Bitcoin Trading Legality?

Alchemist

Administrator
Staff member
#2
There is not enough clarity on the legal status of bitcoins in India. The government is aware that bitcoins are being traded in India and has not banned them yet.

As the government and the tax department do not recognize bitcoins and other virtual currencies as currencies, I guess one should treat such currencies as assets and the gains arising from these as capital gains.
 

Alchemist

Administrator
Staff member
#4
Hi

Thanks for reply. Does your reply apply to ethereum as well ?
Yes to all "virtual" currencies.

In case of losses, can they be offset?
Logically, yes.

However, in absence of clear laws, your assessing officer may have a different view on this subject.

Please note that I am not qualified to give any kind of tax advice to anybody. I am just expressing my views based on whatever limited knowledge I have.
 
#6
I tried to search about bitcoin but could not really understand bitcoin basic.

The first question I have is what is the intrinsic value of bitcoin? I assume every asset has some intrinsic value such as share value can be defined as (company's valuation)/ (no of shares). For currency, govt has the liability to pay to the holder of currency. But can't understand this for bitcoin.
 

Alchemist

Administrator
Staff member
#7
The first question I have is what is the intrinsic value of bitcoin?
The price of a bitcoin is determined by supply and demand.

As such there is nothing "backing" the currency except the "trust" that people have in it and it's network.

The fact is that value of most currencies in the world comes just from trust.

The Indian government promises it will pay the holders of the currency note, but what will the government pay?

The government will pay rupees. There is nothing backing these "rupees". The value of rupee comes from the trust that people have on the government and the central bank.

Without this trust, the notes and coins have little scrap value.
 

paran

Active member
#8
It is still unclear to me.

Government and the central bank are a structured institution. They back up the rupee whereas in case of bitcoin who is backing it up?

In India no one is going to say using rupee is illegal. However bitcoins transactions can be said it is an illegal at any moment.

Self declaration: I am a novice to bitcoin.
 

Alchemist

Administrator
Staff member
#9
Government and the central bank are a structured institution. They back up the rupee whereas in case of bitcoin who is backing it up?
As I said no one is backing bitcoin.

People find it useful and thus are using it. There is demand for it and that is what gives it a price.

Sooner or later Indian government will create problems (regulations) for bitcoin or just declare it illegal. That risk remains.

I don't see how the government can stop people from using bitcoins. One just needs a PC and an internet connection to create a bitcoin wallet.

Different countries treat bitcoins in different ways.

Whilst the majority of countries do not make the usage of bitcoin itself illegal (with the exceptions of: Bangladesh, Bolivia, Ecuador & Kyrgyzstan), its status as money (or a commodity) varies, with differing regulatory implications.
https://en.wikipedia.org/wiki/Legality_of_bitcoin_by_country_or_territory
 
#10
As I said no one is backing bitcoin.

People find it useful and thus are using it. There is demand for it and that is what gives it a price.

Sooner or later Indian government will create problems (regulations) for bitcoin or just declare it illegal. That risk remains.

I don't see how the government can stop people from using bitcoins. One just needs a PC and an internet connection to create a bitcoin wallet.

Different countries treat bitcoins in different ways.

https://en.wikipedia.org/wiki/Legality_of_bitcoin_by_country_or_territory
I think if no one is backing this, then at some point the value of bitcoin will definitely become zero. That can happen because of various reasons. Even if everything is going great, I am very sure some reputed MNC will come up with another currency and possibly with backing. At that time bitcoin value can become zero.
 

Alchemist

Administrator
Staff member
#11
I think if no one is backing this, then at some point the value of bitcoin will definitely become zero.
One major attraction about bitcoin is that no one is backing it.

People don't want their money and wealth to be controlled by governments and that is one reason why people are attracted towards bitcoins.

Bitcoin is 100% open source and anyone can create a "coin" similar to bitcoin. The hard part is getting people to use and accept it.

There are already 100s of altcoins, but most of them are hardly used. On the other hand bitcoin is accepted by many companies including big ones like Microsoft and Dell.

