goods and service tax
Published on 14 April 2025
Understanding Cryptocurrency Regulations and Trends in India
Understanding Cryptocurrency and Its Regulation in India
Cryptocurrency, commonly referred to as crypto, is a digital asset consisting of binary data designed to serve as a medium of exchange. Ownership records of individual coins are maintained in a ledger, which is a computerized database secured by robust cryptography. This cryptographic technology ensures the security of transaction records, regulates the creation of new coins, and verifies the transfer of coin ownership.
Cryptocurrencies leverage distributed ledger technology, usually taking the form of a blockchain.
Popular Cryptocurrencies
Some well-known cryptocurrencies include:
- Bitcoin (BTC)
- Ethereum (ETH)
- Tether (USDT)
- Cardano (ADA)
- Ripple (XRP)
- USD Coin (USDC)
- Polkadot (DOT)
- Dogecoin (DOGE)
Cryptocurrencies are typically classified as fiat currency. Their issuance is driven by market demand, influencing their value. Consequently, cryptocurrency values fluctuate daily.
Current Cryptocurrency Valuations in India
As of December 3, 2021, the following table outlines the value of various cryptocurrencies in Indian Rupees, including their 24-hour price change, market capitalization, and transaction volume:
| Coin Name (Code) | Price (INR) | Change (24h) | Market Cap (INR) | Volume (24h) (INR) |
|---|---|---|---|---|
| Bitcoin (BTC) | Rs 4,513,922 | -18,617 (-0.41%) | 79.8 trillion | 2.5 trillion |
| Ethereum (ETH) | Rs 364,297 | +3,275 (+0.91%) | 39.9 trillion | 1.7 trillion |
| Tether (USDT) | Rs 79.81 | -0.21 (-0.26%) | 5.6 trillion | 5.9 trillion |
| Cardano (ADA) | Rs 133.78 | +10.44 (+8.47%) | 4.3 trillion | 249.7 billion |
| Ripple (XRP) | Rs 77.86 | +0.27 (+0.35%) | 3.4 trillion | 181.2 billion |
| USD Coin (USDC) | Rs 79.75 | -0.24 (-0.30%) | 2.9 trillion | 406.6 billion |
| Polkadot (DOT) | Rs 2,839.28 | -10.37 (-0.36%) | 2.7 trillion | 85.5 billion |
| Dogecoin (DOGE) | Rs 16.69 | +0.25 (+1.51%) | 2.1 trillion | 140.0 billion |
The growth of these currencies is evident from the data presented above.
Cryptocurrency Popularity in India
Cryptocurrency has gained significant traction in India, especially following the Supreme Court's decision to overturn the banking ban on crypto in 2020. The ease of investing in cryptocurrencies further boosts their popularity. To invest, individuals must:
- Register on a cryptocurrency platform.
- Complete KYC verification.
- Transfer funds from a bank account to a crypto wallet to purchase cryptocurrencies.
Legislative Developments
The Cryptocurrency and Regulation of Official Digital Currency Bill 2021 is set to be introduced during the ongoing winter session of Parliament. This bill differs from the earlier "Banning of Cryptocurrency and Regulation of Official Digital Currency Bill 2019," which proposed a total ban on crypto-related activities, including mining, buying, holding, and selling.
Taxation of Cryptocurrencies
Currently, the Indian government has not established a definitive framework for taxing cryptocurrencies under the Income Tax Act or the Goods and Services Tax (GST) Act. At present, only El Salvador has recognized Bitcoin as legal tender, while other countries are still assessing the tax implications (both direct and indirect) concerning cryptocurrency transactions.
In India, cryptocurrencies are regarded as commodities, not legal tender. Here are a few key points regarding potential taxation of cryptocurrencies in India:
- If a cryptocurrency is held for more than 36 months, any gains will be classified as Long Term Capital Gains (LTCG) and subject to a 20% tax rate plus applicable surcharges and cess after indexation.
- If transactions are large and frequent, the taxpayer may be deemed to be trading in cryptocurrencies, and income from sales (e.g., Bitcoin) would be taxable as business income.
- When cryptocurrencies are categorized as "Business Income," the implications of GST should also be considered. For transactions on foreign cryptocurrency exchanges, the government may levy an 18% GST. The GST would also apply to transactions on Indian cryptocurrency exchanges.
The government intends to classify virtual currencies and their tax treatments based on their specific use cases—whether for payment, investment, or utility.
Conclusion
Cryptocurrencies represent a rapidly growing segment of digital currencies. The Government of India is actively considering regulatory measures, transitioning from outright bans to regulatory frameworks. In 2018, the Reserve Bank of India (RBI) prohibited banks and financial institutions from facilitating cryptocurrency transactions; however, this order was reversed by the Supreme Court in 2020, permitting trading in virtual currencies like Bitcoin.