How safe it is to buy cryptocurrencies in India?

With a tremendous run of registering 300% to1500% growth, cryptocurrencies became the best investment vehicle for the year 2017. The year witnessed Bitcoin, the leader of the board, touching an all-time high of over $19,000 and gave the investors returns that were unheard of. This spectacular rise in the valuation has attracted more and more people to look at cryptocurrencies as a viable investment option in their portfolios.

Legality of cryptocurrencies in India:

However, despite all the curiosity, many of us have wondered if it is safe to buy, store and sell bitcoins in India. In the recent Union Budget, finance minister Arun Jaitley announced, "The government does not consider cryptocurrencies legal tender or coin and will take all measures to eliminate the use of these crypto-assets in financing illegitimate activities or as part of the payment system." In other words, the government has yet not decided about how to regulate cryptocurrencies yet, however, they have not declared them as illegal. Due to the absence of any regulatory guidelines, trading in cryptocurrencies in India will be unhindered as of now.

Volatility a constant factor:

One cannot overlook the ever-existing volatility that cryptocurrencies bring with them. Since this asset class is not regulated, there is bound to be a constant swing in the pricing of all the cryptocurrencies. From enjoying the highs of $19,000 in November-December 2017, the valuation of Bitcoin crashed to $6,000 in by the starting of February 2018. As an investor, you need to factor the volatility as per your risk taking an appetite.

How to buy and store cryptocurrencies?

You can buy Bitcoins and other cryptocurrencies in India using exchange platforms and peer-to-peer OTC (over the counter) markets. This is often carried out between the known parties. There are few entities which offer an escrow solution to enable the P2P transactions. Another way of procuring cryptocurrencies are through crypto exchanges. In order to transact with the exchanges, you will have to go through KYC check process. The advantage of trading with the exchanges is that you will have a reduced counterparty risk since the orders are matched within the exchange. You can buy cryptocurrencies by making a payment to the exchange's bank account and wait for the amount to reflect in your wallet. Once the money hits your rupee wallet, you can buy cryptocurrencies at the existing value on the respective exchanges.

Blockchain - the technology behind Bitcoin

While the Indian government has yet not regulated or legalised cryptocurrencies in India, it did announce that it would explore the use of blockchain technology proactively for ushering in the digital economy. This is a tremendous boost for the industry in India as it sends a strong signal that government is seriously thinking of steps to regulate cryptocurrencies.

With Prime Minister Narendra Modi leading the charge of digitising India, digital cryptocurrency has caught the attention of many Indians. As of now, the government has not termed it illegal. However, as a cryptocurrency user, you should treat with caution.

The writer is Chief Operating Officer, Belfrics Group