Bitcoin, Ethereum, and other cryptocurrencies are in demand as investment options among family offices inspite of the government introducing a 30 per cent tax on income and a 1 per cent tax deduction at source from virtual digital assets in the budget.

Crypto exchanges said that they are receiving investment enquiries from family offices that manage the investment and wealth of high-net-worth families.

Speaking at the Chainalysis Crypto Forum India 2022, Neeraj Khandelwal, co-founder, CoinDCX , said institutional investors are exploring cryptocurrencies as an investment option following clarity provided on taxes and how to disclose such income.

“We have seen a lot of inbound enquiries from family offices. This provides a good opportunity to grow business on the institutional side because of the taxation clarity. There is not much interest from corporate treasuries because they might still need more clarity,” Khandelwal said on Saturday.

He said while the taxes may not be in favour of day-traders, for long-term investors a 1 per cent tax deducted at source would not matter. While a 30 per cent tax is still on the higher side, Khandelwal said that with the kind of returns in the crypto domain it just might work for these investors.

A study by Chainalysis conducted in 2021 shows that large institutional-sized transfers (above $10 million) represented around 42 per cent of the transactions from India-based addresses. This represents a trend where high net worth investors, who were focussed on assets such as real estate, are increasingly looking at access to a new source of alpha on their investment portfolio.

UPI fallout

The National Payments Corporation of India, came out with a clarification saying it is not aware of any crypto exchange using UPI. Crypto exchanges said several service providers, who were already providing UPI-based money in-money out option before the statement was issued, have started to gradually pull out.

While sources said that there is no official mandate yet on payment service providers, the resultant impact has been a delay in transactions and deployment of more resources on the part of exchanges.

“UPI is is not the only mode of transaction available. There are RTGS, NEFT, and other options. It was just that the experience was getting better when the apps were providing UPI-based payments and it could automate a lot of processes . Now, we have to deploy more manpower and there is some kind of delay sometimes depending upon what mode of transfer that people are doing,” said Sathvik Vishwanath, CEO, Unocoin.