What a time to be alive. After years of being told about being smart and investing in recurring and fixed deposits, or diversifying portfolios with mutual funds, millennials are now telling their bewildered parents how they made bucketloads overnight by purchasing cryptocurrency instead.
Yes, it is volatile, but it is also lucrative, growing rapidly, and slowly becoming mainstream, with even governments taking notice. So it is understandable that everyone wants a piece of the block. But before jumping on the crypto-bandwagon in India, here are a few points to consider.
Should I be buying?
That's entirely up to personal preference, but obviously, the first step is research. If you're investing your hard-earned savings in something, you should at least have a basic understanding of what it is, how it works, and the potential risks involved. You can read a quick primer from The Economic Times here:
While the advantages of cryptocurrencies are many, they are unregulated, which is good in some ways, but don't offer much redressal in case you are the victim of a hack and or a scam. Now, there are ways to protect yourself from both, mainly by purchasing reputed currencies, dealing with established exchanges, and storing your coins offline. At the moment, investing is an option, but as you've probably heard others say, don't invest anything you can't afford to lose.
What can I buy?
As is the case with most phenomena, India caught on to the crypto-rage later than the Western world, but many enterprising entrepreneurs have jumped into the space and now India boasts a number of startups that help users purchase their crypto fuel of choice. Zebpay, Coinsecure and Unocoin are the big names, mostly due to media coverage and being among the first movers, but they limit themselves to Bitcoin as the currency of choice.
The alt coin brigade need not fear, as this year has seen many new entrants who offer the likes of Litecoin, Ripple, Dash and more. I would go into more specifics, but Inc42 has covered the startups dabbling in the crypto space thoroughly, and you can read up on their analysis linked below.
https://inc42.com/features/cryptocurrency-exchanges-ethereum-bitcoin-india/
What are the legalities?
Here is where things get murky, there aren't really any. In the age of technological empowerment, governments are often playing catch-up with what tech companies are doing. In India, the RBI has repeatedly declared the idea of cryptocurrency to be something it is not entirely comfortable with, and warned entrepreneurs, investors and the general public to dabble in it at their own risk (which is why, again, don't invest what you cannot afford to lose).
That said, the Government has woken up to the idea of cryptocurrency, and is mulling over what to do with it, with Laxmicoin being reportedly touted to become India's first legal cryptocurrency. This does not mean existing currencies are illegal, they are merely not recognised by law, and therefore are not legal tender (yet). So, even if a store offers to accept Bitcoin for whatever you bought, that purchase may not hold up in a court of law in case of a dispute.
Long story short, the Indian government has not taken a stance on cryptocurrency as yet, so you can technically invest in it. However, if it is deemed to be illegal at some point in the future, the Indian companies you bought your currency from may have to shut shop, and you can wave your virtual coins goodbye. So, don't leave those precious coins in exchanges whenever possible.
That is not to say the exchanges themselves are corrupt, just make sure the one you pick follows Know Your Customer (KYC) norms, which is usually a good indication for you and for the Government if it does officially legalise cryptos.
I'm going ahead, the reward is worth the risk. What now?
Taxes my friend, they come for all of us. You may make a killing off your investment, but in the absence of a true legal classification, where do you show these returns while filing taxes?
Some experts suggest showing them as capital gains from 'other sources', while others say it technically doesn't fall in that category. Another (potential) hurdle is the buying of alt coins from foreign exchanges, as this could potentially run afoul of money laundering laws as these exchanges operate outside the purview of our country's laws. However, as more options to buy alt coins within India grow, this should be less of a problem.
That... was a lot
Tell me about it. But informed decisions are always better than speculating for the pot of gold at the end of the blockchain. So go forth armed with knowledge, and all the best!
(Image credit: Pixabay | MichaelWuensch and ErikaWittlieb)