Cryptocurrency made its debut in India in 2013, sparking enthusiasm among people from various social backgrounds who eagerly embraced it for investment and trading. During this initial period, the Indian Government did not provide clear regulations but instead issued cautionary advisories.
In this article, we will delve into India’s evolving relationship with cryptocurrency. From the outset, the Indian government displayed reservations toward cryptocurrencies. However, they demonstrated a keen interest in harnessing the underlying blockchain technology for government services. The Reserve Bank of India (RBI) expressed concerns regarding the functioning of cryptocurrencies and their inherent price volatility.
While the government has indeed made numerous attempts to regulate or ban cryptocurrency, as of now, there has been no strict and final resolution. However, there is a possibility of seeing some progress in the days following the G20 event. The G20 event may serve as a catalyst for further discussions and potential developments in India’s stance on cryptocurrencies.
Series of Notable Events in the advent of regulating Crypto in India.
15-06-2016: The First Official concern was recorded
The Financial Action Task Force (FATF), established by the Reserve Bank of India (RBI), issued regulations and guidelines pertaining to virtual currencies. Expressing concerns that these digital currencies had the potential for fraudulent activities and posed a risk of being utilized by terrorist organizations for illicit donations.
08-11-2016: Increased Bitcoin Adoption With Demonetization Announcement
After the Indian Prime Minister’s demonetization announcement, Bitcoin prices in India surged. Before this, they typically ranged from $800 to $900 per Bitcoin. However, within just 18 days of the announcement, Bitcoin prices on exchanges jumped to $1,020. In contrast, in the United States, where Bitcoin prices typically set the benchmark, they remained at $770 per Bitcoin. This difference in prices highlighted a clear premium on Indian Bitcoin exchanges during that time.
07-11-2017: First Announcement to Ban Crypto, by RBI
The Reserve Bank of India has declared its intention to prohibit the use of cryptocurrencies as a means of payment throughout the country.
During a conference in Mumbai on November 6, 2017, RBI’s executive director, S Ganesh Kumar, suggested that digital currencies like Bitcoin and Ethereum would not be permitted for legal transactions within India. He stated, “Our current stance on bitcoins is that we will not accept them for any payments and settlements, but the technology supporting cryptocurrencies will persist.“
01-02-2018: “No Support to crypto”, declarations by Finance Minister
In a parliamentary address, Mr. Arun Jaitley the then finance minister, categorically labeled virtual currencies as illegal forms of tender and emphasized that the government did not endorse their usage. However, he also expressed the government’s interest in exploring the potential of blockchain technology.
Following this, the State Bank of India (SBI) took a proactive role in facilitating collaboration between banks and technology firms. Major tech giants like IBM and Microsoft, alongside Skylark, KPMG, and ten commercial banks, came together to engage in this initiative.
05-03-2018:- Second Attempt to Ban Crypto, CBDT
The Central Board of Direct Taxes (CBDT) presented a proposal to the Department of Economic Affairs, advocating for the regulation of cryptocurrencies. Subsequently, during the G-20 summit on March 19th and 20th, Finance Ministers and Central Bank Governors from G-20 member nations recognized the potential benefits of crypto-assets in enhancing financial system efficiency and economic growth. However, they also expressed collective apprehensions regarding issues such as safeguarding consumers and investors, ensuring market integrity, preventing tax evasion, countering money laundering, and thwarting potential terrorist financing activities.
06-04-2018:- Ban and Lift Ban of Crypto
The RBI’s statement directed financial institutions and payment providers to cease virtual currency transactions and services to entities involved. On April 6, 2018, the RBI declared cryptocurrencies illegal in India, effective from June 6, 2018.
Cryptocurrency exchanges incurred losses due to suspended transactions and lack of banking access, leading to many closures and user losses. Exchanges challenged the ban in court, filing their first petition on May 1, 2018. The Supreme Court consolidated petitions opposing the ban and set a hearing for May 11, 2018.
On May 17, 2018, the Supreme Court allowed petitioners to submit a representation to the RBI. Zebpay ( The only major exchange at the time) suspended operations on July 4, 2018.
In January 2019, the Income-tax department issued notices to cryptocurrency investors, while some banks suspended services to exchanges, and others severed ties completely.
On July 23, 2018, SEBI objected to regulating crypto assets.
Then Exchanges formally requested the RBI to lift the ban, expressing willingness to undergo regulation.
