crypto industry Offering products that mimic offerings in traditional asset categories. As of now, crypto exchanges offer systematic investment plans (SIPs) and crypto token baskets just like mutual funds. Then, there is ‘crypto deposit’, which is described as similar to bank fixed deposit. Since these products are not regulated, their features and interests vary greatly from exchange to exchange.
Generally, under the ‘Lock’ option of crypto deposits, customers are required to deposit their crypto assets for a specified time, which can be 7, 30, 60, 90 days etc. They will earn a fixed return at a predetermined rate of interest for the selected period. Interest payments – which can be as low as 1% per annum or up to 24% – vary depending on the type of crypto asset and exchange. The interest earned is credited to the wallet at the end of the tenure. However, if the customers decide to take back the asset before the end of the lock-in period, they will lose the interest earned.
Typically, ‘blue-chip’ cryptos such as Bitcoin, Ethereum and Cardano earn lower interest rates, while smaller tokens earn higher.
CoinDCX Recently launched its yield program ‘EARN’, where customers can earn interest on their inactive crypto assets. Exchanges deploy assets at stake to generate multiple yield-generating opportunities such as margin trading, lending or returns.
Keep in mind that unlike bank fixed deposits, in the crypto ‘deposit’ feature, the value of the principal amount may change depending on the price of the token. However, some platforms offer lock-in for the principal amount as well.
Bharat Vivek, Co-Founder and COO, Casio, a global crypto asset management platform, said, “In the Casio Earn Programme, if you invest in a crypto fixed deposit, your initial principal amount will remain the same (in Rupee terms) of the fixed deposit. Duration.”
The platforms also claim that they have introduced security features like cold wallet storage and insurance up to a certain level to ensure the safety of investors’ assets.
Vivek said, “Deposits are managed through a balance of hot and cold wallets – 99% of funds are stored in cold wallets by the best custody solutions to minimize the risk of any potential security risks.” operates.”
An important difference between bank FDs and crypto FDs is government security. As per the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act, every depositor in the bank has to 5 lakh for both principal and interest amount. However, no such guarantee is available for crypto deposits.
Financial advisors caution against the use of these investment instruments as they are generally not a fixed deposit but a lending product. Furthermore, there is no clarity on the current crypto regulations in India, making the legal status of such deposits questionable. “Investing in cryptocurrency is a big risk as it is still not regulated in India. Also, as an investor, you have no idea where your money is being lent. It is not the same as a fixed deposit,” said Mrin Agarwal, Founder Director, Finsafe India Pvt Ltd.
Investors should also take into account the taxation angle when it comes to crypto ‘fixed deposits’. “Right now, the law has not addressed all these issues. But it is clear that the income from it will be taxable. So if you have any income, which is in the nature of interest, you have to call it ‘income from other sources’. , and pay tax thereon as per slab rate assuming that the investor has not exited crypto, because the moment you transfer crypto, 30% tax rate will start ,” said Archit Gupta, Founder and CEO, Clear.