From prohibition to regulation to its digital currency — the journey of cryptocurrency in India so far
From an outright ban on cryptocurrencies to an upcoming Bill of regulation, the Indian government’s stance on digital assets has changed significantly in recent years. While the older law aimed to impose a complete ban on all activities related to cryptocurrencies, including mining, buying, holding, selling, and trading, the new laws seek to make a clear distinction when it comes to the commonly used classification as currency and is now even being considered the creation of a “digital rupee” (a central bank digital currency).
It all started in 2013 when the Reserve Bank of India (RBI) issued a circular warning to the public against the use of virtual currencies. The bank warned virtual currency users, holders, and traders of the potential financial, operational, legal, customer protection, and security risks they face. The central bank noted that it was closely monitoring developments in the world of virtual currencies, including Bitcoins, Litecoins, and other altcoins, and eventually the complete ban of cryptocurrencies in the country by 2016.
The most significant development took place in March 2020. The Supreme Court of India overturned the RBI’s ban on cryptocurrencies, which prevented banks and financial institutions from providing access to banking services to those who transacted in cryptocurrencies. Nevertheless, the Reserve Bank of India has still repeatedly underscored its opposition to cryptocurrencies, stating that they pose a serious threat to the country’s macroeconomic and financial stability.
In November 2021, the Standing Committee on Finance met with representatives of crypto exchanges, the Blockchain and Crypto Assets Council (BACC), and concluded that cryptocurrencies should be regulated, not banned. The RBI Governor Shaktikanta Das reiterated his opposition to cryptocurrencies, saying that they pose a serious threat to any financial system as they are not regulated by central banks. The RBI also announced its intention to launch an official digital currency in light of the proliferation of cryptocurrencies such as Bitcoin, about which the central bank had many concerns.
Following the developments of last year, the Indian government announced plans to tax income from cryptocurrencies. This makes India the latest major country to move quickly on legalizing and regulating digital assets. This will also have an impact on profits from cryptocurrencies and NFTs, which have boomed in India recently. At the same time, the country will launch its blockchain-based currency, a digital rupee controlled by the Reserve Bank of India, before April 2023, Finance Minister said.