when the US seconds First allowed crypto-based ETFs To be listed in October 2021, the price of bitcoin had reached its all-time high of $67,000. Although the ETF did not invest directly in bitcoin and instead bought its futures contracts, it was still a significant event in the history of crypto as it signaled regulatory and institutional acceptance in the world’s largest financial market. Crypto futures are derivatives of virtual currencies that are similar to products on stocks, commodities and other fiat currencies that are traded on exchanges globally.
In recent months, a variety of crypto-linked ETFs have debuted globally – some investing directly in virtual assets, some sticking to futures, while others on stocks of companies in blockchain and other crypto-related sectors. Let’s focus. The first US ETF made market history as it attracted $1 billion within days of its launch. But ETFs not only bring in higher inflows, they also allow for a wider investor pool. Institutions and individuals are drawn to crypto ETFs because they are regulated investment vehicles.
what are etfs
An exchange-traded fund (ETF) is a basket of securities that trades in a stock like a stock. For example, Nifty ETF 50 tracks the prices of index stocks. Similarly, a crypto ETF tracks the value of one or more crypto assets, such as bitcoin.
The main advantage of an ETF is that it allows you to diversify your portfolio without owning the asset. Like mutual funds, ETF issuers also buy the assets they track. But unlike mutual funds, not all crypto ETFs are controlled by a regulated asset manager. These are also traded on exchanges but they are either managed by a crypto exchange or some other firm. Also, to invest in crypto ETFs, you do not need a demat account. While ETFs that invest directly in crypto are listed in Canada and some European countries, the US has not yet approved such ETFs.
Can Indians Invest in Crypto ETFs?
In India, ETFs are usually offered by mutual fund companies and market regulators. Self They have been limited to stocks and their indices, gold and silver. According to industry players, asset management companies will not come up with crypto ETF schemes unless there is a law. So how can Indians invest in crypto ETFs? One option is to invest in regulated global crypto ETFs through a platform that allows clients to buy using foreign-listed stocks, bonds, mutual funds and ETFs. reserve Bank of IndiaLiberalized Remittance Scheme (LRS). Through LRS, a resident Indian can invest up to $250,000 (about Rs 1.9 crore) per year, under the regulatory purview of the RBI.
Krishna Mohan Meenavalli, CEO, TorusKling Blockchain IFSC, which is in the process of launching India’s first crypto ETF at GIFT City, said, “When it is listed, it is a ‘bitcoin’ to put in your cash. It’s as easy as searching. and start trading.” He added that the ETF, once launched in India, will give investors confidence as they will be regulated. In fiscal year 2011, Indians invested $472 million in approved foreign investment products, official data showed. ETF-specific data was not available.
Another route, industry players said, is through domestic wealth management firms that offer ETF-equivalent products. An ETF-equivalent is a basket of crypto assets and unlike normal ETFs, these products cannot be traded. according to this Joseph MasseyThe MD & CEO of Cryptowire, who recently launched India’s first crypto index, ETF, can be beneficial for those who are not sure which crypto token to buy and in what ratio. “The index is weighted based on the token’s market capitalization and popularity. Therefore, investors do not need to set their minds on how much bitcoin or ether to buy,” said Massey.
Safety First: Check Foreign Norms
India has not legalized crypto use and investment. But it has made budget provisions to tax crypto gains. Also, since crypto ETFs listed abroad are not leveraged investment instruments, Indians can invest in them through the LRS route. Before making a decision, investors should also look at the quality of regulatory standards in the jurisdiction where such ETFs are listed.