NEW DELHI/MUMBAI : Global investment platform Vested Finance has launched Grayscale’s crypto investment products, which will offer Indian investors exposure to bitcoin, ethereum and other crypto assets indirectly without having to buy any cryptocurrency directly. Investing through this route comes under capital gains taxation similar to investing in US equities and is not subject to 30% tax on crypto gains and 1% tax deducted at source (TDS) on each transaction as introduced in Budget 2022, according to Vested.
Regulations around crypto assets are unclear in India, but the Grayscale products, which are preferred by global institutional investors, open up a new investment avenue for Indian crypto investors who were grappling with stringent taxation norms. US-based Grayscale Investments, LLC, is the world’s largest digital currency asset manager with more than $40 billion assets under management (AUM) as of April 2022. Grayscale securities are traded in the over-the-counter markets, where trading is done between two parties without the supervision of an exchange.
“The taxes on crypto assets have made investment in crypto less appealing for Indians. Through Grayscale, investors can get exposure to crypto by investing in a stock and at the same time not be subjected to high taxation,” said Viram Shah, co-founder and chief executive officer, of Vested Finance.
Short-term capital gains will be taxed according to an individual’s tax slab. Long-term capital gains will be taxed at 20% with indexation benefits.
Through Vested, Indian investors can invest in five single-asset products of Grayscale called Bitcoin Trust, Ethereum Trust, Litecoin Trust, Ethereum Classic Trust, and Bitcoin Cash Trust, as well as a multi-asset Grayscale Digital Large Cap Fund.
Trusts work like mutual funds with net asset value being calculated everyday. As and when new investments come into the trust, new shares are issued and the underlying digital currency is purchased against the shares issued. A big downside to these products is that they trade at a premium or discount to their crypto asset.
Another product, Grayscale Digital Large Cap Fund (GDLC), invests in a basket of large-cap digital assets through a single fund. While about 90% of the fund is currently invested in bitcoin and ethereum, it also has exposure to litecoin, solana, cardano, avalanche, and other coins.
Since trusts are not full-fledged exchange-traded funds, the expense ratio of these products is usually on the higher side in the range of 2% to 2.5%.
Additionally, in terms of brokerage charges, as of now, Vested would offer these products free of cost to its premium customers, which are charged ₹2,500 for the yearly service. The platform at a later stage intends to offer Grayscale products to its regular customer for a brokerage charge plus expenses.
Currently, spot crypto ETFs are not allowed in the US, however, there are certain bitcoin futures crypto ETFs such as ProShares Bitcoin Strategy ETF, where Indians can also invest.
However, these futures crypto funds do not invest directly in bitcoin, but seek to provide capital appreciation primarily through managed exposure to bitcoin futures contracts.
Notably, Grayscale has applied to the Securities and Exchange Commission (SEC) to make to convert GBTC into a spot bitcoin ETF.
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