Where Does India Stand on Cryptocurrency? A Simple Legal Overview

Jun 4

3 min read

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Where Does India Stand on Cryptocurrency?A Simple, Yet Exciting Legal Overview by dCorpo Legal

Cryptocurrency has long been the wild child of the financial world. From being the rebel currency of the internet to a multi-billion-dollar asset class, it’s now knocking on the doors of regulators worldwide. So, what’s India’s stance? Let’s decode it together—without the jargon, and with just the right amount of legal spice.

🔍 Is Crypto Legal in India?

Yes—but with a twist.

Not banned. Not officially legal either. You can buy, sell, or hold cryptocurrencies like Bitcoin or Ethereum, but they aren’t considered legal tender.
Recognized as "Virtual Digital Assets" (VDAs) under tax laws, not as currency.
No dedicated legislation yet, so you're operating in a legal grey zone.

In short: You can trade crypto, but don't expect to pay for your chai with Bitcoin anytime soon.

🚫 The 2018 RBI Circular: Crypto's Silent Shutdown

In April 2018, the Reserve Bank of India (RBI) shook the industry by directing banks to sever ties with crypto exchanges.

No bank accounts. No payment processing. Crypto exchanges in India struggled to survive.
It wasn’t a direct ban on crypto, but it choked the ecosystem.

The rationale? Risks to consumers, fear of money laundering, and potential financial instability.

🌟 2020 Supreme Court Verdict: A Win for Crypto

Crypto made a legal comeback in March 2020 when the Supreme Court quashed the RBI's directive.

Cited Article 19(1)(g) — right to trade and profession.
Said the RBI acted without legislative backing or clear evidence of harm.
Brought crypto exchanges back into the banking system.

This was a huge moment—the industry finally saw the light at the end of a long legal tunnel.

Case Citation:

Internet and Mobile Association of India v. Reserve Bank of India, (2020) 10 SCC 274

⚡ Attempts to Ban Crypto (Yes, More Than Once)

2019 Draft Bill

Proposed by the Subhash Garg Committee:

Full ban on private cryptocurrencies.
Jail term up to 10 years for mining, holding, or trading crypto.
Supported only a government-backed digital currency.

2021 Reboot:

Another draft emerged, aiming for a similar ban, but it never became law.

Result? No ban, but plenty of confusion.

📈 2022 Budget: Crypto Becomes Taxable

While still not "legal tender," crypto became taxable in India from April 1, 2022.

30% tax on profits from VDAs (no deductions allowed).
1% TDS on transactions over ₹50,000 per year (or ₹10,000 for specified individuals).
No loss offsetting allowed—a major blow for traders.

This didn’t legalize crypto per se, but made it clear: if you earn from it, the government wants a piece.

🔒 AML & KYC: Welcome to the Compliance Club

To curb misuse, the government brought crypto exchanges under the Prevention of Money Laundering Act (PMLA).

Mandatory KYC (Know Your Customer) procedures.
Reporting of suspicious transactions to the Financial Intelligence Unit (FIU).

Even global exchanges like Coinbase had to register with the FIU to operate in India.

💸 RBI's Favorite Child: The Digital Rupee (CBDC)

While RBI doesn’t trust private crypto, it loves its own: the Digital Rupee (e₹).

Launched in pilot form in Dec 2022.
Used for wholesale banking and now retail transactions too.
Circulation crossed ₹1000 crore as of early 2025.
Cross-border CBDC trials are now being explored.

Clearly, India wants digital currency, but only if it's government-approved.

✨ What's Happening Right Now?

Crypto profits = taxable — avoid underreporting, or face up to 70% penalty.
WazirX hack (2024) highlighted security risks, reinforcing the call for tighter regulation.
A discussion paper on crypto regulation is expected in June 2025.
Industry push for reforms continues: Better tax treatment, clearer rules, and innovation support.

🤔 So... Is Crypto Legal or Not?

Let’s simplify:

✅ You can own, trade, and invest in crypto.
❌ You can’t use it as money (yet).
❓ You’re not protected if things go wrong.
⛔ RBI still doesn’t like it.
✔️ The Supreme Court says it’s your right to trade.

📊 Final Word: Regulate, Don't Eliminate

Banning crypto could:

Push innovation underground
Increase use of risky, unregulated platforms
Hurt startups and India's digital growth

Instead, India should:

Create clear regulations
Protect investors and consumers
Encourage blockchain innovation
Keep pace with global norms

The world is watching—and India's crypto future could be a gamechanger. Until then, invest smartly, stay compliant, and consult a legal expert when in doubt.

Need help navigating the crypto legal maze? Reach out to dCorpo Legal today.