Despite the crackdown, Unocoin launched a Bitcoin ATM in Bangalore on October 14, 2018, seized by cybercrime police a week later.
07-06-2019:- 3rd Attempt to Ban Crypto, presented in Parliament Bill
The Indian Government introduced a bill titled “Banning Cryptocurrencies and Regulation of Official Digital Currency Bill 2019,” which aimed to prohibit all cryptocurrency-related activities. The bill proposed severe penalties for such activities, with the exception of cryptocurrency usage in experimentation, research, or education.
The bill specified a requirement to declare and dispose of any cryptocurrency holdings within 90 days of the act’s commencement. Individuals engaged in cryptocurrency activities could face a 10-year prison sentence, while exchanges could be penalized with up to 5 years of imprisonment. It’s important to note that this bill has been deferred indefinitely up to the present time.
05-12-2019:- Governor of RBI Said No to Crypto
The Governor of the Reserve Bank of India, during a press conference, unequivocally expressed the RBI’s strong opposition to cryptocurrencies and emphasized the need to thoroughly evaluate their functionality.
— IndiaBits (@indiabits21) December 5, 2019
28-01-2020:- Final arguments from both sides heard and concluded
Members of the Internet and Mobile Association of India (IMAI) gathered for the last round of arguments in the Supreme Court. During this session, the Reserve Bank of India (RBI) conceded that it lacked the authority to comment on the legality of cryptocurrencies and clarified that the RBI & Payment Settlement Act does not cover cryptocurrencies.
However, the RBI maintained that it possessed the authority to take measures if it determined that cryptocurrencies posed a threat to the payment system. Nevertheless, the RBI was requested to respond to the IMAI’s representation.
04-03-2020: Uplifting ban imposed by RBI on cryptocurrency.
Following a series of contentious disputes between IMAI and RBI, the Supreme Court issued a favorable verdict in support of IMAI, thereby overturning the cryptocurrency ban imposed by RBI. This landmark decision was celebrated worldwide within the cryptocurrency community.
Supreme Court of India has struck off Reserve Bank of India’s (RBI) banking ban against #Crypto. The Court held that RBI Circular dated 6th April 2018 is unconstitutional.
— KoinX (@getkoinx) March 4, 2020
29-01- 2021: Government introducing a bill on cryptocurrency
After this, the government announced its intention to introduce a bill aimed at creating a sovereign digital currency while simultaneously banning all private cryptocurrencies. This move posed a significant challenge to the revived cryptocurrency industry in India. The proposed bill seeks to prohibit private cryptocurrencies but may make exceptions to promote the underlying cryptocurrency technology and its applications.
02-02-2022: Finally, Crypto in India Were Taxed to 30%
During the 2022 Union Budget session, Finance Minister Nirmala Sitharaman announced a significant development in India’s taxation policy regarding cryptocurrencies and digital assets.
She disclosed that a 30% tax would be imposed on income generated from these assets.
This decision entails placing earnings from cryptocurrencies and non-fungible tokens (NFTs) within India’s highest tax bracket. Additionally, it was stated that any losses incurred from the sale of these assets would not be eligible for offset against other sources of income, thus discouraging trading and investment in digital assets. The implementation of this tax rule was scheduled to begin on April 1st.
Furthermore, Minister Sitharaman also unveiled plans for the central bank to introduce a digital currency in the upcoming financial year, utilizing blockchain technology and other supporting technologies.
26-03-2022: By this time crypto turned out to be legal
Indian Finance Secretary, T.V. Somanathan, clarifies the terminology used in India regarding cryptocurrencies, referring to them as “crypto assets” instead. He emphasizes that the act of buying or selling crypto assets in India is not considered illegal. The government has established a tax framework specifically for crypto assets, categorizing them in a manner similar to winnings from activities like horse races or other speculative transactions. This distinction provides a legal framework for the taxation of crypto asset transactions in India.
28-08-2023- India opening international doors to discuss crypto
During the B20 Summit in India on August 28, 2023, Prime Minister Narendra Modi highlighted the urgent requirement for a comprehensive global framework for cryptocurrencies. He emphasized the significance of adapting to the ever-changing digital landscape and stressed the importance of utilizing transformative technologies like artificial intelligence (AI) to navigate this evolving terrain effectively.
