Top Indian crypto founders and insiders said that investors in the country won’t benefit much from the approval of spot Bitcoin ETFs in the US, as local platforms will not be able to offer them without regulations.
This is just good for a sentimental shift and gaining credibility as an industry, they said.
ETF, or exchange-traded fund, is an investment instrument similar to mutual funds but can operate with the flexibility of combining investments such as equities or bonds. It can be traded on stock exchanges.
According to Sathvik Vishwanath, co-founder of Unocoin, it took nearly 10 years and six months for this ETF application to get approved in the US, and India has yet to form any opinion on how to handle the crypto industry and transactions.
ALSO READ: Explainer: Why spot bitcoin ETF approval by US SEC matters to Indian crypto investors
“When it comes to ETFs in India, what SEBI thinks becomes most important, and they don’t have an opinion yet,” he told Moneycontrol.
However, approval of Bitcoin ETF by the US Securities and Exchange Commission (SEC) significantly adds credibility to the industry, he added.
“The government of India keeps comparing crypto with gambling and betting and hence is imposing high income tax. This gives us an opportunity to recheck the facts and probably include income from crypto as being not different from any other income in the upcoming budget,” he said.
Sumit Gupta, co-founder and Chief Executive Officer (CEO) of crypto unicorn CoinDCX, concurred, saying that while Bitcoin ETFs are for the US audience, the industry overall will benefit.
“Indian investors may not have access to engaging directly with these US financial instruments, but the global momentum in ETFs indicates positive growth for the crypto industry overall,” he told Moneycontrol.
However, trying to invest in a spot Bitcoin ETF through a US-based brokerage house won’t be the most efficient route to get exposure to the best Bitcoin prices, as it will have a lot of tax implications.
Parth Chaturvedi, Investments Lead, CoinSwitch Ventures, Web3 investment arm of crypto platform CoinSwitch, said that an Indian retail investor who is into buying US equities via online platforms and US-based brokerage houses can have the option of purchasing these ETFs.
“But I would say it's not the most efficient route to get exposure to the Bitcoin price because you will fall under the Liberalised Remittance Scheme (LRS). There will be tax implications. There's also going to be TCS (Tax Collected at Source), which the government has increased. So, all these factors make it not the most efficient route for Indian investors,” he told Moneycontrol.
Tax implications of buying Bitcoin ETFs
To invest in spot Bitcoin ETFs, Indian retail investors will have to go through the LRS route of the Reserve Bank of India (RBI). Under this, Indian citizens will be able to remit up to $250,000 in a financial year for such transactions.
Additionally, for LRS amounts crossing Rs 7 lakh, retail investors will be charged 20 percent TCS.
The approval of the Bitcoin ETF in the US not only legitimises the token as an asset class but also eases the process of investing in it.
Chaturvedi explained, “It is also a matter of ease of investing. Till now, if you wanted to buy a spot Bitcoin in the US, you needed to have certain technological know-how regarding its custody and regulatory clarity for holding it on your balance sheet. But now all that can be skipped.”
“Now all that will be taken care of by BlackRock or Fidelity, who will be the managers of the ETF. You will just purchase it using your brokerage account,” he added.
Chaturvedi expects that in the next three to four months, there will be more clarity on the actual impact and the influx coming in through this offering.
Earlier, crypto research firm CREBACO Global’s founder, Sidharth Sogani, estimated that this product will bring $5 billion worth of institutional investments over the next 45 days.
Rightly so, Bitcoin ETF saw nearly $4.6 billion in trades on January 11, with the majority of the trading volumes being driven by Grayscale, BlackRock, and Fidelity.
Meanwhile, closer home, RBI Governor Shaktikanta Das said that the central bank's position of crypto remains unchanged irrespective of what the US regulators decide. He compared the popularity for crypto with Tulip mania.
"We are all familiar with the Dutch term Tulip Mania in Netherlands which built up into a big asset bubble and then collapsed. So I don't think the world and in particular, the emerging market economies can afford crypto mania, which will lead to similar outcomes," he said at a Mint event.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
