Cryptocurrency regulation in India: Complete Timeline

Several centralized cryptocurrency exchanges, such as Zebpay, CoinDCX, and Unocoin, were providing services to Indian users. These platforms facilitated seamless transactions, allowing users to buy and sell cryptocurrencies directly via bank transfers. For the first time, a surge in cryptocurrency exchange popularity caught the attention of the Reserve Bank of India (RBI) and everyone start talking about cryptocurrency regulation in India.

For the first time, the Reserve Bank of India (RBI) published a press release about cryptocurrency regulation in India. The RBI warns investors and traders about the potential risks associated with virtual currencies (VCs). The RBI also stated that VCs as a payment method are not authorized by any central bank or monetary authority.

An Indian bitcoin enthusiast, Venugopal Badaravada, filed the representation, asking the RBI to clarify the status of cryptocurrency regulation in India. For the first time, in response, RBI says, “RBI is presently examining the issues associated with the usage, holding, and trading of virtual currencies under the extant legal and regulatory framework of the country, including Foreign Exchange and Payment Systems laws and regulations.”

The Indian government made a historic announcement, implementing demonetization by invalidating 500 and 1000 rupee notes. As the government began actively promoting digital payment services as part of its demonetization strategy, it inadvertently catalyzed a surge in the popularity of cryptocurrency and its volume in the Indian market.

In January 2017, the bitcoin price reached $1000 for the first time, and its popularity too, which forced the RBI to recall 2013 press release about cryptocurrency regulation in India.

For the first time, the government of India formed a high-level Inter-ministerial Committee (IMC) under the chairmanship of Shri Subhash Chandra Garg, Secretary, Department of Economic Affairs, Ministry of Finance. The aim of the committee was to examine the policy and legal framework for cryptocurrency regulation in India.

The bitcoin price is now $20,000. The gentle reminder turned into frustration. The RBI released its second press release within a year, citing the same 2013 press release about cryptocurrency regulation in India.

Finance Minister Arun Jaitley, during a budget speech in parliament, clarified the government’s position on cryptocurrency. He said that “the government does not consider cryptocurrencies legal tender or coins and will take all measures to eliminate the use of these crypto-assets in financing illegitimate activities or as part of the payment system.”

After warning many times, the RBI took strict action to prevent cryptocurrency in India. The RBI issued a notification telling all banks to stop transactions related to cryptocurrency. This was a huge setback for Indian cryptocurrency exchanges and traders. After the RBI action, a public interest litigation (PIL) was filed in the Supreme Court of India by the Internet and Mobile Association of India.

The high-level Inter-ministerial Committee (IMC) that was formed in February 2017 released its report. The committee highly recommends that all private cryptocurrencies, except any cryptocurrency that may be issued by the government, be banned in India. On the other hand, the committee gives suggestions on blockchain technology and CBCD.

After two years, the Supreme Court of India lifted the ban on banks related to cryptocurrency transactions and criticized the RBI for taking harsh action. This was the first positive thing happen for the Indian cryptocurrency community.

The government of India officially banned private cryptocurrency (Monero, Dash, Zcash, etc.), as reported by the high-level Inter-ministerial Committee (IMC) in 2019. The RBI governor also mentioned that cryptocurrencies pose a serious concern for macroeconomic and financial stability.

During the parliament question, finance minister Nirmala Sitharaman said the government has no intention of recognizing bitcoin as a currency. She also informed that the government does not collect any data on cryptocurrency transactions.

The rumor was that the government would recognize the cryptocurrency, but the government surprised the crypto community with a heavy tax. During the budget speech, the finance minister imposed a 30% tax on cryptocurrency as capital gain and a 1% TDS on crypto transactions. The government still refuses to recognize cryptocurrency, even imposing taxes on it.

From now on, a 30% tax on capital gains on cryptocurrency has started here.

The remaining 1% TDS on cryptocurrency transactions has started here. This charge will be automatically deducted when traders place orders against Indian rupees. Because of 1% direct losses, Indian users started moving their funds to offshore crypto exchanges, and the volume of Indian crypto exchanges started falling.

During budget 2023, the finance minister proposes penalties, including jail, if anyone fails to give TDS on cryptocurrency. Also, the RBI governor says bitcoin is gambling and it should be banned.

The Financial Intelligence Unit (FIU) of India asked the Ministry of Electronics and Information Technology to ban nine offshore cryptocurrency exchanges, such as Binance, Huobi, Kraken, Gate.io, Kucoin, Bitstamp, MEXC Global, Bittrex, and Bitfenex. The FIU said these centralized exchanges are not following cryptocurrency regulation in India and are violating the PMLA (Prevention of Money Laundering Act). After receiving complaints, the IT department imposed a shadow ban on these crypto exchanges. Indian users are still using these banned exchanges with the help of VPNs.

This statement comes after bitcoin reaches its all-time high of $72,000. Madhabi Puri, chairperson of the Securities and Exchange Board of India (SEBI), said that we need instant settlements like cryptocurrency. She also mentions that if we want investors to stay within traditional finance, then this step is necessary. Remind you that SEBI is starting the same-day settlement cycle on March 28, 2024.

OKX a leading cryptocurrency exchange platform has ended it services in India and asked its users to withdrawal their fund before April 30, 2024.

KuCoin said it has become the first global crypto exchange to comply with India’s FIU. Now KuCoin will support INR and local banks, but customers are still not happy about 1% TDS.

Indian cryptocurrency exchange WazirX suffered an exploit resulting in the unauthorized transfer of over $230 million in crypto assets.

After all this, Indian crypto exchanges are saying we are happy; at least the government is doing something. While crypto users are not happy about cryptocurrency regulation in India and are asking to lower the tax and remove TDS on social media every day. If we note that the Indian government or institutes never use the terms cryptocurrency and blockchain in their documents; they replace both terms with virtual currency and a public ledger.