<p>Bitcoin prices recently crossed $1,20,000 which translates to almost 90% year on year return! No wonder investor interest in cryptocurrencies is back roaring. A recent report points to Gen Z under 35 years making up 71% of India’s cryptocurrency investors. Investors are pumping more money into cryptocurrencies driven by quick returns and favourable global trends. But investors mustn’t forget that in India, cryptocurrencies are not regulated nor a legal tender. </p>.<p>Since the announcement of US election results, bitcoin has gained at 70%. The approval of spot Bitcoin ETFs in the US and subsequent investor flows into these ETFs and supportive US policy has led to this increase. The recently passed GENIUS Act which legitimises the use of stablecoins (which are digital tokens backed 1:1 by US dollar-denominated liquid assets) and the creation of a US Strategic Bitcoin Reserve has added further validation to cryptocurrencies. </p>.<p>The Reserve Bank of India (RBI) maintains that cryptocurrencies present systemic risks, including threats to financial stability and undermining the effectiveness of monetary policy and hence do not recognise cryptocurrencies as a legal tender in India. </p>.US tariff, growth concerns may prompt RBI to cut rates again.<p>While India has one of the world’s largest crypto user bases which is rapidly growing, in the absence of a structured regulatory framework, investors are left vulnerable to risks, with no access to legal remedies or insurance protection. The security breaches at trading platforms like WazirX and CoinDCX highlight how unprotected investors are. In the case of WazirX, investors are still waiting to get back their locked funds, even after a year. Added to that the cryptocurrency world is awash with ponzi schemes, pump and dump schemes, phishing and social engineering. Thus investors are exposing themselves to all sorts of risks which can have larger ramifications. </p>.<p>Cryptocurrencies in India are taxed similar to gambling at 30% irrespective of the tax bracket. Further there is a 1% TDS on all transactions above Rs 10,000. Proper declaration and filing of cryptocurrencies is essential to avoid scrutiny, penalties, or legal action. A taxpayer is liable to pay a penalty equal to 50% of the tax payable on under-reported income. However, if the under-reporting results from misreporting, the penalty increases to 200% of the tax due on the misreported income. It is very important to maintain comprehensive records such as TDS certificates, exchange statements, and transaction logs to support claims in ITR filing and in the event of any future litigation. </p>.<p>With no regulation, complex tax reporting and lack of protection, investors would do well to stay away from investing in cryptocurrencies. It is better to miss a risky profit than to put oneself at all sort of inconvenience. Further, those who are already investing must conduct a due diligence on the platforms they are dealing with. Aspects like security protocols, insurance protection, provision for liability in case of hacking and clear dispute resolution mechanism must be clarified.</p>
<p>Bitcoin prices recently crossed $1,20,000 which translates to almost 90% year on year return! No wonder investor interest in cryptocurrencies is back roaring. A recent report points to Gen Z under 35 years making up 71% of India’s cryptocurrency investors. Investors are pumping more money into cryptocurrencies driven by quick returns and favourable global trends. But investors mustn’t forget that in India, cryptocurrencies are not regulated nor a legal tender. </p>.<p>Since the announcement of US election results, bitcoin has gained at 70%. The approval of spot Bitcoin ETFs in the US and subsequent investor flows into these ETFs and supportive US policy has led to this increase. The recently passed GENIUS Act which legitimises the use of stablecoins (which are digital tokens backed 1:1 by US dollar-denominated liquid assets) and the creation of a US Strategic Bitcoin Reserve has added further validation to cryptocurrencies. </p>.<p>The Reserve Bank of India (RBI) maintains that cryptocurrencies present systemic risks, including threats to financial stability and undermining the effectiveness of monetary policy and hence do not recognise cryptocurrencies as a legal tender in India. </p>.US tariff, growth concerns may prompt RBI to cut rates again.<p>While India has one of the world’s largest crypto user bases which is rapidly growing, in the absence of a structured regulatory framework, investors are left vulnerable to risks, with no access to legal remedies or insurance protection. The security breaches at trading platforms like WazirX and CoinDCX highlight how unprotected investors are. In the case of WazirX, investors are still waiting to get back their locked funds, even after a year. Added to that the cryptocurrency world is awash with ponzi schemes, pump and dump schemes, phishing and social engineering. Thus investors are exposing themselves to all sorts of risks which can have larger ramifications. </p>.<p>Cryptocurrencies in India are taxed similar to gambling at 30% irrespective of the tax bracket. Further there is a 1% TDS on all transactions above Rs 10,000. Proper declaration and filing of cryptocurrencies is essential to avoid scrutiny, penalties, or legal action. A taxpayer is liable to pay a penalty equal to 50% of the tax payable on under-reported income. However, if the under-reporting results from misreporting, the penalty increases to 200% of the tax due on the misreported income. It is very important to maintain comprehensive records such as TDS certificates, exchange statements, and transaction logs to support claims in ITR filing and in the event of any future litigation. </p>.<p>With no regulation, complex tax reporting and lack of protection, investors would do well to stay away from investing in cryptocurrencies. It is better to miss a risky profit than to put oneself at all sort of inconvenience. Further, those who are already investing must conduct a due diligence on the platforms they are dealing with. Aspects like security protocols, insurance protection, provision for liability in case of hacking and clear dispute resolution mechanism must be clarified.</p>