The prospect of a Bitcoin ETF in India appears distant, however, a few financial platforms may offer a potential avenue for Indian investors
Following a decade of persistent efforts, spot Bitcoin exchange-traded funds (ETFs) have received approval in the United States (US), signifying a significant breakthrough. In the days post-approval, US-listed Bitcoin ETFs witnessed US$4.6 billion in traded shares, indicating investor enthusiasm for these groundbreaking products. The broader global impact of such advancements necessitates vigilant monitoring and analysis.
In just a few short years, cryptocurrencies have evolved from digital novelties to trillion-dollar technologies, poised to disrupt the global financial system. Bitcoin and numerous other digital currencies are not only increasingly viewed as investments but are also utilised as currencies for purchasing a diverse range of goods and services, spanning from software and digital real estate to, regrettably, illicit substances.
Advocates perceive cryptocurrencies as a force for democratisation, challenging the traditional authority wielded by central banks over money creation and control. Critics, on the other hand, argue that the lack of regulatory oversight empowers criminal entities, terrorist organisations, and rogue states. Moreover, they contend that these digital assets contribute to societal inequality, are plagued by substantial market volatility, and exact a significant environmental toll due to their energy consumption.
Bitcoin and numerous other digital currencies are not only increasingly viewed as investments but are also utilised as currencies for purchasing a diverse range of goods and services, spanning from software and digital real estate to, regrettably, illicit substances.
Despite ongoing debates, the undeniable growth of cryptocurrencies has exceeded previous expectations. After nearly a decade of challenges, the realisation of Bitcoin ETFs now seems imminent, signifying a noteworthy milestone in integrating these digital assets into mainstream financial markets. While this development may be embraced in the United States (US) and various parts of the world, the stance of India on this matter remains uncertain, leaving questions about the potential support for such advancements in the country.
An ETF is a dynamic investment vehicle traded on stock exchanges, mirroring specific indices, commodities, bonds, or a range of assets. Known for their transparency, liquidity, and cost efficiency, ETFs grant investors access to diversified portfolios, providing a flexibility reminiscent of individual stock trading.
A breakthrough in the U.S. has resulted in the approval of spot Bitcoin ETFs, a significant achievement following a decade of persistent efforts. Facilitated by the Securities and Exchange Commission (SEC), these highly anticipated products are set to debut on major US markets—NYSE, Cboe Global Markets, and Nasdaq—ushering in a revolutionary era for Bitcoin accessibility among retail customers through conventional brokerage apps. Traditional financial institutions now have the direct opportunity to invest without navigating the complexities of crypto exchanges. These ETFs will consist of actual bitcoins acquired from crypto exchanges and securely held through custodians. This marks a pivotal moment in the integration of Bitcoin into mainstream financial markets.
Traditional financial institutions now have the direct opportunity to invest without navigating the complexities of crypto exchanges.
Bitcoin ETFs emerge as a crucial solution for institutional investors, providing a reliable avenue for engaging with the world's largest cryptocurrency. In the absence of such options, institutions frequently resort to futures ETFs or closed-ended funds, each accompanied by challenges, such as high fees and limited efficiency. The advent of Bitcoin ETFs not only enhances accessibility but also streamlines the investment process for institutions, presenting a more cost-effective and efficient means to tap into the potential of the cryptocurrency market. This marks a significant step forward, addressing the needs of institutional investors and contributing to the broader evolution of the cryptocurrency investment landscape.
Despite past unfortunate incidents, such as compromised wallets and sudden company closures resulting in financial losses, the advent of ETFs on closely regulated US stock exchanges heralds a positive change. Retail investors can now conveniently access these ETFs through their existing brokerage accounts, which are meticulously monitored, enhancing the overall security of the investment process.
Forecasts of Bitcoin's value surging to US$100,000 by year-end, reminiscent of the impact Gold ETFs had two decades ago, amplify industry excitement. The recent approval of Bitcoin ETFs injects fresh vitality into the crypto landscape, especially with major players like BlackRock securing approval to offer these products in the U.S. This green light is poised to spark a surge in institutional and retail investments, breathing renewed vigor into the cryptocurrency ecosystem. The introduction of a spot Bitcoin ETF marks a triumphant moment for the crypto industry, elevating its credibility and propelling Bitcoin deeper into mainstream acceptance. Amid a broader struggle with the SEC, this victory underscores the industry's resilience. As spot Bitcoin ETFs make their debut, their potential impact echoes historical shifts, drawing parallels with the transformative effect Gold ETFs had on gold prices. The crypto investment landscape in the US stands on the brink of a promising new era, offering heightened accessibility, increased liquidity, and substantial gains in Bitcoin's value.
The introduction of a spot Bitcoin ETF marks a triumphant moment for the crypto industry, elevating its credibility and propelling Bitcoin deeper into mainstream acceptance.
The perspectives on cryptocurrency differ notably between the US and India. In the US, the endorsement of Bitcoin ETFs stands as a robust institutional validation for cryptocurrency, signaling a shift from its initial characterisation as a speculative and volatile asset.
India's cryptocurrency market has been marked by uncertainty and volatility, with the government and RBI oscillating in their views on regulation. In 2018, the Reserve Bank of India (RBI) banned crypto dealings through banks, isolating them from the traditional financial system. The Supreme Court's 2020 decision to lift the ban reinvigorated the industry, leading to a surge in startups. In July 2022, India implemented a 30-percent tax on cryptocurrency profits along with a 1-percent tax deducted at source (TDS) on all transactions. In late 2023, the Financial Intelligence Unit (FIU) issued notices to nine offshore crypto exchanges for alleged “unlawful operations” and non-compliance with India's anti-money laundering regulations. The FIU, under the Indian Finance Ministry, has officially requested the Ministry of Electronics and Information Technology (MeitY) to take action by blocking the URLs associated with these nine cryptocurrency exchanges in India. The level of regulatory support for cryptocurrency in India remains uncertain, emphasising the importance of proceeding with caution in this evolving landscape. The prospect of a Bitcoin ETF in India appears distant amidst this unclear environment. Yet, a few financial platforms may offer a potential avenue for Indian investors. India's widespread enthusiasm for cryptocurrencies, particularly resonating among the younger demographic, makes the evolving response to Bitcoin ETFs a narrative worth following.
Sauradeep Bag is Associate Fellow at the Observer Research Foundation
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Sauradeep Bag is Associate Fellow at ORF. Sauradeep has worked in several roles in the startup ecosystem and in international development with the United Nations Capital ...
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