US Spot Bitcoin ETFs Attract Wealthy Indians Despite Central Bank Warning

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In January, the debut of US Bitcoin spot ETFs drew in a massive influx of institutional investors, amassing over $12.3 billion in total assets. Surprisingly, these Bitcoin ETFs have seen significant interest from affluent international investors, notably from India.

Indians Use Remittance Quota to Invest in Bitcoin ETFs

Wealthy investors in India have found a way around the warnings from the central bank regarding cryptocurrency investing. They are attempting to invest in Bitcoin ETFs on the spot market through their remittance quota, which is facilitated by the Reserve Bank of India’s Liberalised Remittance Scheme introduced in January this year. This scheme enables Indian citizens to remit up to $250,000 in a financial year.

India’s homegrown investment platform Vested Finance reported a significant interest among Indians to invest in Bitcoin Exchange-Traded Funds (ETFs). This local platform allows Indians to put money into international securities and has recorded impressive trading volumes of approximately $5.3 million, with about two-thirds being buy orders.

Based on Viram Shah’s statement as CEO of Vested, around 7 in 10 ETF investors are wealthy individuals boasting substantial net worth. These financially privileged persons are presumably drawn to the tax advantages offered under the LRS (Liberalized Remittance Scheme).

India’s Hefty Taxes Hurting Local Crypto Businesses

Back in 202, the Indian government introduced a hefty taxation regime for crypto with a flat 30% tax on crypto profits in addition to 1% TDS on crypto trading. The goal was to deter investors from participating in the crypto market. However, instead, several users chose to flock to overseas and offshore platforms thereby hurting local businesses. For e.g. buying BTC ETFs through LRS is a cheap option. Speaking to Bloomberg, Shah said:

Long-term investors can enjoy a tax rate lower than 20% on their cryptocurrency capital gains compared to the fixed 30% tax and 1% TDS when investing via crypto exchanges.

Mudrex, a crypto asset management firm supported by Y Combinator, teamed up with Vested to provide clients with access to Bitcoin ETFs. As stated by Edul Patel, the CEO of Mudrex, there’s growing interest among Indian family offices towards investing in Bitcoin ETFs using the Liberalized Remittance Scheme (LRS). This approach is tax-compliant and well-known to them.

Despite the Indian central bank’s continued warnings, the increasing curiosity towards cryptocurrencies continues unabated. RBI Governor Shaktikanta Das has maintained the bank’s firm position against digital currencies, even with the launch of Bitcoin ETFs in the United States.

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2024-04-10 07:31