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Indian policymakers’ heavy-handedness towards crypto has left the sector high and dry. Trading has almost come to a halt and several industry bigwigs are flocking to friendlier nations while others chose to stay back hoping for some change in the government’s policy.
Ironically things don’t look good in the near short term. But that has not deterred some from looking out for alternative routes to place their crypto bets. And these are not just any ordinary investors. In fact, this cohort belongs to India’s most affluent kind.
According to a local source, these high net-worth investors are employing the Overseas Direct Investment [ODI] route to bet on cryptocurrencies abroad. The ODI offers liberalized remittance facility [LRS] – the customary window for offshore investments.
These wealthy individuals utilized the services of a non-banking finance local entity to sponsor an overseas investment company located for instance Dubai.
The funds used to capitalize on this foreign arm are invested in securities and assets abroad, including cryptos sold on trading platforms outside India.
Why India’s Top Investors are banking on ODI?
Under pressure from the nation’s top regulator, large private and foreign banks have been asking investors remitting funds under LRS to provide an undertaking that the money would not be used to purchase digital assets.
This is why ODI has emerged as a preferred option for larger investors. The foreign subsidiary can receive investment up to four times the net worth of the local NBFC. Also the former is governed by the laws of the country it’s based on [and not Indian regulations].
An expert specializing in foreign exchange regulations further added, “The central bank may never get to know about it from the annual information which the RBI receives. RBI typically doesn’t ask for their balance sheets.”
Thanks to the stiff taxes, and a clampdown on crypto trading in India, many are figuring out ways to hold cryptos overseas as many believe that the Indian government would not be able to collect TDS on trades cut on foreign exchanges.
Nevertheless, It is apparent that many crypto enthusiasts are desperate to find ways to invest in these asset classes without facing regulatory wrath.