05-09-2023- India Seeks Collaboration on Regulating Crypto as of G20 Summit
India’s Finance Minister, Nirmala Sitharaman, has disclosed that significant deliberations are currently taking place regarding the establishment of global regulations for crypto assets. She underscored the crucial need for international cooperation and collaboration among nations to address the various challenges associated with crypto assets effectively. in Mumbai, Sitharaman stated, “During India’s G20 presidency, we have put forth essential topics concerning the regulation and the recognition of the imperative for a framework to govern matters related to crypto assets.”
In the ever-evolving journey of India’s crypto regulations, the G20 Summit serves as a promising crossroads. As the nation opens its doors to global collaboration, the crypto landscape holds both uncertainty and opportunity, awaiting the dawn of a comprehensive and harmonious framework.
Government’s Stand on Cryptocurrencies
The Indian government is not so friendly with cryptocurrencies from the start but wants to encourage blockchain-related technologies in various government services. The Reserve Bank of India (RBI) wanted to ban the activities related to cryptocurrencies. The decentralized nature of cryptos and the constant fluctuation in the trading volumes had bought the RBI’s radar over them.
Cryptocurrencies landed in India and started functioning in 2012 on a small scale and became very familiar among the people within a year. A few businessmen started accepting Bitcoin as payments. For example, a Pizzeria in Mumbai became the first restaurant to accept Bitcoin as payment in 2013.
What might have made RBI ban cryptocurrency activities in India?
- The primary reason might be that no individual or agency or organization is responsible for its value. It is pure speculation.
- There is no control over the crypto transaction or activities as it is decentralized.
- There is no third-party involvement like banks to regulate the transactions.
- Fear of losing the value of Fiat currency and banking system.
- Protect the interest of people so that they do not lose their money.
RBI had banned the banks to encourage activities related to cryptocurrencies in 2018, the Supreme court lifted the Cryptocurrency Ban in March 2020. But still, RBI wants the supreme court to rethink the judgment as they still do not have faith in them.
Historic Events and Announcements.
09-02-2021: Finance Minister Sitaraman said on February 9th, 2021 in Rajya Sabha, that all private cryptocurrencies, except any virtual currencies issued by the state, will be prohibited. Mr. Anurag Thakur, Minister of State for Finance also said about the government’s plan of bringing the bill on cryptocurrency. A senior government official told Reuters that cryptocurrencies must be banned and the one using cryptocurrency must be penalized for trading in the country or even just holding any such virtual assets.
To know more click on the document here.
29-11- 2021: Steps will be taken to create awareness about the risky area of cryptocurrency through SEBI and RBI. Speaking about the government introducing a bill on cryptocurrency, the Government won’t collect the data on Bitcoin, says Sitaraman on Lok Sabha.
To know more click on the document here.
29-1-2021: The government says it will introduce a bill to create a sovereign digital currency and simultaneously ban all private cryptocurrencies. The recently-revived industry realizes it faces a second existential threat. The bill seeks to prohibit all private cryptocurrencies in India. However, it would allow certain exceptions to promote the underlying technology of cryptocurrency and its uses.
18-03-2020: The government of India revealed to the lower house, ‘Lok Sabha’ about the inspection carried out by the Ministry of Corporate Affairs on specifically cryptocurrency companies, Zeb It Services Ltd and Unocoin Technologies Ltd.
05-03- 2020:- After a series of arguments between IMAI and RBI, the Supreme court delivered its verdict in favor of the IMAI uplifting ban imposed by RBI on cryptocurrency. The whole world of crypto hailed the judgment all over the globe.
29-01-2020:- The Indian Institute for Smart Government (NISG) has published a draft ‘National Strategy on Blockchain’. The document examines blockchain technology, its impact on society, challenges, the role of government and national strategy principles in addition to SWOT analysis.
The document also urges the Reserve Bank of India to issue regulated digital coins which would be decided soon.
You can go through the whole document HERE.
05-12-2019:– The Governor of the Reserve Bank of India, in a press meeting clearly said that the RBI is completely against cryptocurrencies and would ascertain its functionality.
28-01-2020:- Final arguments from both sides were heard and concluded. The judgment was kept reserved.
