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Bitcoin ETF: Understanding Bitcoin ETF and What It Means for Indian Investors

By January 15, 2024January 16th, 20242 minute read
Note: This blog is written by an external blogger. The views and opinions expressed within this post belong solely to the author.

In a groundbreaking move, the U.S. Securities and Exchange Commission (SEC) has given the green light to the listing and trading of spot Bitcoin exchange-traded product (Bitcoin ETF) shares, marking a historic milestone on January 10, 2024. This decision opens new avenues for investors and introduces the world’s oldest digital asset to a wider audience. BlackRock, a financial giant, is at the forefront of this development, poised to shape the future of the crypto landscape.

Understanding Bitcoin ETF

What is an ETF?

Let’s demystify the term. An ETF, or Exchange-Traded Fund, is a type of investment fund that’s traded on stock exchanges, much like individual stocks. It bundles together a collection of assets, such as stocks, bonds, or commodities, and allows investors to buy or sell shares of the entire portfolio.

How Do Bitcoin ETFs Work?

Now, let’s apply this concept to crypto. A crypto ETF functions similarly, but instead of traditional assets, it holds cryptocurrencies like Bitcoin. Investing in a crypto ETF means acquiring shares representing ownership in a fund that holds a variety of cryptocurrencies. The SEC’s recent approval for Bitcoin ETF includes 11 applications from major financial institutions like BlackRock, Fidelity, and others. These ETFs will be listed on prominent exchanges like NYSE, Nasdaq, and CBOE, with assets comprising physical Bitcoin obtained from crypto exchanges and held by custodians.

Impact on India: Regulatory Considerations and Future Landscape

As the global financial landscape evolves with SEC-approved Bitcoin ETFs, India is not immune to the ripples of change.

Regulatory Shifts in India

As the global financial landscape evolves with SEC-approved Bitcoin ETFs, India is not insulated from the changes. Aligning with the G20 declaration, India might reassess its stance on cryptocurrency regulations. The SEC’s recognition of Bitcoin as a non-security commodity underscores the increasing acceptance of digital assets in traditional finance, urging global regulatory bodies to adapt.

Access for Indian Investors

Indian investors can actively engage in these US-listed ETFs directly through domestic or international brokers, mirroring their approach to investing in US stocks. The modern landscape of stock brokers facilitates seamless access to US stocks and ETFs. However, it’s important to remember that, like any venture, terms and conditions do apply. Take a moment to understand the specifics before diving in!

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Taxation Norms

Under the Reserve Bank of India’s Liberalised Remittance Scheme (LRS), allowing Indian investors to invest up to $250,000 abroad, taxation norms come into play for overseas ETFs, including Bitcoin ETFs. However, investors should be mindful of Tax Collected at Source (TCS) and management fees, adding nuances to the investment process.

In conclusion, the SEC’s approval of Bitcoin ETFs signifies a major stride toward mainstream acceptance of cryptocurrencies. The impact in India, both in regulatory shifts and investment opportunities, underscores the evolving nature of the global financial landscape. As investors navigate this new terrain, understanding the basics and staying informed will be key to unlocking the full potential of crypto ETFs.

Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.
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Shashank is an ETH maximalist who bought his first crypto in 2013. He's also a digital marketing entrepreneur, a cosmology enthusiast, and DJ.

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