How Indians Can Invest In Bitcoin

Bitcoin is a decentralised digital currency that can be bought, sold, and traded without using an intermediary such as a bank. It is built on blockchain technology, a distributed digital ledger. Bitcoin was launched in 2009 and is widely regarded as the first cryptocurrency. While it has experienced significant price fluctuations, it has also seen meteoric growth since its launch. As of August 2024, its value is stable at around $57,000.

In India, Bitcoin is not illegal, but it is also not promoted by the government. The Supreme Court of India lifted the RBI's restrictions on cryptocurrencies in 2020, stating that their existence is unregulated but not unlawful. This has allowed crypto exchanges to restart their business and given investors the opportunity to buy and sell Bitcoin.

There are several crypto exchanges in India where investors can buy Bitcoin, including CoinDCX, CoinSwitch, Mudrex, WazirX, Coinbase, Coindesk, and ZebPay. These platforms offer different features, such as user-friendly interfaces, low or zero fees, and robust security measures.

Before investing in Bitcoin, individuals should educate themselves on this asset class and be aware of the risks involved. It is important to note that there is no minimum amount required to invest in Bitcoin in India, but the investment should be made through a crypto exchange that is registered and compliant with local regulations.

How to buy Bitcoin in India legally

Step 1: Sign up to a crypto exchange

To buy Bitcoin in India, you will need to sign up to a cryptocurrency exchange platform. Examples of crypto exchanges available in India include:

• CoinDCX
• CoinSwitch
• Mudrex
• WazirX
• ZebPay
• Unocoin
• Coinbase
• Coindesk

When choosing a crypto exchange, look for one with a user-friendly interface, extensive support for BTC trading pairs, and low fees.

Step 2: Set up your account

Once you have chosen a crypto exchange, you will need to create an account and verify your identification. This will usually involve submitting important documents such as your Aadhaar Card and PAN card, and completing a Know Your Customer (KYC) process.

Step 3: Fund your account

After your account is set up, you will need to fund your account before you can start investing in Bitcoin. You can do this through bank transfers, net banking, Mobikwik, a cryptocurrency wallet, or Unified Payments Interface (UPI). Note that different platforms may charge higher transaction fees for certain funding options.

Step 4: Place your order

Once your account is funded, you can place your first order to buy Bitcoin. Depending on the platform, you may be able to purchase it by tapping a button or entering Bitcoin's ticker symbol (BTC), followed by the amount you want to invest.

Step 5: Store your Bitcoin securely

When you have purchased your Bitcoin, you will need to store it securely. Your crypto exchange will likely have an integrated Bitcoin wallet or a preferred partner wallet. However, if you do not feel comfortable leaving your crypto connected to the internet, you can store your Bitcoin in an offline wallet, also known as a cold wallet. This option provides more security but comes with the risk of permanently losing access to your coins if you lose the private key that serves as your wallet password.

Where to buy Bitcoin in India

Cryptocurrency Exchange Platforms

Firstly, it is important to note that Bitcoin is legal to buy in India. Investors can purchase Bitcoin on cryptocurrency exchange platforms, ensuring that the platform is registered with the Financial Intelligence Unit India (FIU-India). Some popular cryptocurrency exchange platforms in India include:

• CoinDCX: Recognised as one of the safest and most transparent crypto exchanges in India, with over 1.5 crore registered users. It offers access to up to 500+ cryptocurrencies and is known for its significant liquidity.
• CoinSwitch: One of the top cryptocurrency platforms in India, with over 2 crore registered users. CoinSwitch offers trading options in nearly 100 cryptocurrencies and is highly recommended for beginners. It allows investments to start from as low as INR 100 in Bitcoin.
• Mudrex: This platform has gained prominence due to FIU directives and has over 2 million users. Mudrex offers investment opportunities in over 350 cryptocurrencies.
• WazirX: Considered one of India's most reliable and rapidly growing platforms for cryptocurrency trading, with over 15 million users. WazirX offers access to over 300 cryptocurrencies for investment purposes.
• ZebPay: India's first crypto exchange, serving 6 million registered users since 2014. ZebPay provides insurance coverage for users' funds, with 98% of funds stored in Multisig cold wallets.
• Binance: A centralised exchange where you can buy several cryptocurrencies, including Bitcoin.

Payment Options

When choosing a cryptocurrency exchange platform, consider the payment options available to fund your account. Different platforms may charge higher transaction fees for specific funding options. For example, CoinDCX doesn't charge a fee for UPI and bank transfers but charges 0.5% on net banking. In contrast, WazirX's trading fee depends on your trading volume and WRX holdings.

Minimum Investment

There is no defined minimum amount to buy Bitcoin in India. However, some platforms, like CoinSwitch, allow investments to start from as low as INR 100.

Storage Options

After purchasing Bitcoin, you will need to store it securely. Cryptocurrency exchange platforms typically provide integrated Bitcoin wallets or partner with specific wallet providers. However, some people prefer to store their Bitcoin in an online or offline wallet not connected to an exchange for added security. Cold wallets, which store private keys offline, offer a higher level of security, while hot wallets work with internet connectivity and facilitate basic transactions.