05-08-2019:- The exchanges which are the members of the Internet and Mobile Association of India(IMAI) assembled for the final round of arguments in the Supreme Court. During the course of the argument, RBI admitted that it did not have jurisdiction to speak on the legality of cryptocurrency and the RBI & Payment Settlement Act does not imply Cryptocurrency. But argued that it has the power to take action if found cryptocurrency is a threat to the payment system. Yet the RBI was asked to provide a reply to the representation done by IMAI.
07-06-2019:- The Indian Government drafted a bill to deal with cryptocurrencies called,” Banning Cryptocurrencies and Regulation of Official Digital Currency Bill 2019”. It prohibited any activities dealing with cryptocurrencies and suggested equivalent punishment excluding the usage of cryptocurrency in experimenting, research or teaching.
It clearly mentioned to declare and dispose of any cryptocurrency under possession before 90 days from the commencement of the act. A person would be sentenced to 10 years of imprisonment if found guilty in the involvement of cryptocurrency activities and the exchanges would be punished for 5 years of imprisonment. This bill, however, got deferred till now.
The detailed bill can be accessed HERE.
25-10-2018:- All four petitions, two petitions for the ban and other two challenging the ban assembled for hearing. The Government of India informed the committee which was set up to research crypto assets. Hence the court adjourned to enable the committee to come up with their recommendations.
14-10- 2018:- Despite the RBI crackdown, one of the exchanges Unocoin launched a Bitcoin Atm in Bangalore for its customers. The user could deposit and withdraw money using the bitcoins in their wallets. Unfortunately, the cybercrime police seized the ATM only a week after its launch.
23-07- 2018:- SEBI sent its comments on the circular on the ban to the Department of Economic affairs. SEBI mentioned its objection to being part of the regulators of crypto assets and tokens.
In the meantime, exchanges requested the RBI in writing, to lift the ban as they were open to more scrutiny and ready to be regulated.
January 2019:-At the beginning of the year in January, the Income-tax department started issuing notices to all the investors. Banks suspended the withdrawal and deposit facilities of some exchanges. Some lenders disassociated with them completely.
17-05-2018:- Supreme court passed interim order allowing the petitioners to submit a representation to RBI.
Amid the circular from RBI, one of the popular exchanges Zebpay suspended its operation in India on 04 July 2018.
05-04-2018:- RBI released a statement that prevented all financial institutions and payment providers to stop dealing with virtual currency and stop services to all entities that deal with virtual currency. And finally, on 6th April 2018, releasing a circular, RBI banned Cryptocurrency in India declaring it an illegal entity which will come into effect from 6th June 2018.
The exchanges dealt with heavy losses as all the transactions were stopped and there was no bank access. All the people were forced to sell the currency before they lost access. Many exchanges closed down and many users too faced loss.
The exchanges were disappointed with the blanket ban, the exchanges decided to take this matter to the court filing its first petition on 01 May 2018 challenging the ban.
The supreme court clubbed up all the petitions against the ban and scheduled 11th May 2018 hearing.
05-03-2018:- Central Board Of Direct Taxes (CBDT) submitted a draft to the Department of Economic Affairs to ban cryptocurrencies. Later on March 19th and 20th, Finance Ministers and Central Bank Governors of G-20 member countries met for the G-20 summit. Here all acknowledge the fact that crypto-assets have the potential to improve the efficiency of the financial system and economy. But at the same time did raise concerns over consumer & investor protection, market integrity, tax evasion, money laundering, and terrorist financing.
01-02-2018:- During a speech in parliament, Honorable Finance Minister of India, Late Mr. Arun Jaitely mentioned virtual currencies as illegal tenders and the government does not support them. But mentioned that the government will look at the utilization of blockchain technology. Post to which SBI took the initiative to bring the banks and the tech firms together. Big tech firms IBM, Microsoft, Skylark, KPMG, and 10 commercial banks joined hands.
Dec 2017:- RBI and Minister of Finance held a joint press meeting and declared Cryptocurrency as ‘Ponzi Schemes’ and they are not currency or coins.
07-11-2017:- The Reserve Bank of India announced its plan to ban cryptocurrencies as a form of payment across the country but has shown support for the blockchain.
At a conference held in Mumbai, India on Nov. 6, 2017, RBI executive director, S Ganesh Kumar, has hinted that digital currencies such as Bitcoin and Ethereum will not be allowed to be legally used across the country.
“Our current position on bitcoins is that we will not be using it for any payments and settlements…though the technology underlying cryptocurrencies will not end.”
