Cryptocurrency has gained tremendous popularity over the past few years. This form of digital money has been extensively used for investment purposes and transactions on a global scale. The digital currency allows individuals to make payments directly to each other through an online system.
Also known as virtual currency, cryptocurrency works on blockchain technology, which provides legitimacy and transparency. However, numerous countries are trying to comprehend how cryptocurrency functions. They are still developing regulations concerning cryptocurrency trading.
What is Cryptocurrency?
Cryptocurrency is a digital currency deregulated by implementing blockchain technology – a distributed ledger maintained across several computers. Using encryption techniques, crypto operates on decentralized networks through this technology. Blockchain is a decentralized system spread across innumerable computers, controlling and recording transactions.
Considered the most distinguished cryptocurrency, Bitcoin is a deregulated substitute for conventional financial systems. Different from fiat currencies, cryptocurrencies lack fundamental value. This signifies that physical assets, such as gold, don’t back them nor can they be redeemed for diverse commodities. Moreover, they exist completely in digital form, with no physical representation.
Here is a list of some of the most popular cryptocurrencies:
- Bitcoin
- Binance Coin
- Ethereum
- Solana
- Litecoin
Is Cryptocurrency Legal in India?
Focusing on what matters most – “Is Cryptocurrency Legal in India?”
Cryptocurrency is not considered illegal in the country as of November 24th, 2021. The legitimacy of cryptocurrency in the country has been a significant topic of considerable debate and regulatory analysis. As of this moment, cryptocurrency has not been completely legalized in India. However, people can easily purchase, sell, and trade these digital currencies on diverse exchanges.
Please note that Cryptocurrency has not been recognized as legal tender by the RBI (Reserve Bank of India). This signifies that it cannot be considered a medium of exchange for goods and services, including the Indian Rupee (INR).
However, the government of India has expressed various concerns about cryptocurrencies being potentially misused for unlawful activities. These include financing terrorism and money laundering. Regardless of these serious problems, the government has not imposed a ban on these virtual currencies.
Instead, the Indian government has been consistently exploring regulatory guidelines to tackle these unwanted threats while paving the way for technological innovation.
The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, was implemented to build a framework to introduce the official digital currency by the Reserve Bank of India and forbidding private digital currencies.
However, this bill has not been passed, and discussions and consultations regarding the same are still unfolding.
What’s the Difference Between Cryptocurrency Vs. Fiat Currency?
A fiat currency, such as the Indian Rupee, is a government-issued currency. However, it is not backed by a physical commodity or precious metal, including gold or silver. Being physical legal tender, this virtual currency is issued, monitored, and controlled by central authorities, such as central banks and governments. While it has been a long time since most of this currency was backed by real physical commodities, such as gold or silver, its value is supported by the government.
Cryptocurrency is completely digital and does not have a physical form. In most situations, there is no cash or physical commodity backing cryptocurrency. No government or central authority exercises control over a cryptocurrency. Instead, a group of people maintain this digital currency. These individuals participate extensively when maintaining a given blockchain.
Regulatory Challenges With Cryptocurrency Law in India
Here is a list of some of the most significant challenges in regulating cryptocurrencies in India:
1. Lawfulness and Recognition
- Lacking clear lawful recognition and regulation leads to uncertainty in users and businesses.
- Building an extensive legal structure that properly manages the unique nature of cryptocurrencies is complicated.
2. Fraudulent Matters
The uncontrolled market is vulnerable to deceptive schemes, Ponzi schemes, and other scams. They can lead to the exploitation of uninformed investors.
3. Financial Credibility
- Keep in mind that cryptocurrency is extremely unpredictable. As a result, it can lead to financial instability and considerable losses for investors.
- Adopting cryptocurrency on a large scale could pose threats to the conventional financial system and fiscal policy.
4. Consumer Protection
Safeguarding consumers against various risks linked to investments in cryptocurrency. Creating awareness and informing investors about the risks and advantages of investing in cryptocurrencies is crucial when making decisions or solving problems.
5. Global Coordination
The holistic and universal nature of cryptocurrencies requires global coordination and cooperation to deal with regulatory challenges effectively.
Is Cryptocurrency a Safe Investment?
Wondering if investing in cryptocurrency is a safe and smart move? As cryptocurrency is a comparatively new kind of investment and technology too, numerous newbies are uncertain if cryptocurrency is a secure asset for investment purposes.
Somewhat to several other financial investments, cryptocurrency (or crypt) may be deemed a safe investment option from a security perspective. The essential blockchain technology not only provides a very secure, but also a transparent way of recording transactions. On the other hand, using cryptographic keys keeps your assets protected.
That being said, there are various dangers associated with cryptocurrencies. The market can be unstable and prices may fluctuate substantially in conventional financial markets. Furthermore, the crypto industry is teeming with hackers and scammers. So you will have to be extra careful when safeguarding your assets. Ensure you store your private keys in the way they should be. Beware of deceptive schemes or transactions!
Can I Purchase Cryptocurrency Legally in India?
Absolutely! You can openly purchase and sell cryptocurrencies in the country through diverse crypto platforms in sync with various regulations in India. For your investment protection, consider looking for crypto exchanges that are registered with the Financial Intelligence Unit.
There is no law in India that restricts people from buying and selling cryptocurrencies. The Reserve Bank of India or RBI prohibited this virtual currency until March 2020. However, the Supreme Court lifted the ban and declared that dealing with cryptocurrencies is not unlawful. Since then, cryptocurrency has become a highly preferred medium for people choosing to invest in India.
Wrapping Up
While cryptocurrency remains deregulated in India, it is not considered illegal to buy or sell this virtual currency. This digital asset undoubtedly remains an unquestionable part of the Indian and global economy. Multiple transactions are being carried out via cryptocurrencies and the government must release a set of rules and regulations concerning these digital currencies.
Frequently Asked Questions About Cryptocurrency
Although cryptocurrency is unrecognized as legal tender in the country, it has been legalized in India. People can purchase, sell, or hold this digital currency. The Supreme Court revoked the ban by the RBI on banking services for transactions via cryptocurrency.
The Reserve Bank of India’s ban on cryptocurrency-related banking services was influenced by serious concerns, including investor protection, financial stability, and its misuse to carry out unlawful activities.
Cryptocurrency was legalized in India in March 2020 when India’s Supreme Court lifted the RBI’s ban that prohibited banks and other financial institutions from providing services concerning cryptocurrencies.
The Reserve Bank of India has expressed concerns regarding cryptocurrencies owing to potential threats to financial credibility. However, the RBI has not banned these digital currencies but has urged caution among users and traders about their risks.
Without a doubt! You can buy cryptocurrency in the country. Numerous platforms and exchanges allow the trading of these virtual currencies, following KYC standards and other vital regulations.
