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Home > Money > Investments Last Updated: Dec 28th 2023

Trading Bitcoins? Top 7 things to know

Bitcoin trading and its legality in India is at its cross-roads. At the same time much demand created there by increased value of almost all actively traded crypto currencies. This article covers Top 7 things that one need to aware while trading BitCoins.

Bitcoin Trading? Top 7 things to know


A cryptocurrency (aka crypto) is a digital or virtual currency designed casually and later became popular, used as a currency in certain parts (extremely limited) of the world, to buy things like a typical physical currency (such as Indian Rupee).

Bitcoin is one type of a cryptocurrency. There are several cryptocurrencies traded in various crypto exchanges around the world and gained much popularity in recent times. The maximum number of cryptos that can be circulated are capped at a limit. Hence the value of crypto is increasing due to its popularity.

1. Bitcoins are Legal?

Cryptocurrency trading and its legality in India is at its cross-roads in India. Around the world this subject received a mixed reaction from the policy makers over the years in regularising and accepting as a currency (legal tender).

Few fundamentals are clearly missing to state it as a currency / legal tender. How come a currency that was already established in the hands of private people who do not have any affiliation to a single statehood gets the wealth approximately $1.4 Trillion? On what basis a country like India, USA, UK and others simply accept it as a currency pay them such or similar money? accepting as a legal tender means giving value to all crypto holders.

Currencies are not supposed to be highly volatile

Even today, 2021, those countries who accepted cryptocurrencies ( virtual currencies ) as legal are not accepting it as a currency and are not accepted in most domestic dealings.

Almost all the governments around the world are accepting cryptos as a digital property or asset ( similar to a fancy item or an antique or e-Gold without backing any real physical asset), such asset is not accepted everywhere but only to accepted by the people or entities who think it has a value.

Bottomline: Not accepted as a currency (legal tender) in India but treated as an asset in the absence of clear regulation.

2. Safe to Invest in Cryptos?

Investment in to cryptocurrencies such as BitCoin or Ethereum are highly speculative. While its ok to try to invest to catch a wave, it is highly risky and may end up losing money and there is no cover from the state regulators for such a loss.

3. International money transfers are Easy

Yes. The purpose of a virtual currency is to transact beyond borders. But only where such transfers are accepted. Money transfers without a regulatory approval are hard to trace and hard to support if any problem arises. E.g. loss of a password does mean loss of bitcoin property, where no court and/or legal body can support the victim. Considerable number of views on stopping such transfers as the money / asset / value may goes to anti-nationals and/or anti-social elements funding.

4. Uncertainty in Taxation

On Jul 08th 2020, both CBDT and SEBI signed a formal MOU to share the data periodically to enhance the tax enforcement on trades and the sources of such. But the crypto exchanges are border-less and how to enforce the tax laws on such trades and gains ?

As on today, there is a clear vacuum on enforcing taxation and curbing illegal money / value transfers into and out of India.

With the recent rumour and news on new bill in parliament to ban cryptos taking the movement, India may introduce India's own version of BCoin a very possibility.

Refer How Bitcoins Taxed in India? for a detailed understanding.

Also refer latest Crypto Tax Calculator? for a comprehensive tax calculation that considers Residential Status, Jurisdiction of Crypto Exchange, Income Slab, Gifting, Lost Stolen cryptos beyond a typical sale.

5. Uncontrolled Cryptos

While blockchain is the underlying technology, according to coinmarketcap, there are close to 8,472 crypto currencies operating in the world with a market cap of $1.490 Trillion (* as on Feb 14th 2021). From this fact, there is no single international body who can regulate and / or to provide dispute resolution if anything wrong in the trades or otherwise.

6. Cryptos value change rapidly

Yes. It's wonderful if it goes up quickly but the value may go down rapidly as well due to sell-off in the markets. In essence, there is no stability in its value like an Indian Rupee. This is one of the reasons why cryptos may never get the acceptance as a currency from Indian Government.

7. Crypto Frauds

As the cryptos are not backed by any government, its completely in the hands of private companies who own and operate the node servers, crypto exchanges, trading platforms. In addition, some of the information is publicly available part of the ledger such as transaction amount, wallet addresses and IDs that may cause future privacy concerns and Frauds.


Blockchain as an underlying technology has proven the beyond a threshold but the virtual currency using the current mode of mining and gaining has no room to be a real currency.

While India may ban as it is showing serious signs of a Ponzi scheme, most countries too may leave it as an asset without authorising as a currency in future. Hence, the future of crypto currencies as it is in its current form may gain momentum until people truly realise its just an asset and not an acceptable currency.

Quick Facts

CryptoCurrencies in Numbers

  1. Cryptos being traded: 8,472
  2. Markets / Exchanges / Intermediaries: 33,759
  3. Total Market Capitalisation: $1,394,190,822 ($1.39 Trillion)
  4. 72% of the total market capitalisation held with Top 2 Cryptos.
* data from coinmarketcap

Disclaimer: This article provides an overview and general guidance, not exhaustive for brevity. Please refer Income Tax Act, GST Act, Companies Act and other tax compliance acts, Rules, and Notifications for details.