Last year, the government of India has kicked off inter-ministerial consultations on a bill draft to impose a ban on cryptocurrencies and regulate official digital currencies. Following that, a panel was formed under finance secretary Subhash Chandra Garg to draft regulations for cryptocurrencies in which the Department of Economic Affairs (DEA), Central Board of Direct Taxes (CBDT), Central Board of Indirect Taxes and Customs (CBIC) and the Investor Education and Protection Fund Authority (IEPFA) gathered to discuss for the future of cryptocurrency in the country. However, based on the feedback, a final law will be proposed by the next government to take decisions after the elections.
The ministry also recommended that the bill might take time to be implemented. Thus, individuals using cryptocurrencies to defraud investors and money launderer will be prosecuted under the “Prevention of Money laundering Act” till a detailed bill is passed.
Is Cryptocurrency Legal in India?
Vijay Dalmia, an advocate at Vaish Associates who is an expert in understanding money laundering has clarified various doubts about owning digital assets which include Is Cryptocurrency Legal in India?
In an interview with Crypto Kanoon, he explained that dealing with cryptocurrency is not an illegal act if the purchase is made through disposable income i.e. after proper taxation. The advocate also said that only the use of crypto for trade in the country would be deemed illegal. However, owning it on foreign exchange or wallet outside India, would not be deemed as illegal.
He quoted that:
“If you use Bitcoin to buy an asset outside India then on your return, FEMA [Foreign Exchange Management Act] will get triggered. The authorities will check into whether the individual’s purchase is within the guidelines of the RBI, if not FEMA will be attracted.”
Moreover, dealing in cryptos or a crypto-to-crypto trade on an exchange outside India is completely legal. However, the conversion of cryptocurrency to fiat and the subsequent use of the fiat currency (INR) for buying any other asset will be an illegal act.