The securities regulator’s approval for the first US-listed exchange traded funds (ETF) to track bitcoin has given Indian cryptocurrency companies hope that the move would create domestic support for the digital assets.
The US Securities and Exchange Commission (SEC) on Thursday approved 11 ETFs for bitcoin, perhaps the most popular virtual currency.
It would enable investors to access bitcoin without challenges such as setting up wallets or accounts with crypto exchanges that have previously suffered cyberattacks or implosion.
SEC’s decision will make the crypto market more regulated, experts say.
Crypto companies said Indian investors may not directly benefit from SEC’s decision but are hopeful for a similar change in domestic policy.
In October last year, the finance ministers and central bank governors (FMCBG) of Group of 20 (G20) countries adopted a road map on crypto assets and called for its swift implementation.
The roadmap was proposed in a synthesis paper by the International Monetary Fund and Financial Stability Board.
“This is a milestone for the crypto industry, and we applaud the SEC's decision to approve the bitcoin ETF. It signifies a leap forward for the entire ecosystem.
"Over the past several months, financial entities like BlackRock, Valkyrie and Grayscale have diligently engaged with the SEC, paving the way for a new era of crypto asset adoption,” said Sumit Gupta, co-founder of CoinDCX; a crypto exchange platform.
Companies said they are hopeful that similar discussion with the regulator will also begin in India.
“We must remember that regulatory discussions have been happening in the US for the last few years.
"The SEC has accepted that bitcoin is a commodity,” said Gupta.
Companies said Indian taxes imposed on crypto transactions would not be applicable if an investor makes direct purchase in an ETF.
India imposes a 30 per cent tax on income from cryptocurrencies and a one per cent tax deducted at source (TDS) on all crypto transactions.
“An Indian investor taking exposure on a bitcoin ETF will get easy exposure through regulated entities without worrying about the storage of the cryptocurrency.
"Besides, 1 per cent TDS on transactions will not be applicable since there is no actual crypto being purchased and capital gains tax will also be lower.
"On the other hand, the 20 per cent TCS (tax collected at source) introduced in 2023 will be applicable on deposits above Rs 7 lakh via LRS.
"Although, unlike TDS, it can be used to offset other tax liabilities but may lead to liquidity getting stuck,” said Viram Shah, chief executive officer of Vested Finance.
Nischal Shetty, co-founder of blockchain startup Shardeum, said: "We have seen that approximately 5 per cent to 10 per cent of gold ownership is through ETFs.
"With the bitcoin ETFs, people are expecting a good portion of bitcoin ownership to be routed through the ETFs.
"This makes bitcoin more accessible to those who have been comfortable trading in the traditional financial markets."
