The Securities and Exchange Commission (SEC) has approved 11 spot bitcoin exchange-traded funds (ETFs), which has investors in the cryptocurrency space in high spirits. For Indian cryptocurrency enthusiasts, this is also huge news, since as of 2023, there were over 19 million cryptocurrency investors in the nation.
The Bitwise Bitcoin ETF, Hashdex Bitcoin ETF, iShares Bitcoin Trust, Grayscale Bitcoin Trust, and Valkyrie Bitcoin Fund are a few of the Spot Bitcoin (BTC) that have received approval from the U.S. financial regulator. Similarly, the VanEck Bitcoin Trust, the WisdomTree Bitcoin Fund, the Fidelity Wise Original Bitcoin Fund, the ARK 21Shares Bitcoin ETF, the Invesco Galaxy Bitcoin ETF, and the Franklin Bitcoin ETF.
According to industry experts, these 11 exchange-traded funds (ETFs) have the potential to lower liquidity risks over time and eventually stabilize the price of bitcoin. All investors should be aware of this.
Would Spot Bitcoin ETFs Influence the Indian Government’s Position?
In India, the cryptocurrency ecosystem is still waiting for robust digital asset regulations, which have been in the works for many years. The government did list the Cryptocurrency and Regulation of Official Digital Currency Bill in November 2021, but it has yet to be debated in Parliament and has not received an official stamp of law.
The Government of India implemented taxation rules for virtual digital assets (VDAs) in 2022, which included cryptocurrencies. If non-fungible tokens (NFTs) or cryptos are held as investments, investors must declare their income as capital gains. If held for trading purposes, these investments would be considered business income.
The income tax return (ITR) forms for the fiscal year (2022-23) include a Schedule – Virtual Digital Assets section for reporting gains from NFTs, cryptos, and other VDAs.
According to Section 115BBH, gains from cryptocurrency trading are taxed at a 30% (plus a 4% cess) rate. Section 194S imposes a 1% tax deducted at source (TDS) on cryptocurrency asset transfers beginning in July 2022, if the transactions exceed INR 50,000, or INR 10,000 in some cases, in the same fiscal year.
According to experts, the Indian financial ecosystem operates in many ways differently than the US, which may impede the path to approval for products such as Spot Bitcoin ETFs in India. Given that Indian banks are not permitted to facilitate crypto trades, India has a long way to go before formal approvals for cryptocurrency trading on stock exchanges.
It is also worth noting that India’s banking regulator, the Reserve Bank of India, has repeatedly raised consumer protection concerns about crypto trades—an issue that is set to take center stage as the United States opens its doors to formal cryptocurrency trading approvals.
How to Invest in Spot Bitcoin ETFs if You’re Indian?
Spot Bitcoin ETFs can be purchased directly by Indian investors through a domestic or international broker, just like stocks. New-age stock brokers provide simple access to US stocks and ETFs.
The Reserve Bank of India’s Liberalised Remittance Scheme (LRS) governs overseas investments such as ETFs and stocks. Any Indian investor can invest up to $250,000 in foreign investments under this scheme. This regulation also applies to ETFs in the United States.
According to Rajagopal Menon, vice president of cryptocurrency exchange platform WazirX, the impact on Bitcoin will be huge, and a lot of institutional money will pour into the space.
How Spot Bitcoin ETFs Function?
Spot BTC ETFs function exactly like any other ETFs available in India; they track commodities like gold and silver as well as indices like the Sensex and NIFTY. However, these will be traded similarly to the value of Bitcoin on traditional American exchanges.
An Indian investor in Bitcoin ETFs will gain exposure through regulated companies without having to worry about storing cryptocurrency, which is a significant change that could allay concerns about holding cryptocurrency in questionable exchanges or risky wallets.
These 11 ETFs’ assets will consist of Bitcoin that has been stored by custodians and purchased from exchanges. Some may even follow specific indexes based on Bitcoin.
To invest in Bitcoin ETFs, current investors won’t need to open a new account on their cryptocurrency exchanges. When Bitcoin ETFs become more and more popular, they should profit from any increase in the price of the Bitcoins.
