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Highlights
- Indians are leveraging Reserve Banks LRS scheme to seek exposure to overseas securities like Bitcoin ETFs.
- India's hefty crypto tax pushing investors to opt for offshore exchanges.
- RBI keeps its stand on cryptocurrencies unchanged despite the Bitcoin ETF success.
The launch of US spot Bitcoin ETFs in January this witnessed attracted a huge pool of institutional players with total inflows surging past $12.3 billion so far. Interestingly, it turns out that the Bitcoin ETFs have been attracting wealthy investors from overseas, especially from India.
Indians Use Remittance Quota to Invest in Bitcoin ETFs
Despite several warnings from India’s central bank over crypto investing, wealthy investors in India are seeking exposure to spot Bitcoin ETFs via remittance quota. Interestingly, these Indians are leveraging the Reserve Bank of India’s Liberalised Remittance Scheme launched in January this year, allowing citizens to remit $250,000 in a financial year.
India’s domestic platform Vested Finance, which permits Indians to invest in overseas securities, said that there’s a strong local demand for Bitcoin ETFs. The platform has registered a healthy $5.3 million in trading volumes, two-thirds of which have been buy orders.
According to Viram Shah, CEO of Vested, approximately 70% of ETF traders are affluent individuals with high net worth. These investors are likely attracted to the tax incentives provided through 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:
“For long-term holders, the taxation can be reduced to below 20% on capital gains unlike the flat 30% and 1% TDS applicable when investing directly through crypto platforms”.
Mudrex, a crypto asset management platform backed by Y Combinator, has partnered with Vested to offer spot Bitcoin ETFs to its clients. According to Edul Patel, CEO of Mudrex, Indian family offices are increasingly interested in utilizing the Liberalized Remittance Scheme (LRS) for investing in Bitcoin ETFs due to its tax-compliant nature and familiarity.
This growing interest persists despite warnings from the Indian central bank, with RBI Governor Shaktikanta Das reiterating the bank’s unchanged stance on cryptocurrencies despite the introduction of Bitcoin ETFs in the US.
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