Legal Crypto In Andaman and Nicobar Islands

Cryptocurrency in Andaman and Nicobar Islands: Legal and Market Insights

The Andaman and Nicobar Islands, a Union Territory of India, present a unique context for the adoption and regulation of cryptocurrencies. As digital currencies gain global popularity, understanding their legal status, market dynamics, and trends in this region is essential. This document examines the legality of cryptocurrencies, exchange methods, local exchange offices, regulatory framework, and the state of Decentralized Finance (DeFi) and Non-Fungible Token (NFT) markets in the Andaman and Nicobar Islands. It also addresses the role of tourism in promoting crypto adoption and the cybersecurity challenges within the crypto ecosystem.

Legality of Cryptocurrency

In India, cryptocurrencies are not recognized as legal tender, and the Andaman and Nicobar Islands adhere to national regulations. The Reserve Bank of India (RBI) has historically cautioned against cryptocurrency risks. However, a 2020 Supreme Court ruling overturned an RBI circular that prohibited banks from engaging with cryptocurrencies, allowing individuals and businesses to trade. Residents of the Andaman and Nicobar Islands can buy, sell, and hold cryptocurrencies, subject to taxation under the Income Tax Act, 1961, where profits are classified as capital gains or business income. The proposed Cryptocurrency and Regulation of Official Digital Currency Bill, pending as of June 2025, may introduce stricter regulations, potentially impacting local users. No specific local directives beyond national policy exist in the region.

Popular Exchanges and Methods to Buy/Sell Crypto

Cryptocurrency trading in the Andaman and Nicobar Islands primarily occurs through online platforms due to limited offline infrastructure. Popular centralized exchanges like WazirX, CoinDCX, and ZebPay offer high liquidity, user-friendly interfaces, and compliance with Indian regulations, supporting major cryptocurrencies such as Bitcoin (BTC), Ethereum (ETH), and Tether (USDT). Peer-to-peer (P2P) platforms like Binance P2P and LocalBitcoins facilitate direct trading using Indian Rupees (INR) via bank transfers or other payment methods. The region’s tourism-driven economy and limited banking infrastructure make mobile apps and UPI-based payments prevalent for crypto transactions. However, inconsistent high-speed internet in remote areas can hinder real-time trading, prompting some users to prefer P2P methods for flexibility.

Local Exchange Offices

Physical cryptocurrency exchange offices are scarce in the Andaman and Nicobar Islands due to the region’s sparse population and geographic isolation. In Port Blair, the capital, informal P2P setups exist where individuals exchange cryptocurrencies for cash, often coordinated through social media or messaging platforms like Telegram. These services cater to tourists and locals seeking to convert crypto earnings into INR. However, such unregulated operations carry risks of fraud or unfavorable exchange rates, leading most users to rely on established online exchanges for security and transparency.

Cryptocurrency Regulation Laws

The Andaman and Nicobar Islands follow India’s federal cryptocurrency regulations, including:

• Income Tax Act, 1961: Cryptocurrency profits are taxed as short-term capital gains (taxed at individual income slab rates for assets held under 36 months) or long-term capital gains (20% with indexation for assets held 36 months or more).
• Prevention of Money Laundering Act (PMLA), 2002: Crypto exchanges must comply with anti-money laundering regulations.
• Foreign Exchange Management Act (FEMA), 1999: Governs cross-border crypto transactions, restricting their use for international payments unless RBI-approved.

In the absence of region-specific crypto laws, national regulations apply. The proposed cryptocurrency bill, if enacted, may mandate exchange licensing and stricter oversight, potentially reshaping the local market.

DeFi Market

The Decentralized Finance (DeFi) sector in the Andaman and Nicobar Islands is in its infancy. DeFi protocols like Uniswap, Aave, and Compound enable intermediary-free lending, borrowing, and trading, but adoption is limited due to low awareness, technical complexity, and unreliable internet in rural areas. DeFi activity is primarily driven by tech-savvy individuals or expatriates engaging in yield farming or liquidity provision. The lack of local DeFi projects and regulatory clarity further constrains growth. Indian authorities have raised concerns about DeFi’s potential to cause financial instability, which may lead to future regulatory measures.

NFT Market

The Non-Fungible Token (NFT) market in the Andaman and Nicobar Islands is emerging, with potential in tourism and art. While NFTs are used globally to tokenize digital art, collectibles, and virtual assets, India lacks specific NFT regulations. Local artists and photographers are exploring NFTs to digitize the islands’ ecosystems and cultural heritage, using platforms like OpenSea and Rarible. High Ethereum gas fees and limited crypto literacy pose challenges. NFT profits are taxed under the Income Tax Act, 1961, as capital gains or business income.

Fostering Crypto Adoption Through Tourism

The Andaman and Nicobar Islands’ tourism-driven economy offers opportunities for cryptocurrency adoption. International tourists may prefer crypto payments for services like accommodation or adventure activities, particularly in areas with limited banking access. Some local businesses accept Bitcoin or stablecoins through payment gateways like CoinPayments, targeting this market. However, regulatory uncertainty and volatile crypto prices deter widespread merchant adoption.

Cybersecurity Challenges

As cryptocurrency use grows, cybersecurity risks such as phishing, wallet hacks, and exchange scams increase. Limited cybersecurity education and technical support in the region exacerbate these threats. Users are advised to employ hardware wallets, enable two-factor authentication, and verify exchange platforms to mitigate risks.

Key Resources

• RBI Guidelines: Official statements on cryptocurrency risks and banking.
• Income Tax Department Portal: Guidance on reporting cryptocurrency income.
• WazirX Blog: Updates on India’s crypto markets and regulations.
• Telegram Crypto Groups: Informal networks for trading in Port Blair.

Cryptocurrency Statistics

Metric	Details
Active Crypto Users (Est.)	~2,000 (Port Blair and nearby areas)
Popular Cryptocurrencies	Bitcoin, Ethereum, USDT
Average Transaction Size (INR)	INR10,000–INR50,000
Exchange Platforms Used	WazirX, CoinDCX, Binance P2P
Tax Rate on Short-Term Gains	10%–37% (based on income slab)

Conclusion

The cryptocurrency landscape in the Andaman and Nicobar Islands is shaped by India’s national regulations, local infrastructure, and socio-economic factors. While cryptocurrencies are legal, adoption is constrained by regulatory ambiguity, limited infrastructure, and low awareness. Trading is predominantly online, with minimal physical exchange presence. DeFi and NFT markets are nascent, facing technical and regulatory hurdles. Tourism and cybersecurity significantly influence the crypto ecosystem. As India’s regulatory framework evolves, the region could leverage its tourism economy to drive crypto innovation, provided challenges like cybersecurity and infrastructure are addressed.