The US securities regulator (SEC) approved the first US-listed exchange traded funds (ETFs) to track bitcoin, in a watershed for the world’s largest cryptocurrency and the broader crypto industry. Retail and institutional investors can now expand their portfolios with Bitcoin exposure without worrying about the complicated concerns of custody.

As per the announcement, SEC has approved 11 applications, including from BlackRock, Ark Investments/21Shares, Fidelity, Invesco and VanEck among others. While approving the new ETFs, the SEC said it was still deeply skeptical about cryptocurrencies. The decision did not mean it approves or endorses bitcoin.

“Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto,” said Gary Gensler, the agency’s chairman.

Post-approval, both retail and institutional investors can now diversify their portfolios with Bitcoin exposure without worrying about the complicated concerns of custody.

Bitcoin briefly crossed over USD 47,000. Bitcoin has already risen more than 160 per cent in the previous 12 months in anticipation of the ETF approval and looser monetary policy, after the approval.

Benefits for Indian investors:

With the approval of Bitcoin ETFs in the US, Indian investors can add cryptocurrency to their portfolios through the Liberalized Remittance Scheme (LRS) route.

The Indian cryptocurrency companies view the SEC’s decision as a positive development for the global crypto industry and express hope for similar discussions with regulators in India

LRS scheme, facilitated by the Reserve Bank of India (RBI), allows residents to remit up to USD 250,000 per financial year for such transactions.

Indian investors taking exposure to Bitcoin ETF will get easy exposure through regulated entities without worrying about the storage of the cryptocurrency.

One notable advantage is that the 1 per cent Tax Deducted at Source (TDS) typically applied to crypto transactions within India would not be applicable when purchasing Bitcoin through an ETF.

This is because investors are not directly buying the cryptocurrency itself.

Notably, the question of the 20 per cent Tax Collection at Source (TCS) arises, which may apply if LRS deposits exceed Rs 7 lakh.

Unlike TDS, TCS can be offset against other tax liabilities, but it may result in liquidity being temporarily tied up.

While the regulatory landscape in the US has evolved over the past few years, Indian companies are optimistic about the potential for regulatory discussions to begin domestically.