What Does US SEC’s Approval For Spot Bitcoin ETF Mean For Indian Investors – Forbes Advisor INDIA

Crypto investors in the U.S. are cheering the Securities and Exchange Commission’s (SEC) approval for 11 spot bitcoin exchange-traded funds (ETFs). This is big news for Indian crypto enthusiasts as well given the numbers of crypto investors in the country stood at more than 19 million as of 2023. 

Among the Spot Bitcoin (BTC) that got an approval from the U.S. financial regulator include Grayscale Bitcoin Trust, Bitwise Bitcoin ETF, Hashdex Bitcoin ETF, iShares Bitcoin Trust and the Valkyrie Bitcoin Fund. Likewise, ARK 21Shares Bitcoin ETF, the Invesco Galaxy Bitcoin ETF, the VanEck Bitcoin Trust, the WisdomTree Bitcoin Fund, the Fidelity Wise Original Bitcoin Fund and the Franklin Bitcoin ETF.

Industry experts believe that these 11 ETFs are set to bring more stability to the price of BTC in the long-term and potentially reduce liquidity risks over time. Here’s all investors need to know. 

How Do Spot Bitcoin ETFs Work?

Spot BTC ETFs work just like any ETFs in India, that tracks indices such as the NIFTY or Sensex or even commodities like gold or silver. But these will be traded on conventional exchanges in the U.S., mirroring the Bitcoin value. 

An Indian user investing in Bitcoin ETFs will get exposure via regulated entities without worrying about cryptocurrency storage—this is a remarkable shift that may address worries of storing crypto coins in risky wallets or dubious exchanges. 

The assets of these 11 ETFs will involve BTC bought from exchanges and stored via custodians. Some might even track certain Bitcoin-based indices. 

Already existing investors will not have to create a separate account on their crypto exchanges to invest in Bitcoin ETFs. They are likely to benefit from any appreciation in the cost of the Bitcoins as Bitcoin ETFs gain popularity. 

Would Spot Bitcoin ETFs Impact Indian Government’s Stance?

In India, the cryptocurrency ecosystem is still awaiting robust digital assets regulations, which have been in the works for many years now. In Nov. 2021, the government did list the Cryptocurrency and Regulation of Official Digital Currency Bill, but it is yet to be discussed in the Parliament and hasn’t got an official stamp of law. 

In 2022, the Government of India introduced taxation rules for virtual digital assets (VDAs) that covered cryptocurrencies in its ambit. Investors who trade in non-fungible tokens (NFTs) or cryptos will have to declare their income gained from them as capital gains if they are held as investments. If held for trading purposes, then these investments would be considered business income. 

The income tax return (ITR) forms for the financial year (2022-23) have a dedicated section called Schedule – Virtual Digital Assets for the purpose of reporting gains from NFTs, cryptos or other VDAs.

The gains opt from trading cryptos are taxed at a 30% (additional 4% cess) rate according to Section 115BBH. Section 194S levies one percent tax deducted at source (TDS) on the transfer of cryptocurrency assets from July 2022, if the transactions exceed INR 50,000 or INR 10,000 in some cases in the same financial year.

Experts say the Indian financial ecosystem works quite differently than the U.S. in many ways and this might hinder the path to approvals for products such as Spot Bitcoin ETFs in India. Considering Indian banks are not allowed to facilitate crypto trades, India has a long way ahead to any formal approvals for trade of cryptocurrencies on stock market exchanges.

It is also noteworthy that India’s banking regulator, the Reserve Bank of India, has repeatedly flagged consumer protection concerns related to crypto trades—an issue that is set to take center stage as the U.S. opens its arms to formal approvals to cryptocurrency trading. 

How Can Indians Invest in Spot Bitcoin ETFs

Indian investors can directly purchase Spot Bitcoin ETFs via a domestic or an international broker just like they invest in their stocks. New-age stock brokers offer easy access to U.S. stocks and ETFs. 

Overseas investments like ETFs and stocks are regulated by the Reserve Bank of India’s Liberalised Remittance Scheme (LRS). Under this, any Indian investor can invest up to $2,50,000 in foreign investments. This regulation also applies to the U.S. ETFs. 

Rajagopal Menon, vice-president of cryptocurrency exchange platform WazirX believes the impact is huge for Bitcoin and a lot of institutional money will pour into the space. 

“When it comes to India, It all boils down to regulation. We must remember that regulatory discussions have been happening in the U.S. for the last few years. The SEC has accepted that bitcoin is a commodity and not a security. We are yet to have this type of discussion in India. Things will change because India is a signatory to the G20 Delhi declaration which outlines the regulatory roadmap”, said Menon. 

Rahul Pagidipati, chief executive officer of cryptocurrency exchange platform ZebPay, thinks the approval of Spot Bitcoin ETFs not only symbolizes a maturing market but also signifies support from regulatory authorities. “This clarity is pivotal for fostering a secure and transparent environment and is essential for the sustained growth of the crypto ecosystem,” said Pagidipati.

Bottom Line 

Cryptocurrency experts believe that it is still future to witness whether spot bitcoin ETF will draw a considerable demand from Indian investors. For now, it looks like a good day for crypto enthusiasts.