Bitcoin & Blockchain Technology are legal in India

There are however no official redressal mechanisms, and users
transacting with virtual currencies do so at their own risk. The RBI is
monitoring the use of Bitcoin in the country, and is in the process of
formulating regulations, including foreign exchange laws, and norms for
payment systems. The cautionary note is based on a press release by RBI
in 2013, when adoption of Bitcoin in the country was a lot less than it
is in 2017.

The risks as noted by the RBI include a lack of a central framework
for resolving problems, the highly volatile and speculative nature of
the cryptocurrency due to a lack of backing by assets, trading across
various jurisdictions with unclear legal regulations, and the dangers of
being entrapped or associated with financial transactions for illegal
and illicit activities. One of the biggest problems for the RBI is in
the way the money is stored in #digitalwallets that are prone to #hacks, #malware attacks, theft and loss.

Early this year, the People’s #BankofChina
met with owners of Bitcoin exchanges, and cautioned the people against
the use of Bitcoin as a currency. Officially, the bank considers Bitcoin
and other cryptocurrencies as “virtual commodities” that do not enjoy
the same status as currency. The bank has also cautioned users of
Bitcoin, asking them to bear the corresponding risks and
responsibilities. #Banks and #Financial
institutions are prohibited from making Bitcoin transactions, and the
Bitcoin trading activities are being monitored for violations of foreign
exchange norms.

In the United States, Bitcoin is treated as property, and Bitcoin
transactions are taxed as if they were property transactions. Employers
are required to report payment of wages to employees using Bitcoin, and
these kinds of payments are subject to payroll taxes. Taxes on gain or
loss of value based on transactions depends on whether or not the
Bitcoin is held as a capital asset. Although bitcoin is commonly used as
a currency, it is not recognised as legal tender.

Initially, Bitcoin in the UK was considered a tradeable voucher,
which was later reclassified as “private currency“, which reduced the
tax liability. Transactions to and from Bitcoin are not taxed. There are
taxes for Goods and Services sold for Bitcoin, based on the
corresponding value of the legal tender to the cryptocurrency at the
time of transaction. Income generated by Bitcoin mining activity is also
exempted from tax.

The Bank of Russia, like the RBI, refers to cryptocurrencies as
“virtual currency”. The Bank of Russia has issued a warning to Russian
citizens, rising the same concerns as the RBI. The speculative nature of
the currency, high risk of loss of value, and no entities that can be
held legally accountable for settling disputes. The strongly worded
warning alerts citizens of possible prosecution over cryptocurrency
transactions as the financial activity can be considered as
participating in a process that helps terrorists and criminals launder
money. The federal Tax Service in Russia has noted in a letter that
there are no legal mechanisms prohibiting Bitcoin transactions in
Russia.

The Reserve Bank of Australia refers to cryptocurrencies as “digital
currencies“, and treats Bitcoin as property, similar to the regulations
in the United States. Bitcoin transactions themselves are regulated by
the bank, or subject to regulatory oversight. Bitcoin trades are treated
as barter trades. As Bitcoin has a steady rate of supply, a limited
availability, and cannot respond to seasonal peaks or sudden increases
in Demand (say around holiday sales seasons), Australia does not
consider any role of cryptocurrencies in the monetary policy.

The European Banking Authority has also issued a warning to European
citizens on the hazards of using “virtual currencies.” The risks pointed
out in the warning include the potential for loss on electronic trading
platforms, there are no legal protections for the money deposited in
cryptocurrency exchanges, the virtual currencies can potentially be
stolen through electronic means, and the high volatility of the
cryptocurrencies. The EBA has gone so far as to recommend that “You
should not use ‘real’ money that you cannot afford to lose.” Virtual
currencies can be used to make payments without incurring charges, and
without a bank acting as an intermediary. Value added tax, and capital
gains tax may apply according to the country where the transaction is
occurring.

The Central Bank of Brazil has issued a clarification noting that
there is no regulation for Bitcoin in Brazil. The notice points out that
any regulatory oversight would put pressure on the cryptocurrencies,
and that regulations from any authority from any country can potentially
affect the prices of the cryptocurrencies, as well as the ability to
trade in them. Brazil refers to Bitcoin and similar cryptocurrencies as
virtual currencies, noting that they are different from digital
currencies.

The process of formulating regulations in India is taking its own sweet time, and #RBI seems to be focusing more on formulating regulations for the underlying distributed #ledgertechnology called #blockchain, rather than the virtual currencies such as Bitcoin and #Litecoin that are based on #blockchains.
Waiting for too long to introduce regulations is likely to disturb the
markets, platforms, apps and systems that emerge before the regulations
are in place.The world over, in times of financial insecurity, Bitcoin is considered as a #hedge.