08-11-2016:-The major boost for the crypto market led when the Prime Minister of India, declared Rs 500 and Rs 1000 had been demonetized with immediate effect. These denominations were about to 86% of the country’s paper currency. The people with large cash holdings were looking out for more options to exchange the money as the time was limited. Investment in gold was also tracked by the government, and hence the people tried investing in Bitcoin.
This increased the bitcoin volume by nearly double and the investors summed up nearly 1,30,000. In India, the price of a bitcoin reached $1020 but in the U.S. it remained at $770.
15-06-2016:- The Financial Action Task Force, set up by RBI in 1994, came up with guidance for a risk-based approach to virtual currency. As mentioned in the guidelines, the possibility of fraud as cryptocurrency transactions can be carried out for anonymous accounts internationally. It also raised concern over virtual currency being operated by terrorist organizations to promote bitcoin donation.
Subhash Chandra Garg Committee
The Indian Government Constituted a Committee under the leadership of Finance Secretary, Subash Chandra Garg in 2017. The members of the committee were top officials of the
- Securities and Exchange Board of India(SEBI)
- Central Board of Excise and Customs (CBEC)
- Income Tax department
- Financial Intelligence Unit
The purpose of the committee was to study issues related to virtual currencies and propose possible actions that could be taken.
The committee has held a series of meetings with inter-ministerial meetings with representatives of the Ministry of Corporate Affairs, the Central Board of Direct Taxes, and MeitY.
The committee briefed the FDSC council about the report on 31-10-2018.
The Committee Concerns
- The customers could be misled and subjected to fraud or Ponzi schemes due to the non-official nature of the virtual currency.
- Virtual currencies cannot be controlled by any authority. This lack of control could lead to excessive volatility which could affect the economy at a larger pace.
- The excessive use of energy resources which could result in environmental disaster as Bitcoin mining requires humongous processing power. This, in turn, requires crippling levels of the energy system which is difficult in a country with a huge population.
- RBI could lose control over the monetary policy by allowing private cryptocurrencies to function as it cannot keep the track of the transactions or any other activities.
- The decentralized nature of cryptocurrencies could lead to their usage of them in illegal activities like money laundering or terror funding etc.
- In this technology, once the transactions are done, they cannot be reversed, which could be difficult sometimes.
The Committee Recommendations
The panel made a clear distinction between the private cryptocurrencies and the official ones that the government could issue in the future. It also specifies the benefits of Digital Ledger Technology (DLT). The recommendations:-
The committee headed by Subash Chandra Garg has made the following recommendations:-
- Cryptocurrencies should be banned by enforcing the law and imposing fines & penalties for those who deal with cryptocurrencies.
- The committee has proposed a draft bill called ‘Banning of Cryptocurrency & Regulation of Official Digital Currency Bill, 2019’. According to this, the individuals who hold the currencies need to declare their holdings within 90 days of law enforcement. The individuals found guilty under the law will be fined with imprisonment and heavy penalties.
- The committee has recommended the government be proactive and progressive towards the launch of official digital currency.
- The committee has also proposed setting up a standing committee to revisit the addressed issues in the report as and when required.
- The committee has suggested implementing distributed ledger technology or blockchain technology in the banking sector and other financial services like loan-issuance tracking, collateral management, fraud detection, and claims management in insurance and reconciliation systems in the securities market.
- The committee also identified the potential use of blockchain technology in various areas such as payments systems, data identity management, or KYC requirements.
Is India Confused with Cryptocurrency Adoption?
The government has always had bifurcated opinions on cryptocurrencies and the technology behind them. On one hand, it stated cryptocurrencies as ‘Ponzi Schemes’ and also banned the banks to deal with them, and on the other hand, it has expressed its desire to bring possible government services on the blockchain technology starting with the banking industry.
For several years, it had a very passive approach to the crypto industry and allowed it to grow without any hindrance. It issued only warnings and guidelines and when the customer base grew and exchanges started to flourish it stopped its activity.
It would be very exciting to witness the further course of action, as India is a big market for cryptocurrencies that have not yet been explored.
Cryptocurrency is now legal in India. Many developments are yet to be observed in the coming days. It would be a great deal if the government would initiate steps towards the regulation of cryptocurrencies.
The new laws need to be framed and taxes need to be thought of as of now. We will hope for a good future for cryptocurrencies in India and expect a positive approach from the government.