Cryptocurrencies are legal in the sense that you are free to buy, sell and hold them. Unlike guns or drugs, it’s perfectly fine to use cryptocurrencies as they are intended. That said, here are some issues they are facing in India right now.
RBI has banned banks regulated by it, from dealing with any individuals or companies that trade cryptocurrencies. This means, it’s very difficult to buy and sell crypto from well-known custodian wallets such as Zebpay or Unocoin. However, we don’t know if this ban is permanent. There is a supreme court hearing some time in July where some companies have challenged the legality of this ban. After all, cryptocurrencies aren’t illegal themselves. So why ban a legal activity?
Cryptocurrencies are not legal tender. This means, spending crypto is the equivalent of buying and selling them. You have to pay capital gains taxes on them. For example if you buy an altcoin worth Rs. 10 and you spend it when it’s Rs 100, you might have to pay a short term capital gains tax of 20% or Rs 20. This means, you will have to keep detailed records of your crypto expenditures and then keep some money aside so that you pay tax at the end of the fiscal year.
Cryptocurrencies aren’t properly regulated. This makes them extremely volatile and vulnerable to price-manipulation. Crypto users like myself are okay with it, but some larger investors are hesitant to enter because of it. They are more accustomed to highly regulated markets such as commodity trades, stocks, financial products etc.
Like any new technology, India is slow to adopt. But that doesn’t mean it’s illegal.