How to buy Bitcoin in India

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The grand old cryptocurrency has had plenty of aficionados in the Indian crypto space. Consensus and YouGov conducted a global survey on crypto and Web3 in unison. They published a report on June 23, revealing that 32% of Indians had bought cryptocurrencies at some point, and 21% still owned digital assets. It also revealed that Bitcoin (BTC) dominated the cryptocurrencies purchased.

Levying a 30% tax on income received from digital assets didn’t dent the sentiment in the country regarding cryptocurrencies. According to a report published by the KuCoin cryptocurrency exchange, the digital assets market in India is expected to clock $241 million by 2030.

As the world’s most populous country, with 1.4 billion people, India comes across as a country with millions of prospective cryptocurrency investors. Based on data from the United Nations Economic and Social Commission for Asia and the Pacific, 68% of this demographic falls within the 15–64 age range, indicating a higher likelihood of interest in cryptocurrencies such as BTC.

This article explains how to buy Bitcoin in India on centralized and decentralized exchanges, systematic investment plan (SIP), over-the-counter (OTC) deals or direct peer-to-peer (P2P) exchanges.

How to buy BTC on a centralized crypto exchange in India

Catering to millions of prospective Bitcoin buyers, there are hundreds of centralized exchanges operating in India, both local and multinational. One needs to check factors such as ease of use, security and low fees when zeroing in on an exchange.

One needs to complete the exchange registration process, including verifying their phone number and email. The next step is Know Your Customer (KYC), a government-mandated procedure that requires the person to submit a soft copy of their identification documents with the exchange. A team verifies these documents before giving access to the applicant. KYC regulations aim to prevent financial crimes such as identity theft and money laundering.

One can buy Bitcoin via OTC or P2P trading on a centralized exchange. OTC trading has a minimum order size. For instance, CoinDCX has a minimum order size of 15,000 Tether (USDT) or 12,00,000 Indian rupees (whichever is lesser), while WazirX OTC Desk serves large crypto volumes worth $50,000 and above.

One may take the P2P route to buy BTC for lower denominations. The role of the exchange is to facilitate a direct deal between the buyer and the seller while acting as an escrow, ensuring nobody is at a loss. The exchange holds the money paid to the seller. Once the buyer receives BTC, the amount is transferred. The buyer can pay in fiat or any other cryptocurrency acceptable to the seller.

How to buy BTC on a decentralized crypto exchange in India

As the name suggests, a decentralized exchange (DEX) is designed to facilitate P2P transactions without any decisive role for a single person or a group of executives. Instead, based on the input provided by participants, a smart contract executes the transactions.

Direct transactions between users on the blockchain eliminate any need for DEXs to act as intermediaries. As trades get executed on top of the blockchain network via a smart contract, every transaction incurs a fee along with the trading fee. This is, however, less than what one incurs on centralized exchanges. Unlike centralized exchanges, DEXs do not take custody of users’ funds, so the end-user always controls their digital assets.

To execute a transaction on a DEX, one needs to connect their cryptocurrency wallet to the exchange. However, DEXs don’t allow buying Bitcoin with fiat currency, so one needs to transfer another cryptocurrency for Bitcoin. Transactions can be conducted without fulfilling KYC requirements. While transactions on DEXs might be anonymous for now, they could be brought into the regulatory ecosystem as it evolves.

How to buy Bitcoin via SIP in India

A systematic investment plan is a disciplined approach to regularly invest a fixed amount in assets at predefined intervals. SIP allows one to keep buying Bitcoin consistently over a predefined period. SIPs have been a fundamental component of conventional market instruments, including stocks and mutual funds. Thanks to SIPs, investors can capitalize on market fluctuations while retaining their portfolios for a long time.

To invest in SIPs, one needs to download the app of a service provider offering SIPs, complete the registration and KYC procedures, and select the relevant option on the screen. The next step is to choose the coin one wants to invest in (in this case, BTC), set the day and frequency of the plan, and start the SIP.

