Check out our latest newsletter. It has also been looking into encouraging blockchain technology in financial and payment institutions. But the government has shunned cryptocurrency with policymakers opting to outlaw cryptocurrency with incarceration and legal petitions. Bitcoin is not recognized as legal tender and, as of 23 July , the Banning of Cryptocurrency and Regulation of Official Digital Currency Bill has been proposed.
Unocoin, an India-based exchange, allowed individuals to trade Bitcoins but is now disabled. Many bitcoin traders usually buy through diaspora networks in countries where it is legal tender. Bitcoin is not legal in India. The RBI ban has also discouraged the overall cryptocurrency market in India, since crypto assets have been accused of financing illegitimate activities.
The downward trend in cryptocurrency trading in India is mostly due to increased government regulations. However, this does not stop people from trading. Two ways in which many Indians trade are: 1 Exchanges and 2 P2P methods. Both these steps follow the KYC norms and usually require documents like Pan card, Aadhaar card or passports. Since banking institutions have banned cryptocurrency trading in India, popular exchanges like ZebPay have had to shut down. Nevertheless, the following top exchanges are still currently used in India:.
Unocoin was founded in and is the leading bitcoin exchange in India. It is a relatively easy exchange platform, allowing users to buy cryptocurrency with any Indian bank account. However, with the banning proposal at hand, things might get challenging for Unocoin.
WazirX follows the KYC norms, has a mobile application for both Android and iOS users and also claims to provide multiple hundred transactions per second. Outside of exchanges, P2P trading platforms enable bitcoin purchases in India, in spite of the bank bans. Two important P2P marketplaces in India are:. Paxful is a peer to peer marketplace founded in that allows buyers and sellers to meet online and trade directly Bitcoin with each other. As a result, many Indians use Paxful due to ease of access and payment.
There is also no fee for ht site itself, since the Bitcoin is traded at a premium. LocalBitcoins supports the most popular payment methods and allows individuals from different countries to purchase Bitcoin for their local currency. For the individual investor, gains from Bitcoin have to be declared as profit or capital gains in year-wise statements. As such the tax rates are subject to the holding period of the asset. Once an indexation benefit is applied and inflation is adjusted, the tax rate can go down further.
For a trader, bitcoin profits are treated as income from a business. As such, certain expenses related to business, office maintenance, such as buying a computer, internet expenses, office rent, administration cost, etc.
However, if the turnover crosses Rs. For those who mine cryptocurrency, profits will not be treated as a capital asset. As such, there is no capital gains tax. Most Indians trade and mine bitcoin to store them in digital web wallets instead of spending them to buy something. Proof of work is a requirement to define an expensive computer calculation, also called mining, that needs to be performed in order to create a new group of trustless transactions the so-called block on a distributed ledger called blockchain.
Bitcoin has a cryptographic security feature to ensure that only the owner of a Bitcoin can spend it. The idea is that the owner generates two numbers—a private key that is secret and a public key that is published. The public key can be easily generated from the private key, but not vice versa. A signature can be used to verify that the owner holds the private key, without revealing the private key, using a technique known as an elliptic curve signature scheme.
In this way, the receiver can verify that the owner possesses the private key and therefore has the right to spend the Bitcoin.