Bitcoins has many flaws, but people are yet to find a better replacement for it.
 
#12
One major attraction about bitcoin is that no one is backing it.

People don't want their money and wealth to be controlled by governments and that is one reason why people are attracted towards bitcoins.

Bitcoin is 100% open source and anyone can create a "coin" similar to bitcoin. The hard part is getting people to use and accept it.

There are already 100s of altcoins, but most of them are hardly used. On the other hand bitcoin is accepted by many companies including big ones like Microsoft and Dell.

Bitcoins has many flaws, but people are yet to find a better replacement for it.
Do you think bitcoin can survive 50 years. With technology evolving so fast I really doubt if bitcoin can survive 50 years. With no backing the value of bitcoin would be zero at that time. Regarding govt currency, it has been there for years and most likely remain in future. The format can change such as instead of physical notes you may hold digital currency in future or the Rupee can be renamed to something else. But whatever happens, you would get adequate chance to convert your older currency to new currency. But in bitcoin any change can cause the bitcoin value to fall to zero.
 
#13
Do you think bitcoin can survive 50 years. With technology evolving so fast I really doubt if bitcoin can survive 50 years. With no backing the value of bitcoin would be zero at that time. Regarding govt currency, it has been there for years and most likely remain in future. The format can change such as instead of physical notes you may hold digital currency in future or the Rupee can be renamed to something else. But whatever happens, you would get adequate chance to convert your older currency to new currency. But in bitcoin any change can cause the bitcoin value to fall to zero.
With the above argument against Bitcoin, the same can be applied to Gold. But you see, it is the only escape in case of any black swan event.
 
#14
With the above argument against Bitcoin, the same can be applied to Gold. But you see, it is the only escape in case of any black swan event.
Yes there is some possibility but chances of Gold failing is much less compared to bitcoins. There is a physical asset involved where value can drop or rise but can't become absolute zero. Also the gold is used the the govts and it represent how much currency you can print and its value.
 

Alchemist

Administrator
Staff member
#16
Government "discussed" about bitcoins today, but no further development has been reported.

Finance Minister Arun Jaitley on Tuesday held an inter-ministerial meeting to examine risks related to virtual currencies (VCs) like bitcoins. Although several issues concerning bitcoins were discussed, no decision was taken, sources said.
Arun Jaitley holds meeting on bitcoins | The Indian Express

Meanwhile, Unocoin is facing some "security issues".

Bitcoin and blockchain startup Unocoin has made its website offline after they identified vulnerabilities in a part of its architecture. The website is going to be back up by end of today, according to Unocoin chief executive Sathvik Vishwanath.
Bitcoin: Unocoin website offline; CEO says it will be back up by end of today - The Economic Times
 

Alchemist

Administrator
Staff member
#18
Bitcoin value crosses $10000 ! It was around $1000 at the start of 2017 and $5000 in Oct 2017. A 10x increase in a single year.
1. Speculative trading is the primary reason for the volatility of crypto-currencies.

2. Bitcoin has become one of favorite transaction modes for illegal deals, especially where money has to move across international borders.

3. Then there is "investment" money. Soon we will have ETFs, mutual funds, derivatives etc for crypto-currencies.

Crypto-currencies now have a market cap of $300 billion. That is 13% of India's market cap (stocks).

India is now home to the world’s eighth-biggest stock market, overtaking Canada for the first time in almost a decade. The score: India $2.29 trillion, Canada $2.28 trillion.
https://economictimes.indiatimes.co...-2-trillion-standoff/articleshow/61862275.cms
 

Alchemist

Administrator
Staff member
#19
Bitcoin is near $15000 and going up, but most other crypto-currencies are showing reversal patterns.

I feel we are near a medium-term top.
 
#20
It falls again and again and rise again. And yes I am not sure how to deal with it's status in India, what other people says about that ? Like few years passed, but I do believe it's all taxable income really ?! What do you say ? How is it going ? Do you know somebody from that topic of interest ?
 
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