The US Securities and Exchange Commission (SEC) has granted approval for the first batch of Bitcoin-based exchange-traded funds (ETFs) to be listed in the United States. This landmark decision not only provides easier access for US investors but also signifies a move toward a more regulated crypto market.
The approval of 11 ETFs, including those from BlackRock, Ark Investments/21Shares, Fidelity, Invesco, and VanEck, allows investors to access Bitcoin without the challenges associated with setting up wallets or dealing with crypto exchanges, which have faced cyberattacks in the past. While the immediate benefits may not directly impact Indian investors, there is hope that the move will influence domestic policies in favor of digital assets.
How Indian investors can gain?
For Indian investors, the approval of Bitcoin ETFs in the US presents an opportunity to add cryptocurrency to their portfolios through the Liberalized Remittance Scheme (LRS) route. This scheme, facilitated by the Reserve Bank of India (RBI), allows residents to remit up to $250,000 per financial year for such transactions.
One notable advantage is that the 1% Tax Deducted at Source (TDS) typically applied to crypto transactions within India would not be applicable when purchasing Bitcoin through an ETF. This is because investors are not directly buying the cryptocurrency itself. However, the question of the 20% Tax Collection at Source (TCS) introduced in 2023 arises, which may apply if LRS deposits exceed Rs 7 lakh. Unlike TDS, TCS can be offset against other tax liabilities, but it may result in liquidity being temporarily tied up.
Indian cryptocurrency companies view the SEC’s decision as a positive development for the global crypto industry and express hope for similar discussions with regulators in India. While the regulatory landscape in the U.S. has evolved over the past few years, Indian companies are optimistic about the potential for regulatory discussions to begin domestically.
The move towards regulated Bitcoin ETFs is seen as a significant milestone for the entire crypto ecosystem. It provides investors with an avenue for easy exposure through regulated entities, addressing concerns related to the storage of actual cryptocurrencies. The expectation is that a considerable portion of Bitcoin ownership may shift to ETFs, making the cryptocurrency more accessible to those accustomed to traditional financial markets.
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