What is the minimum amount of investment in Bitcoin

In India, there is no minimum limit to investing in Bitcoin. However, the minimum investment amount varies between different crypto exchanges. For example, on the Binance platform, an investor can buy Bitcoin in Indian Rupees with a minimum capital of Rs.100.

Before investing in Bitcoin, individuals must submit essential documents, including the Aadhaar Card and PAN card, and complete the KYC process. They can then place an order for their purchase on a cryptocurrency exchange and transfer the payable amount from their bank accounts.

It is important to note that the Indian government has not passed any official clarification on the legality of cryptocurrencies like Bitcoin. The Reserve Bank of India (RBI) has not made it legal, and there are no rules or guidelines for settling disputes when dealing with cryptocurrency. As such, trading in cryptocurrency is done at the investor's risk.

How to store Bitcoin in India

Storing Bitcoin securely is an important step in the process of investing in cryptocurrencies. Here are the steps and options to store Bitcoin in India:

Choose a Storage Option

There are various types of Bitcoin wallets available in India, each with its own advantages and disadvantages. The two main categories are:

• Cold Wallets: These crypto wallets store users' private keys offline, often in conjunction with compatible software on a computer. Cold wallets are considered more secure as they do not store information digitally, protecting them from potential online theft.
• Hot Wallets: Hot wallets require internet connectivity to function. They allow users to send and receive internet tokens, facilitating basic transactions. Hot wallets can be further classified into different types based on their software usage.

Select a Wallet Provider

Once you've decided on the type of wallet, it's time to choose a wallet provider. Some popular options include:

• Desktop Wallets: These wallets are installed on your computer and offer a convenient way to store and manage your Bitcoin.
• Mobile Wallets: Mobile wallets, such as apps provided by crypto exchanges, offer the advantage of portability. You can carry your Bitcoin with you and use it anytime, anywhere.
• Online Wallets: These wallets are typically web-based and can be accessed through a browser or an app. They offer similar security levels to crypto exchanges.
• Hardware Wallets: Hardware wallets are physical devices that store your Bitcoin offline, providing an extra layer of security. Examples include Ledger and Trezor.
• Paper Wallets: Paper wallets are physical documents that contain the private keys to your Bitcoin. While they are safe from online threats, you must keep the paper safe and not lose it.

Additional Considerations

When choosing a wallet, it's important to consider the level of security, ease of use, and accessibility. Some wallets may offer additional features like two-factor authentication or multi-signature transactions for enhanced security. Additionally, always ensure that your private keys are securely backed up to prevent permanent loss of access to your Bitcoin.

It's worth noting that some crypto exchanges provide integrated Bitcoin wallets or recommended partners for storage. However, if you prefer to have more control over your Bitcoin, you may consider using a non-custodial wallet, where you hold the private keys yourself.

What to consider before buying Bitcoin in India

Before buying Bitcoin in India, there are several things you should consider. Here is a list of key points to keep in mind:

• Do your research: It is important to understand the overall scenario of the global and Indian crypto capital markets before investing. Conduct comprehensive research using the ample online resources available on different websites. Track the movement of prices of digital coins and the market share of Bitcoin.
• Volatility: Bitcoin is known for its extremely high returns in a short period, but it is also a relatively new instrument in the Indian market, making it highly volatile. As with any investment, it is important to understand the risks involved.
• Legal status: The legal status of Bitcoin in India is ambiguous. While it is not illegal to trade or invest in Bitcoin, it is not explicitly promoted or regulated by the Indian government. The Reserve Bank of India (RBI) has not made it legal, so there is always a risk of losing your capital.
• Minimum investment: There is no minimum amount required to invest in Bitcoin in India. You can buy small units of Bitcoin if you don't want to purchase an entire Bitcoin. The minimum investment amount can be as low as 100 Indian Rupees (INR).
• Payment methods: Consider the different payment methods available to you when purchasing Bitcoin. You can use bank transfers, net banking, Mobikwik, a cryptocurrency wallet, or UPI. Some platforms may charge higher transaction fees for certain funding options, so it is important to compare the fees across different exchanges.
• Storage: Think about how you will store your Bitcoin securely. You can use a crypto wallet provided by the exchange or a third-party wallet. There are two main types of wallets: cold wallets, which store your private keys offline, and hot wallets, which work with an internet connection and allow you to send and receive tokens easily.
• Tax implications: Be aware of the tax implications of investing in Bitcoin. In India, there is a 30% tax on gains from cryptocurrencies and a 1% tax deducted at source. Make sure you understand your tax obligations before investing.
• Exchange platform: Research and choose a reputable and secure crypto exchange platform that is registered with the Financial Intelligence Unit India (FIU-India). Consider factors such as user-friendliness, trading fees, security measures, and KYC protocols when selecting an exchange.
• Risk assessment: Investing in Bitcoin carries risks due to its volatile nature. Consider your risk tolerance and whether you are comfortable with the potential for significant price fluctuations. Diversifying your investments can help mitigate some of the risks.
• Long-term potential: Consider the long-term potential of Bitcoin. While it has experienced significant price fluctuations, it has also demonstrated the potential for substantial price appreciation. Some investors view it as a hedge against inflation and a long-term store of value.

Frequently asked questions