Bitcoins in India had only started to gain momentum when a banking ban in 2018 by the Reserve Bank of India (RBI) cooled off the sentiment. RBI had then said that any entity regulated by it such as banks, wallets etc shall not deal with or provide services to any individual or business entities for buying or selling of cryptocurrencies. Since then, Indian investors have been wary of Bitcoins.
For those unaware, Bitcoin is one of the earliest cryptocurrencies, forming part of the worldwide peer-to-peer payment system. The Bitcoin network and currency was introduced by an unknown person or group Satoshi Nakamoto in 2009.
But what exactly is a cryptocurrency? Cryptocurrency is basically digital money and uses cryptography to secure its transactions. Cryptography is a method of converting comprehensible data into complicated codes which are tough to crack.
So basically, Bitcoin is like virtual cash. Each Bitcoin behaves like a computer file which is stored in a ‘digital wallet’ app on a smartphone or computer. People can send Bitcoins to each other’s digital wallets. Every single transaction is recorded in a public list called the blockchain. This makes it possible to trace the history of Bitcoins to stop people from spending coins they do not own, making copies or undoing transactions. After Bitcoin, there has been a rapid increase in the number of cryptocurrencies such as Litecoin, Ethereum, Zcash, Dash, Ripple etc.
However, India has not had a positive stance towards Bitcoins and other cryptocurrencies. A high-level government panel on virtual cryptocurrencies has recommended a ban on all virtual cryptocurrencies in India. The committee had submitted its report on 23 July 2019, along with a proposed draft bill, Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019. It is available on the website of the Department of Economic Affairs.
Along with the ban, the committee has also proposed a fine of Rs 25 crore and imprisonment up to 10 years for any activity related to virtual currencies, which is carried out by individuals or companies.
The Reserve Bank of India (RBI) had also cautioned Indian public in the past over cryptocurrencies, with the central government vowing earlier this year to eliminate the use of digital currency, which it considers illegal.
However, even with this background, one can still say that there has been no blanket ban on Bitcoins in India yet as these are just committee recommendations and no law has been formulated as of now. In this regard, the Supreme Court of India in a ruling pronounced on 25 February 2019 had also asked the Indian government to come up with cryptocurrency regulation policies.
For those who have already invested in Bitcoin and hold the cryptocurrency, various media reports have suggested that even if a ban comes into effect, individuals may be given a time period of up to three months to dispose off their assets.
Bitcoin in India is mainly bought from digital currency exchanges like ZebPay, CoinDelta, CoinSecure, etc, through a credit card. Zebpay even had an Android and iPhone app which allowed individuals to link their bank accounts for quick transfers. There was a KYC requirement and buyers needed to verify their ID by simply clicking a photo of their PAN card.
Unocoin, another India-based exchange, allowed individuals to trade Bitcoins. They helped them buy, sell, store, use and accept Bitcoin. However, after RBI’s restrictions, withdrawals and deposits via Indian bank accounts have been disabled.
Many cryptocurrency users also trade in Bitcoins through family or friends based in other countries where cryptocurrencies have been given legal status.