With around 100 million cryptocurrency investors, India is one of the biggest markets for cryptocurrencies in the Asia region and one of the fastest expanding in the world, growing 641 percent between July 2020 and June 2021, according to a report by cryptocurrency research firm Chainalysis. What really is astonishing is the gap between India and the US, which sits at the next second. The United States has 27 million crypto owners, followed by Russia at 17.4 million and Nigeria at 13 million. It is really surprising to see the number of Indians investing in cryptocurrencies, especially because there is a lot of uncertainty around their legal status in India.
As of now, the legality of cryptocurrencies in India has been more or less gray. But recently, the government has proposed a bill banning all private cryptocurrencies ahead of this year's Union Budget.
So what does the future look like? Is crypto legal in India? Is it in the gray area? Is crypto going to be banned in India?
Let us jump straight to the facts that we know so far.
Currently, cryptocurrencies are not banned in India and neither has it been banned previously. The confusion is due to the fact that the central bank told financial institutions to stop doing business with cryptocurrency exchanges; it mentions nothing about the people owning these cryptocurrencies. Although this was ruled down in 2020 by the Supreme Court of India, still some banks do not allow people to deposit money on crypto exchanges. The government is still working on a bill that will regulate crypto trading and will bring rules on how cryptocurrency exchanges are supposed to operate in the country, and how income from such currencies will be taxed, along with other aspects. Furthermore, at this point in time, there is no specific guidance in the Income Tax Act for taxing income and profits from crypto trading. However, most experts recommend that profits from cryptos should be reported in the income tax return as capital gains.
So will cryptocurrency be banned in India?
Not likely, it is more likely that the government will come up with laws to regulate them. According to some sources, India’s crypto exchanges will come under the purview of the Securities and Exchange Board of India. Citizens of India will be required to keep their digital assets in Indian exchanges only and the proposed laws will disallow people from keeping their investments on global exchanges or in private wallets.
We request all readers to do their own research before deciding to invest in any asset, cryptocurrency, or otherwise.