Cryptocurrency has been a hot topic in India for years, with the government and the Reserve Bank of India (RBI) taking different stances on its regulation. While crypto trading has gained immense popularity, concerns about legality, security, and financial stability have led to multiple legal battles.
The Supreme Court of India played a crucial role in shaping the country’s crypto landscape by overturning RBI’s ban on cryptocurrencies. But does this mean crypto trading is completely legal in India? What are the risks and regulations involved? Let’s dive into the Supreme Court’s take on cryptocurrency and the legal status of crypto trading in India.
1. The Evolution of Cryptocurrency in India
Cryptocurrency entered the Indian financial system in the early 2010s, but it wasn’t until 2017-2018 that it became a mainstream topic. During this period, Bitcoin and other digital assets witnessed massive price surges, attracting investors from across the country.
However, concerns over fraud, money laundering, and investor protection led the government and the RBI to take strict measures against crypto-related activities.
Key Events in India’s Crypto Journey:
✔ 2013-2017: Rise of Bitcoin and other cryptocurrencies in India.
✔ 2018: RBI bans banks from facilitating crypto transactions.
✔ 2020: Supreme Court overturns RBI’s ban, reviving crypto trading.
✔ 2021-2023: Government proposes a Crypto Bill, taxation policies, and possible regulation.
2. Supreme Court’s Landmark Judgment on Cryptocurrency (2020)
The biggest turning point for the crypto industry in India came on March 4, 2020, when the Supreme Court struck down RBI’s 2018 ban on cryptocurrency transactions.
What was RBI’s 2018 Ban?
- The RBI issued a circular in April 2018 restricting banks from providing financial services related to cryptocurrencies.
- This created a major setback for crypto exchanges and traders, forcing many platforms to shut down.
- The ban was justified on grounds of investor protection, financial fraud, and lack of regulation.
How Did the Supreme Court Overturn the Ban?
- The Supreme Court ruled that RBI’s ban was unconstitutional, stating that:
- There was no solid evidence that cryptocurrencies posed a direct threat to the financial system.
- The blanket ban was disproportionate and violated the fundamental right to trade under Article 19(1)(g).
- As a result, crypto trading in India was revived, and several new exchanges emerged.
3. Is Crypto Trading Legal in India After the Supreme Court’s Verdict?
The Supreme Court’s verdict removed restrictions on banking services for crypto traders. However, it did not legalize cryptocurrency as a recognized asset or currency.
What This Means for Traders:
✅ Crypto trading is allowed, but investors must comply with tax regulations.
✅ No official government approval – Crypto is not considered legal tender like INR.
✅ Regulation is uncertain – The government may introduce new laws affecting crypto use.
4. Current Crypto Regulations in India
Despite the Supreme Court’s verdict, the Indian government remains cautious about cryptocurrencies.
Key Crypto Regulations in India:
1️⃣ Crypto Taxation (2022 Budget)
- 30% tax on crypto profits.
- 1% TDS (Tax Deducted at Source) on transactions above a certain limit.
- Losses in crypto trading cannot be set off against other incomes.
2️⃣ RBI’s Stance on Cryptocurrency
- RBI still discourages the use of cryptocurrencies due to their volatility and financial risks.
- The central bank is pushing for a Central Bank Digital Currency (CBDC) as a safer alternative.
3️⃣ Proposed Cryptocurrency Bill
- The government has hinted at strict regulations or a possible ban on private cryptocurrencie