, Government and RBI is working on “Cryptocurrency and Regulation of Official Digital Currency Bill, 2021”

Government Attitude towards Cryptocurrencies

The government’s attitude is to observe cryptocurrencies, market trends, investor’s responses, and the security of the fund. The regulatory bodies are not in a hurry to carpet ban or strict regulation on the crypto. If the market behaves optimistically, the government might make the provisions for legal cryptocurrency in India.

In a calculated approach, The Ministry of Corporate Affairs has notified that all entities and companies have to furnish crypto investment and trading details for the financial year. We can say, this is one of the initial steps towards cryptocurrency regulation in India.

The government is treading carefully towards making any decisions concerning cryptocurrency. Accountability of companies to disclose crypto business will help in any illegal activities including money laundering, black money in the system, etc. The MCA decision will improve corporate governance with transparency.

The government has clarified its intention recently that there would not be a blanket ban on crypto. In a press brief, Finance Minister Nirmala Sitharaman assured investors that the government is observing the crypto market and open for experimentation with new technologies.

Current Size of Cryptocurrency Market in India

After clarifying the point on is trading cryptocurrency is legal in India, let’s move ahead with the current and future of the crypto market in India. Indicators and trends are very optimistic and the size of the cryptocurrency market in India will grow from 1.6 billion US Dollars in 2021 to 2.2 billion US Dollars by 2026 as per experts’ opinion.

Leading exchanges are showing impressive rallies and experiencing a huge rush of investors and partners. One of the leading exchanges for the trading in crypto BuyUcoin has crossed a million holders and traders on their platform. The market is experiencing a compound annual growth rate of 7.1 percent.

Blockchain technology, safety systems, ease of use, an alternative to physical assets are prominent reasons for an impressive market rally in recent years and it will grow stronger in near future.

Taxation on Cryptocurrency Investment

The Reserve Bank of India has not made notifications or authorization for cryptocurrency regulation in India. Hence, there are no tax laws regarding cryptocurrency investment and business. There are no rules for definition and clarification from Income Tax Department. But it does not mean that you do not need to pay taxes for crypto business. If a person is earning profit from crypto investment and business, he/she is liable for income tax on profit gain from the investment.

Profit gains from trading in cryptocurrency can be taxed as income from a business if trades frequently or held for investment requirements. If earning is more than fifty lakhs INR, the investor needs to disclose their holdings in the schedule AL.

Nature of Investment Decides Taxation

Cryptocurrencies are traded and stored either in currency or assets. Type of investment decides taxation regulations. Tax slabs are applicable on short-term and long-term investments.

Short term and long-term investor

If the investor consumes their investments in crypto within three years, a relevant tax slab for short-term capital gains tax will apply. For more than three years, the tax will be charged for long-term capital gain that is twenty percent.

Crypto Miners

For crypto miners, digital currency mined is a type of self-generated capital asset and can qualify as capital gains tax.

Foreign Assets and Income Disclosure

Traders should also disclose cryptocurrencies details in asset and currency in foreign assets and income schedules. This will save them from unwanted taxation and penal repercussions according to the Act and the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. There is no specific cryptocurrency regulation in India regarding taxation and we will have to wait and watch the market trends and government steps.

RBI’s Stand on Cryptocurrency

RBI is the central bank of the Government of India and apex body for financial decisions. Though RBI is not very supportive of crypto, they are making efforts to make digital transactions safer and proper utilization of new-age technology that is blockchain.

In a recent series of announcements and notifications by RBI in respect to cryptocurrencies, the apex body notified banks on 6th June’21 that they cannot discourage customers from trading in crypto. It was a response where some of the banks including SBI and HDFC have asked their customers not to trade in cryptocurrency.

In another instance, the Deputy Governor of RBI has informed that about 86 percent of central banks are actively observing the capability of cryptocurrencies, 60 percent are already utilizing blockchain technology for experimentation, and 14 percent have started pilot projects. These are some of the recent developments by RBI while we look answer for is cryptocurrency legal in India. 

Key Takeaways from RBI Stand on Cryptocurrencies

  • RBI is considering its digital currency, Government has deferred regulation on crypto business, these indicate RBI has softened its tough stand on crypto.
  • Deposit and withdraw will become easier after RBI’s notification for banks. This is the Confidence booster for investors and exchanges
  • This is a new beginning towards legal cryptocurrency in India.

Final Thoughts

The government of India has not listed the much-anticipated Cryptocurrency Bill for the ongoing Monsoon Session 2021. Spokespersons have declined to reply whether it will be tabled in Winter Session 2021 or not. The Intention of the Government is somewhat clear with the postponement of the bill. The government wants to observe the crypto business and its effect. The government’s stand regarding the bill is that it requires further discussion among the Ministry of Finance, RBI, Banks, and other significant stakeholders.

RBI has conveyed its concern for the unregulated cryptocurrency and suggested investors do due diligence and careful investment decision. The central bank asked banks to conduct necessary KYC and regulation governing standards for AML, CFT, and PMLA, 2002. The government is exploring all the options, and the future holds excellent prospects for cryptocurrencies in India.

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