Myth buster: Is Bitcoin and cryptocurrency trading illegal in India?
1. What is Bitcoin and cryptocurrency?
Cryptocurrencies are digital currencies that can be used to make payments in exchange for goods and services. These are decentralized currencies, i.e. they operate independently of a central bank as opposed to centralized digital currency/electronic money. These currencies are generated and maintained using encryption algorithms which form a public ledger. Bitcoin was the first decentralized cryptocurrency found in 2009. It works on the blockchain technology. Bitcoin and Cryptocurrencies can also be bought in fraction allowing investors to buy even INR 500 worth of Bitcoins / cryptocurrencies. You probably may have heard of Ethereum as well. It is the 2nd most valued cryptocurrency after Bitcoin. Further, there are about 800 different cryptocurrencies, each one having different value associated with it.
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2. What is so good about them?
Cryptocurrency is said to be the future of economy. Here are some of it’s noteworthy features:
a) Anti-Fraudulent: Unlike fiat currency, cryptocurrency cannot be counterfeited or reversed arbitrarily by the sender.
b) Safeguards Identity: In the scenario of credit cards, which operate on ‘pull’ mechanism, irrespective of the amount, every time, the card holder has to provide access to their full credit line. ‘Pull’ mechanism allows the store to pull the designated amount from your account. Cryptocurrency work on ‘push’ mechanism which allows the cryptocurrency holder to send an exact amount to the recipient with no additional information.
c) Immediate Settlements: Purchase of real world assets typically invite a timely procedure along with it. The settlements may take days, weeks or sometimes even more due to third party delays (Lawyers, Notary, Government approvals). Bitcoin/cryptocurrency contracts can be designed and enforced to eliminate or add the requirement of third party approvals or external factors. Moreover, the requirement to complete an asset transfer at a future date or time could be fulfilled at a significantly lower expense.
d) Lower fees: Usually, there aren’t any transaction fees involved with Cryptocurrencies because the miners are being compensated by the corresponding networks. However, people prefer to use third-party wallet services like Zebpay, Unocoin and Pocketbits for creating and maintaining their own bitcoin wallets. They charge a fee which is lesser than what is charged by traditional payment transaction services like PayPal, Bank transfers and others.
“THE BLOCKCHAIN KEEPS EVERYONE HONEST, AND A WHOLE LAYER OF BANKING BUREAUCRACY IS REMOVED, LOWERING COSTS.” — PAUL VIGNA.
e) Ownership: Existent transactional service providers like PayPal have the power to freeze your assets when they have a reason to believe that your account has been misused. Such cases have repeated themselves more than it may seem. In the case of cryptocurrency, you hold your private key and corresponding public key which makes up your cryptocurrency address. Unless you lose it yourself, there is no way anyone can take that away from you.
3. Why is it all over the Internet?
This is what a Bitcoin chart looks like. It can be seen an exponential growth in terms of value and market capitalization. Currently Bitcoin is valued at $2570 USD with a market cap of approximately $42 billion USD. Bitcoin market dominance as of 7th July 2017 is 42.8%
4. Has it really made Millionaires or Billionaires?
Yes it has! Fortune.com says if you brought $5 worth of Bitcoin you’d be $4.4 million richer. Look at the Bitcoin price chart, there people who got into bitcoin in early 2013 by investing a few, hundred or thousand dollars. You can calculate their worth today. You will find hundreds of people on the internet who have literally gone from ‘Pickup trucks to Lambos’ in no time.
5. Can I become a Millionaire/Billionaire too?
Well, of course! It is never too late. There are 800 different Cryptocurrencies apart from bitcoins (a.k.a. altcoins), a lot of which have not realized their full value yet. If you can spot the right altcoins and invest in them right now, who knows? That Lambo could be yours’ too!
6. Are cryptocurrencies illegal in India?
No! It is not illegal, it never was. In fact, thousands of people from India have been trading cryptocurrency for many years now. They have made a lot of money too.
- On February 1st 2016, RBI issued another cautionary press release which states that users transacting cryptocurrency must be aware of their Cryptocurrencies and the risks associated with them since they don’t regulate these Cryptocurrencies. A similar notice was given by them in December 2013.
- A month later, in March, RBI Deputy Governor R. Gandhi raises points out financial, legal, customer protection and security aspects of Cryptocurrencies that they deem to be risky.
- As of August 2016, there were 50,000 estimated Bitcoin users in India. Please note that this was during the pre-demonetization period. This number has been growing ever since. The establishment of prominent exchanges and wallets like BTCXIndia, Zebpay, Unocoin, Pocketbits has resulted more and more people get into cryptocurrency trading in India. By some estimates, Bitcoin users could alone go beyond five million by 2019, globally.
- After the revolutionary announcement of cash ban by PM Narendra Modi, Bitcoin was reported to be inflated 20-25 percent over cost. The value shot up from ₹40,000/Bitcoin in October 2016 to ₹90,000/Bitcoin.
- During or until this period, unlike the RBI, regulators elsewhere in the world were taking measures proactively to adopt such currency. These include neighboring countries like China, Russia, Singapore and Philippines.
Although an Inter-disciplinary committee was set up by the RBI in March,2017 to examine the risks associated with Bitcoin and other virtual currencies
- RBI’s research wing, the Institute for Development and Research in Banking Technology, acknowledged the prominence of blockchain technology and such currency by issuing a whitepaper.
- Cut to June 27, 2017. Union Finance Minister Arun Jaitley held a meeting to discuss several issues concerning bitcoins after seeking a public opinion on allowance of such currency a month ago.
- The meeting ended without any verdict but with a further commencement in end of this month.
- Please note that the Government has never used the word “Illegal” in any of their notices. Nishith Desai Associates, India’s leading international law firm has released a whitepaper which concludes that Bitcoin is legal in India.
- All the exchanges are following strict KYC Policies which includes PAN and Bank verification before the user can start transacting Bitcoin.
- With countries like USA and China having reached at a point where they have ATMs for Bitcoin, India will definitely catch up with the trend soon.
- India has a population of about 1.3 billion people. They day the word goes out that Government of India is officially supporting Bitcoin, one can easily speculate a considerable amount of hike in its value since demonetization. You surely want to hold some Bitcoin and Cryptocurrencies when this happens. Who would want to miss out?
Tradescrypt.com hopes that this has cleared all the misconceptions about Bitcoin and cryptocurrency trading in India and answered all your questions.
If you think that we have missed out on anything, please feel free to leave a comment or contact us.
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