With all the recent noise around Bitcoin, people have been wondering if the cryptocurrency is legal in India or not. The value of Bitcoin has been rising for a while now. In the last year it went from $5,000, to $10,000, followed by $17,000 before touching $17,900. As the prices rise at that speed, sceptics and the governments are concerned about the future of the cryptocurrency.

In the Indian context, the Reserve Bank (RBI) has been careful of warning those interested in this digital currency. The Finance Ministry has shared similar concerns. Before we delve into the question of it being legal or not, let us get to know the cryptocurrency a little better.

What is Bitcoin and what is a cryptocurrency?

Bitcoin is a type of cryptocurrency. A cryptocurrency is a digital currency in which encryption techniques are used to regulate the generation of the currency and to verify the transfer of funds. Digital currencies operate independently of a central bank.

Let us also be clear that there are other digital currencies such as Ripple, TRON, Parody coin Dogecoin, and IOTA that exist. However, since its inception in the year 2009, Bitcoin has been the trendsetter in the world of digital currencies.

What are the risks of Bitcoin?

As per the Bitcoin RBI warning, the RBI has stated five risks:

• It is in digital format. Meaning it is prone to hacking, or risk of losing the password or other such risks.
• There is no central authority to regulate this digital currency. Also, there is no one for redressal of any grievances.
• There is no underlying asset which means that the value of Bitcoin is only based on speculation.
• The Bitcoin exchanges are located in various parts of the world. This becomes a problem for law enforcement.
• It can be used for illegal activity since it can be untraceable.

Is Bitcoin legal in India?

The concern for the future of Bitcoin in India came from a statement made by Arun Jaitley, the Finance Minister of India in his budget speech on February 1, 2018. He said: “the government’s position is clear, we don’t recognise this as legal currency as of now.” 

Then in early 2018, the Reserve Bank of India announced a ban on the sale and purchase of cryptocurrency.

“In view of the associated risks, it has been decided that, with immediate effect, entities regulated by RBI shall not deal with or provide services to any individual or business entities dealing with or settling [virtual currencies],” the bank said in a statement. That statement raised a lot of panic for those trading in the currency.

There are around five million digital currency users in India. This announcement has raised the fear of not able to cash out and have  in turmoil.