There has long been a discussion both in India and internationally surrounding the legality and regulation of cryptocurrencies. Central banks across the world including Reserve Bank of India issued stern warnings around the risks of trading cryptocurrency. With the advent and success of Bitcoin, there is many more alternative currencies that are coming into the mainstream including Ethereum, Ripple, Bitcoin Cash, Dash, NEM, etc. For crypto investors, it is very important to understand if cryptocurrencies like Bitcoin and Ethereum are legal in India, and what the regulations are.
Strictly speaking, RBI has not categorically stated cryptocurrency as being illegal in India in any of its warnings. However, that does not mean it is legal. Due to a lack of regulation, we are still in a gray area. RBI has stated that cryptocurrency is not approved, regulated or authorized by the RBI. The RBI continues to caution users and traders of cryptocurrency of the potential financial, security, and legal risks that come with owning and trading cryptocurrency. RBI also extends the warning to ICO’s, token sales, and altcoins.
The CIS (Center for Internet and Society) which is a thought leader in the technology space in India has said that Bitcoin cannot be termed as illegal under current laws. However, as RBI emphasized, cryptocurrency trading is extremely volatile and risky. Potential investors are strongly advised to understand the risks and invest responsibly.
Some of the risks of trading cryptocurrency include:
- Lack of regulation in India
- Extremely volatile prices of cryptocurrency
- Instances of hacking of wallets
- Rise of fraudulent ICO’s and token sales