Bitcoin Status in India- Explained

Bitcoin is a cryptocurrency developed by an unknown person or a group of unknown persons using the name Satoshi Nakamoto. It was first used in 2009 after being released as open-source software.

The concept of cryptocurrency was first described by Wei Dai in the year 1998 on the cypherpunks mailing list where he proposed the idea of a new form of money that uses cryptography to control its creation and transactions, rather than with a central authority.

Satoshi Nakamoto, about whom nothing much is known, was the first person to give Bitcoin specifications and also provide proof of the concept, which he did in 2009. He provided these in a cryptography mailing list. In 2010, Satoshi Nakamoto quit the project and since then, the community has multiplied with currently many developers working on Bitcoin and other cryptocurrencies.

How is Bitcoin created?

Bitcoins are created as a reward for a process known as mining. They can be exchanged for other currencies, products, and services, but the real-world value of the coins is extremely volatile.

How does Bitcoin work?

Each Bitcoin is basically a computer file that is stored in a ‘digital wallet’ app on a smartphone or computer. People can send Bitcoins (or part of one) to one another’s digital wallets, and make transactions by sending Bitcoins to other people. Every single transaction is recorded in a public list called the blockchain.

Bitcoin in India

Supreme Court gave a boost in the case of Internet and Mobile Association vs. RBI. The Reserve Bank of India (RBI) prohibited organizations regulated by it from trading in or assisting transactions in virtual currencies in a circular dated April 6, 2018. The RBI attempted to block those enterprises operating in virtual currencies by cutting linkages between virtual currency exchanges and the traditional economy, without the right outlawing virtual currencies. The RBI’s decision to supervise India’s monetary and credit system included the regulation of virtual currencies, according to the Supreme Court. It did and ruled that a complete prohibition on virtual currency exchanges was excessive and therefore not a “reasonable limitation” under Article 19(2) of the Indian Constitution. Surprisingly, the Supreme Court found that the RBI lacked sufficient empirical evidence to show that virtual currencies had a negative impact on the traditional economy.

In March 2021, it was announced by the Government of India that it would be introducing legislation that would penalize an individual found to be in the possession of bitcoin. The legislation, one of the world’s strictest policies against cryptocurrencies, would criminalize possession, issuance, mining, trading, and transferring of crypto-assets. This measure was in line with a January government agenda that called for banning private virtual currencies such as bitcoin while building a framework for an official digital currency.

On 1st February, 2022, the Indian crypto industry reacted like cheerleaders unsure if the team had scored a goal. India’s Finance Minister- Nirmala Sitharaman made two major announcements related to cryptocurrency while introducing the nation’s budget for the upcoming year i.e., 2023. First, the government intends to levy a 30% tax on any income generated from crypto transactions and a second tax of 1% at source on all transactions. Second, India intends to introduce a digital rupee (a central bank digital currency, within the financial year, the first reference to a time frame.

The single biggest point of confusion for users as a result of the announcements is how crypto could be taxed and yet not be legal. The government has refrained from suggesting crypto was legal. In other words, the bill that gives crypto the ultimate legitimacy or makes it legal will take time to come but the government is not waiting for that to happen before taxing people.

India is awaiting crypto-specific legislation to be introduced in the parliament, deliberated upon, and then passed by both houses to establish whether crypto is legal, meaning it can be accepted as an everyday speculative asset or as anything but a legal tender or form of money to buy and sell anything.

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