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CoinSwitch brings SIP-style investment to crypto assets, here’s what you need to know

This may be a sign that India’s crypto space is evolving into a mature financial market even as tax uncertainties loom.

CoinSwitch*, one of the most prominent crypto exchanges in India, will now allow its investors to buy crypto assets in a systematic manner, according to a press release from the company. The recurring buy plan (RBP) is derived from the same logic as SIPs (Systematic Investment Plan) in which investors invest a fixed amount of money at predefined intervals in mutual funds.

The exchange, which turned unicorn last year, said that it is looking to address the volatility concerns and impulsive trades of investors with the plan. The plan is not available to everyone as of now and users will need to sign up to get on a waitlist for early access, the company said.

“Crypto is an emerging asset class and has a higher degree of volatility in comparison to traditional assets. The recurring buy plan allows users to experience the power of compounding by systematically buying cryptos and making regular, distributed purchases,” said Ashish Singhal, Founder and CEO, CoinSwitch.

The exchange has begun registrations for early access and revealed that users will be able to make systematic investments in more than 80 coins. The plan is available to Android users for now but the company said that it will be offering the same on iOS soon.

This is the first time that a major Indian crypto exchange is offering a plan modelled on a SIP-style investment. It will be interesting to see the tax implications of such a scheme after the Indian government brought in a taxation structure for virtual digital assets.

India ushers in tax regime for crypto assets

The year 2022 marked a significant development for the crypto community in India as the government signalled its intention to regulate crypto assets instead of imposing an outright ban.

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Finance Minister Nirmala Sitharaman announced that any income from the transfer of any virtual digital asset shall be taxed at 30 percent in her Budget 2022-23 speech in the Parliament.

“The magnitude and frequency of these transactions have made it imperative to provide for a specific tax regime,” Sitharaman said during her speech, noting that there had been a “phenomenal increase” in the transaction of virtual digital assets.

It must be noted that the government has not legalised crypto assets nor has it come up with a regulatory framework. Sitharaman said that stakeholder consultation was underway and the government’s stand on crypto will be clear only after its conclusion.

One of the key announcements saw the government impose a one percent tax deducted at source (TDS) on payments made for the transfer of digital assets.

A new section 194R will be added to the Income Tax Act, which will be effective from July 1, 2022. A perusal of the Finance Bill 2022 suggests any transaction in which someone acquires crypto assets in lieu of crypto assets or cash, will be subject to TDS. The responsibility of paying the tax will rest with the buyer of these assets.

There is a lot of confusion over how this TDS will come into play but it is likely that it will impact the new recurring buy plan by CoinSwitch. The industry thinks that the TDS will end up throwing a lot of complications.

MediaNama has reached out to CoinSwitch and this post will be updated when a response is received.

Adopting a mutual-fund approach to crypto

CoinSwitch’s plan is not the first time a crypto entity has tried to incorporate an approach perfected by mutual funds.

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An investment plan by Mudrex, a US-based crypto asset management platform, started to offer retail investors a chance to invest in cryptocurrencies in the style of mutual funds last year. The scheme, titled Coin Sets, allows investors to invest in a basket of crypto tokens based on different themes.

With this option, investors will be able to diversify their crypto assets portfolio by investing in baskets they believe will augment their wealth, Cointelegraph reported. For example, the coin set named ‘DeFi 10’ will include top 10 DeFi tokens whereas the ‘NFT’ coin set will be a basket of the top NFT projects, the report explained.

These baskets will be created and curated by experts from the Mudrex team. It will take care of fund allocation, weightage, order execution, and periodic rebalancing as well.

Coin Sets offers an assortment of tokens in which investors can invest in a lump sum manner whereas CoinSwitch allows investors to invest an amount periodically in a single token.

*Disclaimer: This author has made his crypto investments through CoinSwitch Kuber

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Written By

I cover several beats such as crypto, telecom, and OTT at MediaNama. I will be loitering at my local theatre and consuming movies by the dozen when I am off work.

MediaNama’s mission is to help build a digital ecosystem which is open, fair, global and competitive.

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