How legal is Bitcoin in India?

There is a lot of misinformation about the official status of Bitcoin in India - especially after several recent comments from government officials.

In short: Bitcoin is currently completely legal in India for individuals. You can own bitcoins and transact with them.

I’ll try to answer every possible question you might have around this. See all the topics below:


Can Indian government decide to completely ban possession of bitcoins and Bitcoin transactions?

Well, yes, in theory, they can. That said, this type of rule would be extremely hard to enforce in practice. Let me explain why.

When you own bitcoins privately it means that you hold the private keys to your Bitcoin addresses. This means that, in theory, you can essentially own and hold bitcoin in your brain (or as a note on a piece of paper). You memorize your 64 characters long private key and that’s it.

Nobody can take that away from you. You can, hypothetically, cross borders with billions of dollars worth of Bitcoin - in your brain.

Now, it’s important to state that crossing most country borders with a lot of bitcoins would be illegal. The same way it’s illegal to cross most borders with a lot of cash on hand. But, in theory, possible. Which makes strictly enforcing a complete ban on cryptocurrencies close to impossible.


Which countries have completely banned Bitcoin?

There are a few extreme governments right now trying to completely ban cryptocurrencies such as Bitcoin. Some of these countries include Morocco, Bolivia, Ecuador, China, Nepal, Cambodia, Algeria and Bangladesh. You can find more here.

These countries have even arrested some people as the consequence of these laws. But as the closer examination shows, the people arrested are mostly those trying to set up Bitcoin-related businesses (mining operations or exchanges). “Normal” people trying to invest and trade in cryptocurrencies have been mostly unaffected.

I’ll repeat it once again - completely banning cryptocurrencies on a national level is hard and close to impossible. Want further proof? Check out the video below:


Bitcoin is currently NOT considered legal tender in India. Here is a definition of what legal tender means:

“Legal tender refers to that form of money which has been approved by the government as a legal form of exchange and has been guaranteed by the government to have a legal status to repay debts or exchange against some good or commodity.”

This means that legal tender is basically every form of money that a government recognises as official and thus acceptable as a form of payment and form of repayment of debts.

As stated before, the Indian government doesn’t recognise Bitcoin and other cryptocurrencies as legal tender. This position has been expressed by many of the top Indian officials, including the finance minister Arun Jaitley.

Can companies operate with Bitcoin in India?

This is the most grey area right now. The Indian government hasn’t issued very clear regulations around it. It does seem, however, that doing any official business in India related to crypto is currently extremely risky.

The latest news from Indian government came on April 5th, 2018. The government, or rather India’s Central Bank (RBI), issued the following statement:

Entities regulated by RBI shall not deal with or provide services to any individual or business entities dealing with or settling VCs (virtual currencies).


Do you need to pay taxes from trading Bitcoin in India?

You do need to pay taxes from trading or investing in bitcoins. The tax rate varies based on how long you held your investment.

Bitcoin mining is currently not taxed in India.

In case you want to know more about Bitcoin taxation in India, you can read here.


Is it wise for governments to ban Bitcoin?

The short answer is: no. As our examples above show, that even when you completely ban Bitcoin or cryptocurrencies, it’s pretty much impossible to enforce such a ban. The only effect this kind of ban has is, it prevents budding entrepreneurs to set up cryptocurrency related businesses in such a country.

As the history shows, stifling entrepreneurship is always a bad idea - it forces the most entrepreneurial people to leave the country and puts a country behind the others in a new technology.


How are progressive countries dealing with Bitcoin?

There are actually many smart countries taking a completely contrary approach to this issue. These countries have decided to actively support the new crypto industry and are encouraging entrepreneurs to set up crypto businesses with favourable and transparent legislation.

A few of these countries are: Switzerland, Malta, Japan, etc.

For example, Malta’s forward-thinking prime minister has himself expressed a warm welcome to one of the world's leading exchanges moving HQ to their country: