Bitcoin and other cryptocurrencies are facing a crackdown from governments around the world, including India and China, in a bid to tighten up regulations and protect consumers. But are cryptocurrencies legal in India?
Since the start of 2018, Bitcoin has suffered a massive price crash after its stratospheric growth last year sparked concern among central bankers.
International Monetary Fund (IMF) chief Christine Lagarde is the latest economic chief to wade into the argument, saying cryptocurrency regulation is “inevitable”.
And bitcoin’s price fall – slumping more than 55 percent since its December high of $19,982 – has been partly blamed on countries that are beginning to introduce cryptocurrency regulations.
Some of the most outspoken countries are India, South Korea and China.
Is the cryptocurrency legal in India?
Bitcoin and other cryptocurrencies have a complicated relationship in India because although they are not technically banned, they are not considered to be legal tender by financial institutions.
This was outlined by Finance Minister Arun Jaitley during a budget speech on February 1.
Mr Jaitley said: “The government does not consider cryptocurrencies as legal tender or coin and will take all measures to eliminate the use of these crypto assets in financing illegitimate activities.”
Last August he told the Indian Parliament that the government had no authority to regulate cryptocurrencies.
Bitcoin trading is hugely popular among Indians and has surged in recent months across the country.
According to one estimate by bitcoin platform Unocoin, its website saw a steep rise in users towards the end of last year.
Company founder Sathvik Vishwanth told the Financial Times in January: “Early last year we were gaining about 10,000 new users each month.
“In December it was about 7,000 to 8,000 each day.”
Is cryptocurrency legislation on its way in India?
While India is not outlawing cryptocurrency just yet, it does seem to be making things very difficult for investors.
In recent days, India’s Income Tax Department announced it had issued notices to 100,000 cryptocurrency investors suspected of concealing profits.
Sushil Chandra, chairman of the Central Board of Direct Taxes, said: “We found out that there is no clarity on investments made by many people, which means that they have not declared it properly,”
“People who have made investments in cryptocurrency and have not paid tax on the profit earned by investing, we are sending them notices as we feel that it is all taxable.”
On Saturday, the Securities and Exchange Board of India chairman Ajay Tyagi said regulations on cryptocurrencies was being finalised, along with the individual roles of regulators, according to the New Indian Express newspaper.
No further information was given but investors will now be nervously waiting to hear what happens in the coming days and weeks ahead.