A cryptocurrency is a form of digital cash that is non-state administered, decentralized ("peer to peer") and open source based.
The pattern of reluctance exhibited by India is evident through the series of either cautionary or prohibitory circulars issued by the Reserve Bank of India ("RBI")
The RBI has maintained that there is a high risk of money laundering, terror financing, hacking and frauds
However, in March 2020, India's Supreme Court struck down a 2018 order by the central bank forbidding banks from dealing in cryptocurrencies, prompting investors to pile into the market. The court ordered the government to take a position and draft a law on the matter.
the Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019 ("Second Draft Bill") was introduced. It proposed to ban usage of VC's as legal tender. Further, mining, buying, holding, selling, dealing in, issuance, disposal or use of cryptocurrency in the country would be prohibited.
The cautionary measures took a steep incline when the RBI vide circular dated April 6, 2018 - Prohibition on dealing in Virtual Currencies11 ("RBI Circular"), imposed a substantial ban on dealing with the VCs.
The RBI Circular, with immediate effect, directed that entities regulated by the RBI shall not deal in VCs or provide services for facilitating any person or entity in dealing with or settling VCs.
However the honorable supreme court contended that the RBI Circular did not protect the interests of the public in general and also violated the right to practice any profession, or to carry on any occupation, trade or business which is granted under Article 19(1)(g) of the Indian Constitution.
n the aforementioned case, it was held that a mere ritualistic incantation of "money laundering" or "black money" does not satisfy the first test and that alternative methods should be explored.
The Court went on to examine that the trading in VCs and the functioning of VC exchanges are sent to comatose by the RBI Circular by disconnecting their lifeline namely, the interface with the regular banking sector. The Court discussed that the RBI could not show substantial empirical data of the actual harm suffered by it. Till date, the RBI had not come out with a stand that any of the entities regulated by it namely, the nationalized banks/scheduled commercial banks/cooperative banks/NBFCs had suffered any loss or adverse effect directly or indirectly, on account of the interface that the VC exchanges had with any of them. The Court essentially stressed on the importance of determining and establishing the loss suffered by the RBI on account of the existence of VC and vividly stated that there was none.
Cryptocurrency and Regulation of Official Digital Currency Bill, 2021
The Parliament, in the next Lok Sabha session, is proposing to introduce the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 ("New Bill"). The New Bill seeks to create a facilitative framework for creation of the official digital currency to be issued by the RBI. The New Bill also seeks to prohibit all private cryptocurrencies in India. However, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses
Thus you may wait until the new bill is passed by parliament to enable you to start the desired business.