“Is cryptocurrency legal in India?” If you're a crypto enthusiast in India, you've wondered this question!
A new buzzword of cryptocurrency has been doing rounds and getting popular during the past few years. Earlier, people had some classic options for investments like the stock market, gold, properties, or fixed deposits. But, this new concept of cryptocurrency has been developed as another alternative for investment.
According to current stats, around 1 billion people worldwide will use cryptocurrency in 2022. This figure is proof of the popularity of cryptocurrency, which makes it essential for an individual to know about the basics of cryptocurrency, keeping its growing market in mind.
In this article, you will learn what cryptocurrency is, how to use it, its pros and cons, and tell if cryptocurrency is legal in India.
What is Cryptocurrency?
In simple words, cryptocurrency is a digital or virtual currency. It is secured by cryptography that ensures there is no counterfeit or double-spend. Several Cryptocurrencies are decentralized networks distributed across many computers based on popular blockchain technology.
The decentralized structure makes it possible to exist outside the control of governments and central authorities. Cryptocurrency is unique as any central authority like cash does not issue it, removing any chance of government intervention.
Cryptocurrency brings the benefit of cheaper and faster money transfers from decentralized systems. This ensures that there is no collapse in the system at any single point of failure. cryptocurrency can be mined or purchased from its exchanges. But, not every e-commerce site will enable you to buy with cryptocurrency.
At the same time, most people use it for investment purposes owing to its future potential. So, even the popular cryptocurrency bitcoin is hardly used in retail transactions. Moreover, the skyrocketing value of this digital currency has made it a favorite of traders and investors. To a restricted extent, cryptocurrency is used in cross-border transfers, which has enabled its expansion worldwide.
How Does Cryptocurrency Work?
It is surprising to know that the cryptocurrency market is expanding at a quick pace. It grew from $200 billion to nearly $3 trillion in 2021. But, it slashed in the first half of 2022 to $900 billion. This indicates that it is a risky market, and it is essential to understand its works.
Since any central authority or government does not control it, cryptocurrency owners are not bound to trust any single source for cryptocurrency trading. All the entities in the cryptocurrency network will have access to similar information.
It cannot be manipulated or altered. The data relating to cryptocurrency exchanges are only accessible by the users of it, so it is a secure method. Moreover, shared ownership ensures that no data mismanagement or miscommunication can occur.
The process of mining can generate cryptocurrency units. This process involved using computers to solve complex mathematical problems that create coins. So, if you are a user, you can reach out to a broker and purchase that digital currency. This can be stored or used by cryptographic wallets.
So, if you are an owner of some cryptocurrencies, you will not have anything physical. You will have a cryptographic wallet and a key that will enable you to move a unit of a particular measure to another user without involving any third party.
The first kind of cryptocurrency, bitcoin, is extensively used, popular and valuable. Along with that, there are other options for cryptocurrency with different levels of purposes and details.
Some are replications of bitcoin. At the same time, others created following the success of bitcoins are altcoins of Litecoin, Peercoin, Namecoin, Ethereum, Cardana, etc. Some countries have accepted cryptocurrency legally, while cryptocurrency legal in India is still an unclear issue.
Pros and Cons of Cryptocurrency
Before investing in cryptocurrency, it is essential to understand its pros and cons.
The pros of cryptocurrency are:
- The fund transfer between two parties is executed. There is no need for any third party like a bank.
- It is cost-effective in comparison to online payments.
- The payments through cryptocurrency are safe.
- In modern cryptocurrency systems, there is a user “wallet” or account address. Like online mobile payment apps, it is accessible only by a public and private key. The private key is only for the user.
- The transfers are executed with the most nominal processing fee.
Cons of Cryptocurrency are:
- The hidden nature of cryptocurrency is a benefit for illegal activities. Additionally, there are no third parties to intervene. So, it often becomes a place for illicit activities such as money laundering, tax evasion, and possibly even terror financing.
- The payments from cryptocurrency can be reversed.
- Every vendor does not accept it. Or it can have limited acceptance in other places.
- As a digital technology, cryptocurrency can be a target for a cybersecurity breach. It can fall into the hands of hackers.
Why is Cryptocurrency Growing in the Present world?
Earlier, bitcoin and cryptocurrency were seen as fringe investments, but the steep growth of their popularity is undeniable. Also, the 24-hour business new cycle has played another vital role in popularizing and normalizing the use and debates on cryptocurrency.
Consequently, cryptocurrency has become more accessible, and more brokers have indulged in the new market that has excellent potential for the future.
Cryptocurrency in India
Cryptocurrency has registered staggering growth in the past few years, and it has the potential to change the current financial ecosystem's established patterns. Despite the suspicion of overuse of cryptocurrency in India, India has attracted significant investments in blockchain and cryptocurrencies.
There has been a total of $638 million in investments over 48 fundraising rounds in 2021. Moreover, the status in crypto and web3 has made 43 agreements with a value of $1 billion in fundraising. But, irrespective of the current market situation, the road to cryptocurrency in India Is not easy.
The Indian government has taken a new approach to digital assets. It gave a significant push towards going cashless by demonetization in 2016. Also, after directly prohibiting cryptocurrency, it has introduced a few rules for it now to indicate if cryptocurrency is legal in India.
