Indian crypto exchanges’ futures trade with foreign peers may test FEMA limits
Mumbai: As Bitcoin surged toward $70,000 and Wall Street went long on Donald Trump, Indian crypto exchanges tapped offshore bourses for crypto futures trade which is catching on, while many HNIs reportedly made misleading declarations to banks to show their foreign crypto holdings as ‘security’ investments.
Local bourses as well as these HNIs believe their trades are kosher — drawing comfort from the fact that the foreign exchanges they are dealing with are registered with Financial Intelligence Unit (FIU). However, they may be unwittingly walking through a minefield of rules on the Foreign Exchange Management Act.
Crypto exchanges in India draw liquidity from overseas exchanges like Binance to support the futures market. In the absence of ready counterparties, they strike back-to-back deals with overseas bourses to facilitate futures trades which offer high leverage — several times more than what’s allowed in equity futures.
Regulatory & Tax Compliance
They are least impacted by the high tax deducted at source which have pulled down spot crypto trade volumes.
Significantly, in carrying out the derivative transactions, the exchanges do not remit funds to place their margin on the overseas exchanges. Instead, they place USDT —
