- Indian investors bypass domestic crypto regulations by using RBI’s LRS to access US Bitcoin ETFs despite warnings.
- High taxation on cryptocurrencies in India prompts affluent individuals to seek tax-efficient offshore investment options.
- Despite regulatory caution, strong local demand for Bitcoin ETFs persists, driven by wealthy investors and family offices.
As per Bloomberg, wealthy Indians are leveraging the Reserve Bank of India’s Liberalized Remittance Scheme (LRS) to trade US spot Bitcoin ETFs, despite cautionary remarks from the central bank. Reports indicate that 70% of investors participating in these ETFs are high-net individuals.
The launch of US spot Bitcoin ETFs in January has sparked significant interest among institutional players worldwide, with total inflows surpassing $12.3 billion. Surprisingly, a considerable portion of this investment is coming from affluent Indians, utilizing the LRS to remit funds overseas for investing in Bitcoin ETFs.
Even though the RBI has repeatedly warned Indians against partaking in cryptocurrency investments, the wealthy investors are eager to gain exposure to the real bitcoin exchange traded funds through the LRS. This program allows anyone to remit the amount that does not exceed $250,000 for foreign trade in the financial year.
Vested Finance, an Indian platform facilitating investments in international securities for Indians, reports a surge in the purchase of Bitcoin ETFs among local investors. With trading volumes hitting $5.3 million, indicating a significant preference for these products, approximately two-thirds of the transactions comprise buy orders.
The hefty taxation regime imposed on cryptocurrencies by the Indian government, including a flat 30% tax on crypto profits and 1% TDS on trading, has driven many users to offshore platforms. By investing in Bitcoin ETFs through the LRS, investors can potentially benefit from tax incentives, reducing their tax liability to below 20% on capital gains.
Mudrex, a crypto asset management platform, has partnered with Vested Finance to offer spot Bitcoin ETFs to its clients. Edul Patel, CEO of Mudrex, notes that Indian family offices are also showing interest in leveraging the LRS to invest in Bitcoin ETFs due to its tax-compliant nature and familiarity.
This continued surge in the Bitcoin ETF demand can be observed even amidst cautionary RBI developments. Dr. Shaktikanta Das, RBI Governor affirmed that RBI is in no way ready to open the doors for the related crypto community and is focusing mainly on the risks related to digital currencies. On the contrary, Indian investors appear to be unperturbed still, finding different ways of approaching cryptocurrencies through offshore investments.
Despite regulatory warnings and taxation challenges, Indians are leveraging the LRS to invest in US spot Bitcoin ETFs. The significant participation of high-net individuals underscores the growing interest in cryptocurrencies among Indian investors despite the regulatory landscape.
