HNIs Shifting Crypto Assets to Wallet Outside India

Wealthy individuals and their family offices that had bought cryptocurrencies in the last two years have started transferring them to family trusts and wallets outside India as the country drags its feet over cryptocurrency regulations, say tax advisors.

In the last two years, many wealthy individuals and family offices had invested in cryptocurrencies.

In most cases, the investment was made through Indian exchanges, which has jumped two to three times since. Many of these individuals and family offices are now looking to hedge their risks, say insiders.

Most HNIs and family offices tend to invest in new products or assets such as cryptocurrency and some of them have made huge returns in the last few years. Many family offices and HNIs are transferring these assets directly outside India or are liquidating them hare and then transferring the amount to entities abroad,” said Sandeep Nerlekar, managing director of Terentia Consultants, one of India’s leading players managing family trusts. Transferring the crypto assets outside India could lead to a loss in the value of the digital assets.

“Cryptocurrencies in India are traded at 8-10% premium and this will be a straight forward loss if these assets are transferring outside India, but many family offices are willing to take this risk,” said a tax advisor.

Industry trackers say while HNIs and family offices may look to hedge their bets amidst regulatory uncertainty in India, this could lead to same regulatory complications.

“While it is technically possible for anyone to transfer cryptocurrency outside the country, there is a comfort that the promoters and even exchanges are in some way based in India. Also, this could violate FEMA (Foreign Exchange Management Act) regulations if crypto assets worth more than $250,000 are transferred during a year,” said Siddharth Sogani, founder CREBACO, a cryptocurrency research firm.

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