Bitcoin and other cryptocurrencies have a complicated relationship in India because although they are not technically banned, they are not considered to be legal tender by financial institutions.
This was outlined by Finance Minister Arun Jaitley during a budget speech on February 1.
Mr Jaitley said: “The government does not consider cryptocurrencies as legal tender or coin and will take all measures to eliminate the use of these crypto assets in financing illegitimate activities.”
Last August he told the Indian Parliament that the government had no authority to regulate cryptocurrencies.
Bitcoin trading is hugely popular among Indians and has surged in recent months across the country.
According to one estimate by bitcoin platform Unocoin, its website saw a steep rise in users towards the end of last year.
Company founder Sathvik Vishwanth told the Financial Times in January: “Early last year we were gaining about 10,000 new users each month.
“In December it was about 7,000 to 8,000 each day.”