Indians are expected to get some crypto-specific laws in the coming time. Also, there are speculations that the country has a plan to launch a digital rupee of central bank digital currency soon.
Is Cryptocurrency Legal in India?
The controversial digital currency or cryptocurrency is still a pending issue in the country. The government is yet to bring the cryptocurrency and regulation of the official digital currency bill into the parliament for making it into law.
The bill prohibits the use of private cryptocurrency in India with certain exceptions. These exceptions were made to encourage the technology of cryptocurrency and its benefits.
For now, India has implemented a 30% tax on cryptocurrency investors. Also, there is a 1% TDS on each crypto intra-traders. As of now, India has not regulated cryptos. Also, it doesn't plan to legalize Cryptos in India.
The country has had discussions with stakeholders in the Indian and global markets. At the same time, it has consulted the World Bank and the International Monetary Fund over the issue. So, until the government does not make it illegal, dealing in cryptocurrency is lawful in India.
Is Cryptocurrency a Good Investment?
The most common doubt people have is whether cryptocurrency is a good investment or not. As per experts, it is recommended to invest a maximum of 1% to 3% of your total liquid assets. In simpler terms, invest the money you can put to risk.
The reason is that cryptocurrency is a volatile investment. It means there can be significant price changes even within an hour. So, there can be another steep rise or a possible crash anytime. There is no guarantee that it will increase in value or not.
Taking an example of figures, the net worth of bitcoin was more than $65,000 in November of 2021, and most experts believed that it would increase in 2022. Despite that, it failed below $18,000 in June, and there is no guarantee of when it will improve.
Steps to Begin With Cryptocurrency in India
Cryptocurrency has offered a new chance to invest and earn decent returns. It has gained massive popularity in recent years. The question remains on if cryptocurrency is legal in India. But, If you want to invest in cryptocurrency, we have listed the following steps to enable you to begin trading.
Step 1: Choose a Crypto Exchange
As there is no crypto regulation in India, there is no fixed structure in terms of trading. But, you can use crypto exchanges' platforms to buy and sell digital currency. Some renowned cryptocurrency exchanges are UnoCoin, CoinDCX, WazirX, etc.
Step 2: Open a Trading Account
Next, you must open a trading account at your chosen crypto exchange, just like the one at the bank. For registration, that crypto exchange will verify your credentials, investment amount, and available coins for trading.
You must share the KYC (Know Your Customer) data and choose a payment option. In this step, one has to submit some verification documents and Residential proofs.
Step 3: Add money to your Account
Once you have opened an account, you need to transfer money into the trading account to purchase cryptocurrency. It can be done online through the bank account, where you will have to link them.
Step 4: Buying and Investing in Cryptocurrency
In the next step, you can choose the coins you want to invest in. Some leading choices are Bitcoin, Ethereum, Cardano, Binance Coin, and Tether.
Step 5: Store your Cryptocurrency
Storing cryptocurrency is a vital part of making the purchase. Since it doesn't have formal institutional backing, there is the uncertainty of Hacking. Consequently, it's crucial to store the Account's codes and other assets safely. It is recommended to keep the purchased coins in a crypto wallet.
Step 6: Make a Strategy
It is essential to make a great strategy to earn profits for investments. You can analyze the market, consult experts and get valuable opinions before increasing your investment. It is advisable to begin with minor investments and study the market carefully.
Things You Can Buy With Cryptocurrency
A big concern in cryptocurrency trading is what are the things one can buy apart from cryptocurrency exchanges. The renowned companies of Microsoft, Shopify, and Wikipedia accept bitcoin payments.
You can get flight tickets from Virgin Galactic for touring space from bitcoins. The famous car dealer of Lamborghini in the USA accepts payment in cryptocurrency. Some performing artists in the west accept cryptocurrency payments for their concerts.
Despite the question of cryptocurrency being legal in India, it is gradually accepting the idea of legal payment methods. A bitcoin trading site named Unocoin allows users to buy vouchers from nearly 90 different brands using bitcoins.
People can make retail purchases like Burger King and Pizza Hut in Venezuela. Multinational food chains like Subway and Pizza Hut accept bitcoin payments in many countries.
Many online platforms have some particular vouchers. Those vouchers can be used to buy things using cryptocurrency. So, as the number of cryptocurrency users increases worldwide, the number of companies that accept it will also increase.
In short, you can purchase furnishings, pizza, fast food, socks, sweets, event tickets, vacations, electronic devices, television services, movie tickets, and more from specific global brands.
Summing up
Cryptocurrency is a digital currency without any central or third-party authority like banks or governments. It is used in investments and purchases. However, it's a volatile market, and one must get complete information about the cryptocurrency market before making any investments.
As far as India is concerned, the question remains of whether cryptocurrency is legal in India; there is suspicion. The government intends to bring laws over it but has not presented any of them in parliament. So, the legal status of cryptocurrency in India Is still hanging in.
Several merchants around the world now accept cryptocurrency as a method of payment which has given a boost to cryptocurrency in modern times. Using a crypto wallet is as easy as using Google pay or Apple pay to make payments.
Furthermore, cryptocurrency indeed has a bigger future than these online payment platforms as it will be a part of the growing technology like blockchain management and metaverse.
