Is crypto investment a missed opportunity in India?

A friend of mine was in low spirits for not investing in Bitcoin a year before. He continued “Had I invested, I would have made a lot of money”

I asked him “Do have the same feeling of wasted opportunity by not doing Future & Options (F&O) trading? Betting on cricket matches? Horse race? Not buying Kerala State Lottery? Peerless funds? Sahara deposits? Agri Gold? Saradha chits?  There was a good amount of money over there! A missed opportunity!”

He said, “But crypto is different”

As I know, his liquid wealth is not more than Rs.75 Lakhs; after a lengthy discussion, he admitted that at the most he would have invested Rs.5 Lakhs in Crypto! I consoled him, therefore, nothing much is lost!

I don’t understand the attitude of missed opportunities. If you don’t get LIC shares at 5% discount than the market rate, how much is the missed opportunity? A maximum of 100 shares may get allotted? A meager sum of Profits!

Let us not find reasons to regret. Today’s risk-free return rate is 6%, adding another 100% premium to it, which means 11-12% return (over 10 years) on the investment is decent money. Anything more can come from high-risk investments. Crypto is one such asset.

Bitcoin or other cryptos are virtual currencies. They are not allowed to be used as an alternative to paper currency in India. You can’t buy 10kgs of rice with Bitcoin. For now, one can trade in Bitcoin, which means buying at low and selling at high prices. You may end up in buying at high and selling at low prices. Thus, Bitcoin is a ‘BET’ COIN, you bet, like on horses.

Can we wait till Central Bank Digital Currency (CBDC) is launched to invest?

Sorry. What is proposed as CBDC is going to be the digital version of paper currency. Instead of Rs.500 or Rs.2000 notes, you will get them in digital code. CBDC will be a legal tender using which one can buy goods and services. If you have CBDC worth Rs.10,000, its value will remain Rs.10,000, it has intrinsic value, won’t diminish. A trader won’t say Rs.500 note is worth only Rs.400!! Whereas a bitcoin worth Rs.10,000 today may have the value of Rs.12,000 or Rs.8,000 as it fluctuates. It is highly unlikely that central bank digital currency will be available for speculation like Bitcoin!

So, those who want to speculate or trade-in currencies have to look at Bitcoin or Altcoins.

Why Governments are not supporting Bitcoins?

Mr. Arvind provides services to Mr. Bhim, worth Rs.5 Lakhs. As a consideration, Bhim transfers Rs 5 Lakhs Bitcoins to Arvind. In turn, Arvind transfers this to his son studying in Canada. The entire transaction happens over the internet, without the involvement of banks, RBI, etc.

What about GST on the sale? What about Income Tax on the profits? How to comply with FEMA, RBI regulations for repatriation of funds from India to Canada? All are in thin air. Transactions are done without leaving an iota of footprint to the regulators. So, naturally, Governments are concerned about Tax evasion.

There is a regulator for every financial transaction like RBI, SEBI, IRDA, etc. Whereas for Bitcoin or Shitcoin, there is no such regulator.

What is the future of Bitcoin in India?

I guess, they will remain as Trading assets in India. Until some technology is evolved to track and legitimize the transactions which can comply with the regulations of the land, I doubt they will get the elevated status of legal tender.

My position? It’s not for me, I will stay away from speculation. Will surely get in, when it becomes legal tender.

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About B E Kumar Prasad

B E Kumar Prasad
He is a Practicing Chartered Accountant in Bengaluru, India. He has 25+ years of experience in income tax, business setup, and NRI matters. He is also an Insolvency Professional and Registered Valuer (F&SA).Prasad welcomes your comments and questions. Please email him at simplifiedlaws20@gmail.com

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Vikram
Vikram
7 months ago

Super sir, very aptly said, it helps us to open our eyes and look at the opposite side of it… Your first line refers to me as well, since i was also thinking in the similar way…

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