If you don’t quite know what cryptocurrency is and how it works, you're in good company. That’s most people in the world. And yet, when we hear about Bitcoin, the best known and most highly valued cryptocurrency increasing its valuation at breakneck speed and we wonder if we’re missing the boat somewhat. So is cryptocurrency trading legal in India, and is a sound investment? Also, is it any use; considering that this is not the way we currently pay for the buying and selling we do?
There is some confusion about the legality of cryptocurrency in India. RBI did ban banks from facilitating cryptocurrency transactions in India in 2018. However, there was a petition challenging the ban and the Supreme Court held that the ban was without just grounds. So as of now, trading in digital currency is not illegal. In fact, cryptocurrency transactions are taxable, though currently there is no clarity on whether digital currency it is to be treated as commodity or currency.
That said, we are also told that the government will be banning all private cryptocurrencies soon by way of the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021. It was also announced that the government would be launching its own digital currency. So it would seem that digital currency investment is currently not illegal, but it may soon be. So, perhaps the more prudent among us would prefer to wait for the launch of the official digital Indian digital currency?
While Raghuram Rajan called it a classic bubble it seems as though he may have been wrong about his prediction that bitcoin would not rise much beyond the previous highs of $36K. Bitcoin recently crossed the $50,000 mark and its meteoric rise in valuation over 2020 has snagged the interest of many looking to grow their wealth. However at the 50K valuation, who on earth can afford Bitcoin anyway?
Turns out, Bitcoin is far from the only cryptocurrency around. There are around eight thousand types of digital currency in circulation. According to reports, the market capitalisation of these as an asset class has crossed the $ 1 trillion mark. There are many cheaper digital currencies out there as well. Some important digital currencies apart from Bitcoin include Ethereum, Litecoin, Cardano, Polkadot, Stellar, Chainlink, Binance Coin, Tether, Monero and others.
Right now, crypto is mostly seen as an investment tool rather like stocks, bonds and so on. Few individuals/ organisations if any use it to buy and sell actual goods right now. However, Elon Musk (largely responsible for bitcoin’s meteoric rise in the first place) announced that bitcoin could be accepted as payment by Tesla.
And gung ho as Musk is about bitcoin, he still sounds a cautionary warning in this regard. He has asked people “not spend all their life savings on cryptocurrency”. That seems like sound advice --- particularly in light of the fact that one would spend around Rs. 37.6 lakh rupees to buy one bitcoin today --- which will not buy anything else in turn.
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