April 12, 2024
By Anjali Kochhar
Wealthy Indians are seizing the opportunity to dive into the Bitcoin frenzy by leveraging their yearly remittance allowances, despite cautionary notes from India’s central bank likening crypto investments to historical financial bubbles.
Indians are actively trading in exchange-traded funds (ETFs) launched in January through the Reserve Bank of India’s Liberalised Remittance Scheme (LRS), which permits citizens to remit up to $250,000 annually.
According to data from Vested Finance, a domestic platform facilitating investments in overseas securities, over $5.3 million in Bitcoin ETF trading volumes have been recorded thus far, with approximately 67% of transactions being buy orders.
Viram Shah, CEO of Vested, revealed that roughly 70% of ETF traders are affluent, high-net-worth individuals, drawn primarily by the tax advantages offered through the LRS.
Since 2022, India has enforced a tax regime imposing a 30% tax on crypto asset income, coupled with a 1% levy known as Tax Deducted at Source (TDS), prompting many Indian crypto traders to seek offshore platforms. However, purchasing Bitcoin ETFs via the LRS presents a more cost-effective alternative.
Shah elaborated, stating that for long-term investors, capital gains taxes could be reduced to below 20%, unlike the flat 30% rate and 1% TDS applicable when investing directly through crypto platforms.
Furthermore, Mudrex, a Y Combinator-backed crypto asset management platform, has teamed up with Vested to provide spot ETFs to its customers. Edul Patel, CEO of Mudrex, noted that Indian family offices are also keen on utilising the LRS pathway.
Patel emphasised that investing in Bitcoin ETFs via the LRS is both tax-compliant and easily comprehensible, which is prompting family offices to explore exposure in this sector.
These early indicators of demand emerge despite repeated warnings from the Indian central bank regarding cryptocurrencies. RBI governor Shaktikanta Das reiterated the bank’s stance on cryptocurrencies, expressing concerns over potential negative outcomes akin to historical financial manias.
Speaking at a public forum on Jan. 11, Das drew parallels between the hype surrounding crypto assets and the infamous tulip mania. He cautioned against embracing a crypto frenzy, particularly in emerging economies, citing potential adverse consequences.
Despite regulatory skepticism, the allure of Bitcoin ETFs coupled with tax advantages under the LRS has prompted affluent Indians, including family offices, to navigate into the crypto space cautiously.
As the global crypto landscape continues to evolve, India’s affluent investors are leveraging available avenues to participate in the Bitcoin market while navigating regulatory frameworks and tax implications.
About the author
Anjali Kochhar covers cryptocurrency stories in India as well as globally. Having been in the field of media and journalism for over three years now, she has developed a sharp news sense and works hard to present information that goes beyond the obvious. She is an avid reader and loves writing on a wide range of subjects.
