India's Cryptocurrency: What is the government's position, legal status, and future?

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India does not recognize cryptocurrencies as legal tender. Although exchanges in India are legal due to the lack of a strong regulatory framework, it is very difficult for some cryptocurrency services and other innovative technologies to operate because of the lengthy licensing process. The chairman of the Central Board of Direct Taxation stated that anyone who makes profits from Bitcoin must pay taxes. Other Income tax Department sources suggest that cryptocurrency profits be treated as capital gains.

Regulations for Cryptocurrency Exchange

India's cryptocurrency exchange regulations have become more strict. Although technically legal, the Reserve Bank of India (RBI), banned banks and regulated financial institutions from "dealing or settling virtual currency." The RBI confirmed on 14 January 2018 that it had not issued any licenses nor authorisations to any entity or firm to operate any scheme or deal. However, it had issued warnings and made it mandatory for companies to exit or unwind their positions. The bank also confirmed the existence of new prohibitory regulations. The broad regulation banned the trading of cryptocurrencies on domestic exchanges. Existing exchanges were allowed to continue trading until 6 July 2018.

A landmark Supreme Court ruling in 2020 declared the ban unconstitutional. This reversed the prohibition and allowed exchanges to reopen.

What is the government's position on cryptos?

The Indian government is taking a positive step toward regulating digital currencies, after much dilly-dallying about legalizing or banning cryptocurrency. The Ministry of Corporate Affairs has made it compulsory for companies to disclose crypto investments/trading during the financial year. Experts consider it a positive step, and they expect taxation rules to follow. This is the first step in India's regulation of cryptocurrency.

Accounting crypto assets is intended to curb illegal activities and the circulation of black currency via cryptos. With more transparent disclosures, it can improve corporate governance. Crypto stakeholders have been assured by the Centre that there will not be a blanket ban on digital currency and that it is still forming its full opinion. Nirmala Sitharaman, Finance Minister, has stated that the Centre is open to new technologies and is not denying its interest in them.

Is it legal in India?

India is not a country where cryptocurrencies are illegal. You can buy Bitcoins and trade in them. India doesn't have a regulatory framework for cryptocurrencies at this time. On November 2, 2017, the government established an Inter-Ministerial Committee, (IMC), to study virtual currencies. Along with a Draft Bill, the Group's report highlighted the positive aspects of distributed-ledger technology. It also suggested several applications, particularly in financial services, to make it more widely available in India.

The Centre had raised reservations about its misuse and wanted to ban India completely. According to recent reports, cryptocurrency might not be subject to a total ban in India. They may soon be regulated by a panel of experts at the Centre. After several cryptocurrency exchanges requested that the Centre regulate virtual coins instead of banning them, it was decided to take this step.

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