Indian investors can profit from Bitcoin ETFs. Here’s how

The US market regulator — The Securities and Exchange Commission — greenlit Bitcoin ETFs in January paving a safe and secure pathway for millions of US and Indian investors looking to invest in cryptocurrencies. 

The development is a welcome one. It brings cryptocurrencies into the mainstream and aids conservative and long-term investors to gain exposure to a new asset class, while cutting out the risks of investing via dubious, shady and highly mis-manged cryptocurrency platforms.

On January 11, the SEC approved 11 Bitcoin ETF applications from reputed fund houses like BlackRock, Ark Investments, Fidelity, Invesco, and VanEck among others. 

It will come as no surprise to readers that since the SEC approval, Bitcoin prices have been on a steady uphill climb. On February 14, Bitcoin conquered the $51,000 level pushing the cryptocurrencys’ market cap to over $1 trillion.

Market analysts and experts believe that the Bitcoin ETFs will draw in close to $50-$100 billion this year alone. 

How can Indian investors benefit from Bitcoin ETFs?

Indian investors keen on investing in the ETFs can use the Appreciate app to seamlessly, effortlessly and safely invest in US Bitcoin ETFs.

What are the benefits of investing in spot Bitcoin ETFs?

First and foremost, by investing in Bitcoin ETFs investors will be able to gain exposure to a cutting-edge asset class, which has been progressively becoming more and more popular in the last two decades. Millions of people around the globe have been channelling their savings into cryptocurrencies, operating under the belief that cryptocurrencies will be an important medium of exchange in the future.

Whether this turns out to be true or not is for the future to tell, however, several cryptocurrencies have delivered stellar market returns.

  • By investing in cryptocurrencies, investors can diversify their portfolios and balance traditional instruments of bonds and equities with new-age digital assets like Bitcoin.
  • Mainstreaming of Bitcoin ETFs will lure in funds from institutional and retail investors worldwide. This will enhance the liquidity in the ETFs, deliver stronger returns and make them more reliable.
  • Bitcoin ETFs provide exposure to the cryptocurrency, helping investors cash in on sudden market movements. 
  • Since the ETF funds will be regulated by the US market regulators, investors will also have assurance of the safety of their investments.

Tax implications of investing in Bitcoin ETFs

Indian investors are allowed to invest up to $250,000 in foreign instruments under the Liberalised Investment Scheme formulated by the RBI. This regulation applies to Bitcoin ETFs as well. 

In India, there are different norms governing the taxation liability arising out of investment in equities, debt, overseas mutual funds, ETFs and crypto assets.

Capital gains arising out of cryptocurrencies are taxed at a flat rate of 30% in India. However, when investing in Bitcoin ETFs, one is purchasing the units of funds that are investing in Bitcoin. Effectively, the end customer in India won’t be buying the Bitcoin directly which will help him cut back on the tax liability.

Under the Liberalised Remittance Scheme, any investment that is sold off before 36 months attracts short-term capital gains tax. The STCG tax payable on the sale of Bitcoin ETF will be determined by the tax slab of the investor. Any long-term capital gains tax will be at 20% with the added advantage of indexation benefit. 

This is a clear-cut benefit compared to the 30% tax levied on investing directly in cryptocurrencies in India.

Additionally, investors must keep in mind that they will have to pay a 20% TCS on deposits above ₹7 lakh under the Liberalised Remittance Scheme. While it is true that 20% TCS might lead to a liquidity choke-up, there is relief for customers as it can be deployed to offset other tax liabilities.

The final word

For now, the entire cryptocurrency and brokerage industry is keenly awaiting the arrival of the digital assets’ regulation framework in India.

The Union government had listed the Cryptocurrency and Regulation of Official Digital Currency bill in late 2021, however, the bill never came up for discussion. 

In the meantime, Indian investors can fruitfully, and most importantly, safely invest in cryptocurrencies by leveraging the many benefits of Bitcoin ETFs. With the Appreciate app at your disposal, investing in a Bitcoin ETF has never been easier and safer.

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