Cryptocurrency is a fast gaining popularity asset, famous amongst investors looking for new investment options. Recent research and studies show that the increasing number of investors are not only city slickers. They belong to small towns and cities of India too. Despite the mounting excitement for investing in these digital currencies, there are some questions about the legalities of cryptocurrency trading in India.
Hence, if you are looking forward to trading cryptocurrencies, you must ensure you are not going beyond any rules and regulations. While some people have decided on digital trading currencies as a fast-moving step, the Finance Minister is yet to clarify whether the trading of currencies like Bitcoin is legal in India or not.
After the budget press conference, Finance Minister Nirmala Sitharaman is yet to finalize the crypto regulation on what is legalized and what is not. However, Finance Secretary TV Soananthan states that digital currencies like Bitcoin and Ethereum can never become legal tenders in India. The minister proposes introducing a digital rupee using the blockchain and other technology by the Reserve Bank of India to commence from 2022-2023.
In addition, Somanathan also mentions that the RBI will back up the digital rupee. In other words, the money will be from the Reserve Bank of India, but its nature would be digital, unlike fiat currency. This digital rupee will be a legal tender for Indians. The users shall be able to purchase non-digital assets through the digital rupee by paying via the UPI platform. Let us now quickly look at the legalities of trading cryptocurrencies in India.
Are Cryptocurrencies A Legal Tender?
Before wading into cryptocurrency trading, it is important to understand whether the trading activity complies with the rules and regulations of the land. For example, the Internet is a facility which is enjoyed worldwide. No one owns it or controls its existence. Similarly is the concept of cryptocurrencies. It is not owned or controlled by any central authority or a private financial institution.
The Reserve Bank of India does not issue them as legal tender. Moreover, till now, they have not been recognized by the government as legal tender for Indians. Neither is it regulated by the Reserve Bank of India. But, there are no possible laws which can stop people from trading crypto coins. It is just like any other commodity, for example, Gold. People trade in Gold without any governmental laws on it. The same is the status of cryptocurrency in India presently.
Is It A Justifiable Currency In India?
In the conventional sense, cryptocurrencies are not a justifiable currency in India. In simpler words, you can not pay with these digital currencies for purchasing or selling any commodity in India. The Reserve Bank of India is a sovereign guarantee backing up India’s legal tender. Therefore, only the central bank has the right to issue any currency in India.
On the other hand, cryptocurrencies are minted on a decentralized platform, following peer-to-peer technology. It is a powerful coded system which runs on blockchain technology. Since these currencies can be traded online within the country, it is only considered an asset class in India.
Supreme Court Judgment On Cryptocurrency
In 2018, the Reserve Bank of India restricted the banks, Non-Banking Financial Companies, and other payment systems regulating payments from promoting financial transactions to separate entities related to cryptocurrencies. However, this was reversed by the Supreme Court of India in March 2020. This judgment of the Supreme Court has given way to the financial institutions in facilitating the cryptocurrency trade. This eventually has given space for different cryptocurrency market exchanges in the country.
Is There Anything Wrong By Trading In Cryptocurrencies?
There is absolutely nothing wrong with trading in cryptocurrencies. There are no laws you are breaking in any way as far as no rules and regulations surrounding the trading of cryptocurrencies in India. However, recently it was seen that in a Parliament session, a question came in front of whether the Center intends to bring forward a specific regulation set for cryptocurrency trading in India. To this, the government responded that if there is a legislative proposal regarding these digital currencies and their trading, only then will it be introduced to the Parliament session with due procedure.
The Final Takeaway
Trading cryptocurrencies is as safe as trading any other asset. However, like other investment options, it is subject to underlying market risks like the stock market and mutual fund investments. The RBI lays down the rules of regulations on the stock market and mutual funds. But since the nature of cryptocurrencies is decentralized, it does not fall under the category of any rule set binding the trading of these digital currencies. Furthermore, until now, India has not legalized the trading aspect of crypto coins, but at the same time, no law restricts it.
