Crypto Exchanges& Regulation in India

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5 min read
Top exchanges in India by Coincub criteria
Article review author
Jonathan Lea
India head image

Crypto Country Rating: 6.9/10

5/10
Institutional acceptance
Uncoordinated approach
8/10
Exchanges & Wallets availability
Leading names plus choice of home-based exchanges
3/10
Government regulation
No clear guidance or regulation as yet
5/10
Defi acceptance
Government looking closely at blockchain advantages
8/10
Financial services
Banks have tapped potential of ATMs
9/10
Transparency
Normal ID requirements for opening accounts
9/10
Spending crypto
Established outlets and services
8/10
Banks activity in crypto
Leading banks actively looking to trial and promote services in virtual assets

Bitcoin and cryptocurrency trading in India

India has an inconsistent approach to crypto. Institutional acceptance and regulation are both low, though leading exchanges and banks are able and willing to tap into high consumer demand. 

 

 

Law and crypto trading in India

Legal - existing crypto legislation

Cryptocurrency trading is legal and acceptable but still unauthorized and unregulated. Originally, India’s banks were banned from allowing customers to trade in cryptocurrency, but things have obviously changed. Huge regulatory changes are on the table, like the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021. This, strangely, was scheduled to be tabled in the Budget session of Parliament in March but was deferred at the last minute so it’s ‘watch this space’ time again. Well-structured cryptocurrency regulations that cover exchanges, blockchain technology, and crypto investment are still being debated and, some would say, overdue.

Legal - forthcoming crypto legislation

India is actively looking at ways of regulating crypto as a digital asset class rather than a currency. A move towards the regulation of crypto, rather than banning banks from offering crypto services, would be a sizable step forward. Despite institutional uncertainty, crypto has many advocates amongst the population.

Blockchain technology is also very much on the agenda – and maybe even a digital rupee.

Taxing cryptocurrencies in India

Income Tax

Tax is a subject never far away from bitcoin and other digital currencies. For some time India had no taxation policy on trading or mining bitcoin. It recently followed the example of other countries in declaring that income from buying and selling of crypto, and the gains from crypto related services, are covered by the country’s Income Tax Act. At the very least you’ll have to record all of your crypto dealings in anticipation of whatever income tax you may or may not be eligible for.

Tax relief

While there is a lack of a clear taxation strategy regarding crypto, it looks like that won’t last long. 

Tax when moving residency

If you are a long-term resident of India, you are probably deemed a permanent resident for tax purposes. If you are not a permanent resident and your holdings are outside of India you’ll fall under the required tax laws of your adopted country.

Tax on mining

 There is a spirited debate in India about the taxation of virtual assets. It may be that mining for bitcoin will be classified as  ‘Income from other sources’ and be taxed as such. Whether it is worth it after all the electricity costs is up to you and the depth of your pockets – but as yet the tax position has yet to be decided.

Crypto financial services in India

Fin services - retirement planning

Most retirement and pension funds worldwide deem cryptocurrencies to be too volatile to become part of long-term retirement schemes. There is little certainty on this at present.

Fin services - banking

Leading Indian banks Axis Bank, ICICI, and HDFC Bank have been instrumental in crypto adoption for the broader population by facilitating crypto-related transactions. Customers are allowed and encouraged to use their accounts for crypto trading,

Fin Services - DeFi

India’s government is exploring the use of blockchain and fintech advantages.

Using crypto in India

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Spend

The crypto phenomenon has been growing in India for some time and investing in crypto for gain, as opposed to using it for payments, is riding a massive wave of enthusiasm. Bitcoin is used for online shopping with a number of major stores including SapnaOnline and Overstock allowing you to use crypto for more or less everything including travel, products, books, toys, gizmos and services. 

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Gifting crypto

Gifting crypto via gift cards or outright gifts as yet has no set tax strategy so you’ll be well-advised to keep records and see what the status of your trading and gifting is under any upcoming legislation.

Crypto regulation in India

Security

India has under-regulated its crypto sector but the sheer volume of trading has led to the formation of crypto forums to discuss ongoing development. Plenty of overseas and home-based exchanges operate, each with its own services, features, and layers of protection. You need to do your homework and find which suits you as, at present, any setbacks or mishaps will be down to you and the exchange or wallet you’re using in the current absence of clear regulation.

Transparency

You have plenty of choices for exchanges, both overseas and home-based. In all cases, you’ll have to verify your email address and identity. Local exchanges all have to comply with central bank guidelines and reporting obligations. 

Helpful?
FAQ

New to crypto? Here’s our guide!

FAQ Image #1 01 Why Bitcoin? It seems like the buzz around Bitcoin just keeps growing. Bitcoin is a constantly evolving technology with a passionate community. What is it about the digital asset that makes it such a controversial topic and attractive investment?
FAQ Image #2 02 How to Get Started with Bitcoin It can be difficult to get past the technical jargon surrounding bitcoin (BTC) and other cryptocurrencies in order to figure out how you can buy and store them. Beginners can purchase Bitcoin, for example, on many exchanges using fiat currency like U.S. Dollar, Euro or British Pound.
FAQ Image #3 03 Blockchains 101 Blockchains are a type of database where data is stored in blocks that are chained together. As new data comes in, it is entered into a block, which is then chained to the previous block. The Bitcoin blockchain serves as a ledger that records every Bitcoin transaction in history.
FAQ Image #4 04 Bitcoin in the Real World Ok - you’ve found an exchange, bought your Bitcoin, and stored it safely. What’s next? By now you can buy just about anything with Bitcoin if you try hard enough, from Amazon gift cards to an old master painting. You can also convert your BTC to fiat with ATMs, an exchange, and more.