How to make direct P2P crypto transactions in India

To conduct direct peer-to-peer crypto transactions, one can opt for either on-exchange or off-exchange methods. On-exchange transactions involve using a P2P service on a crypto exchange platform where users register, complete identity verification (KYC), and then browse and initiate transactions with other users. The platform holds the cryptocurrency in escrow until both parties confirm the transaction.

Off-exchange or OTC transactions require finding a trusted buyer or seller, often through personal networks or OTC brokers, and directly agreeing on transaction terms. Payment is usually made via bank transfer or digital wallets, and the cryptocurrency is transferred directly to the receiver’s wallet. In both methods, it’s important to prioritize security and adhere to local regulations.

Direct P2P cryptocurrency transactions can be conducted through several popular P2P Bitcoin exchanges, such as Paxful, OKX, WazirX and Hodlhodl.com. These platforms facilitate the buying and selling of Bitcoin and other cryptocurrencies directly between individuals, offering various payment options, including bank transfers and online wallets.

They typically charge low trading fees, provide noncustodial wallets, and use escrow services to enhance security. With features like auto-matching and multiple payment methods, these exchanges cater to diverse needs while ensuring user safety and minimizing the risk of fraud and hacks in the P2P crypto market.

Modes of payment for cryptocurrency transactions in India

Crypto exchanges in India allow one to transfer money using bank transfer (debit card or credit card) via Immediate Payment Service (IMPS) and Unified Payments Interface (UPI). When conducting P2P trading, the seller might take payments in any mode they prefer, along with regular IMPS and UPI. These modes include regular Paytm, a digital payment service, and Lightning UPI, fast real-time transactions on Paytm with a single click without a PIN.

One can also pay for BTC using other cryptocurrencies, such as Ether (ETH), Polkadot’s DOT (DOT) and Cardano (ADA), though many sellers prefer using stablecoins, such as USDT and USD Coin (USDC). However, buying Bitcoin via PayPal is not supported in India yet.

Methods to store Bitcoin

After buying Bitcoin, the next step is to store it securely. One can choose from several types of Bitcoin wallets, such as desktop wallets, mobile wallets, online wallets, hardware wallets and paper wallets. Many buyers leave their Bitcoin with the exchange, which may not be suitable because the exchange holds the cryptocurrency and not the buyer.

Hardware wallets and paper wallets store Bitcoin offline, making it safe from thieves, though one still has to be careful not to lose the private key or the paper wallet itself. Mobile wallets have the advantage of convenience, and one can carry their BTC around and use it the way they want at any time. Desktop and online wallets typically offer a level of security comparable to keeping Bitcoin on an exchange.

Wallets can also be categorized as custodial or noncustodial. When storing funds in custodial wallets, users have no control over their private keys, and funds lie in the custody of a third party. In contrast, noncustodial wallets give users complete control over their private keys and, subsequently, their funds.

Bitcoin regulations in India

Indian law requires anyone who has made gains from trading virtual digital assets (VDAs), including Bitcoin, to pay tax at a rate of 30% plus 4% cess, a tax levied on the tax for spending on a specific purpose. When buying Bitcoin on an Indian exchange, the onus to ensure compliance is on the exchange.

However, when buying BTC on an international exchange or conducting a P2P transaction where BTC exchanges hands, the buyer and seller must ascertain that compliance requirements are met.

Should you buy Bitcoin in India?

Although purchasing Bitcoin in India presents possible investment prospects, careful thought must be given. Regulatory uncertainties exist despite the legality of cryptocurrencies. Decision-making is impacted by variables such as market volatility, a lack of detailed guidelines and prospective policy changes.

Accessibility via exchanges that facilitate rupee transfers is a benefit; however, there are still restrictions on some payment options. It’s critical to assess one’s own risk tolerance, comprehend market dynamics, and stay current on regulatory changes.

Even though Bitcoin offers opportunities for investing, careful consideration and knowledge of India’s changing cryptocurrency scene are necessary before making any decisions.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.