Crypto SIPs could gain popularity among young investors: Cashaa founder

According to a September 2024 report from Chainalysis, India has emerged as a global leader in crypto adoption for the second year in a row. Although activities such as buying, selling, trading and holding cryptocurrencies are legal in India, no cryptocurrency has been recognized as legal tender. In an interview with Gadgets360, Kumar Gaurav, CEO of Cashaa, noted that crypto-based systematic investment plans (SIPs) could gain popularity in the coming years as young investors seek alternatives to traditional assets such as stocks and bonds. Cashaa, a UK-based banking platform, also offers crypto-related services.

Cryptocurrencies are volatile and often unregulated virtual assets, sensitive to global micro- and macro-economic fluctuations. Speaking to Gadgets360, Kumar Gaurav, CEO of Cashaa, emphasized that crypto investments should be considered as part of a diversified portfolio. He warned against relying solely on crypto for SIPs or retirement savings as this could expose investors to significant financial risks.

In our chat, we tried to discuss crypto SIPs and what the future might hold for this savings option. Here are lightly edited and condensed excerpts from our chat:

Gadgets360: What is a crypto SIP and how is it different from traditional mutual fund or equity SIPs?

Kumar Gaurav: A crypto SIP functions similarly to a traditional SIP, with investors investing a fixed amount regularly over time. However, instead of investing in mutual funds or stocks, crypto SIPs allow you to invest in digital assets like Bitcoin, Ethereum, and other cryptocurrencies.

The main difference lies in the underlying assets: cryptocurrencies are decentralized, highly volatile and global, unlike mutual funds or stocks which are typically regulated, relatively stable and country-specific.

Another difference is the potential for high growth and risk associated with the crypto market, as opposed to the more conservative growth we see in traditional investments.

Gadgets360: What are the benefits of investing in cryptocurrencies through a SIP model instead of a lump sum investment?

Kumar Gaurav: Making a lump sum investment in crypto assets carries higher financial risks given the unpredictability of crypto prices. Investing in cryptocurrencies through an SIP model enables rupee cost averaging. This reduces the risk of entering the market during a volatile time.

In a market as dynamic as crypto, where prices can fluctuate drastically within hours, an SIP helps spread the investment over time, reducing the risk of buying at a market peak. This investment strategy encourages the habit of consistent sustainable investing.

Gadgets360: How does the long-term performance of crypto SIPs compare to traditional investment options?

Kumar Gaurav: While traditional SIPs in the equity markets offer relatively stable and moderate returns, crypto SIPs have the potential for exponential growth. Bitcoin, for example, has delivered higher returns than most traditional assets over a ten-year period. However, these returns are accompanied by extreme market fluctuations.

Over the long term, crypto SIPs can provide superior returns as the market matures, but they need to be balanced with traditional investments to hedge against volatility.

Gadgets360: What are the biggest risks associated with Crypto SIPs, given the volatility of the market?

Kumar Gaurav: Crypto market volatility is one of the biggest risks associated with crypto SIPs. Even with the cost-averaging advantage of a SIP, cryptocurrencies can experience large price swings within a short period of time. There is also regulatory uncertainty in many countries, including India, where the legal framework for cryptocurrencies is still evolving.

Other risks include security concerns such as cyber attacks and hacking of exchanges, as well as liquidity risks associated with smaller or less established cryptocurrencies.

Investors looking to experiment with investing in virtual digital assets should do their due diligence when choosing established cryptos like Bitcoin or Ethereum, while also selecting compatible and legal crypto platforms.

Gadgets360: Can you explain the step-by-step process of setting up a crypto SIP in India?

Kumar Gaurav: Firstly, you need to select a safe and trusted platform to start your SIP. You will then need to complete your KYC and, once approved, select your preferred cryptocurrency. Bitcoin and Ethereum are generally more secure due to their market dominance.

Once you are ready, simply determine the investment amount and frequency of your SIP, such as weekly, bi-monthly or monthly. You can link your bank details to automate recurring payments.

Gadgets360: What are the regulatory considerations when investing in crypto SIPs?

Kumar Gaurav: In India, the regulatory environment for cryptocurrencies is still evolving. While the government has not imposed a complete ban, there are restrictions on how cryptocurrencies can be traded, especially for speculative or investment purposes.

Investors should be aware of regulatory updates, which may impact the way Crypto SIPs are managed.

Currently, exchanges offering SIPs in India are expected to follow strict KYC and Anti-Money Laundering (AML) protocols. It is important to choose platforms that comply with Indian regulations, as future changes could impose stricter regulations or taxes on crypto investments.

Gadgets360: What are the tax implications of investing in cryptocurrencies through SIPs in India?

Kumar Gaurav: In India, cryptocurrencies are classified as virtual digital assets (VDAs) and any gains from them are taxed at 30 percent. The tax rate for both short-term and long-term is 30 percent. Moreover, a TDS (tax deduction at source) of one percent will also be levied on crypto transactions above a certain threshold. Keeping accurate records of all transactions is critical to calculating your tax liabilities.

According to Gaurav, given the high potential for long-term appreciation, crypto SIPs could indeed become part of retirement or long-term savings plans, especially as regulatory frameworks become clearer and platforms offer more insured, secure and compliant products. In 2022, a survey by US asset manager Charles Schwab had said that around 45 percent millennials and 46 percent of the Gen Z population consider cryptocurrencies as a retirement plan in the US.

Cryptocurrency is an unregulated digital currency, not legal tender and subject to market risks. The information contained in this article is not intended to be and does not constitute financial advice, trading advice or any other advice or recommendation of any kind offered or endorsed by NDTV. NDTV is not responsible for any loss arising from any investment based on any perceived recommendation, forecast or any other information contained in the article.