Warren Buffett is perhaps the greatest investor in modern times. He and his long-time partner Charlie Munger have built a reputation for value investing. They have advocated buying companies below their intrinsic value and then wait till the real value is realized by the market. Yet, this is what Warren Buffett advises to the common retail investor.
Passive investing eliminates the need to study & select stocks and then monitor the portfolio regularly.
Now like me, almost every investor is looking to generate more returns and also diversify his investment portfolio. Naturally, many of us are attracted towards digital assets such as crypto currencies and tokens. But, is there something similar in the crypto space which will allow the retail investor to invest in a passive way? Before you start wondering, let us tell you that it’s now a reality. A simple google search reveals an index investing option in crypto currency and that is available in India! We are talking about BitSave, a company that is bringing a index fund approach to investing in crypto currency. Let us dive in and understand it in more detail.
Corporate Structure & Founder Background
BitSave, owned by Casper Wealth Group headquartered in Singapore, operates with a multi-jurisdictional structure. The fund management is handled by Casper Digital Inc., a company registered as per the laws of Seychelles, which is 100% owned subsidiary of Casper Wealth Pte. Ltd. (Singapore). Its Indian operations are handled by BitPe Digital LLP, which is the authorized distributor of BitSave Products to Indian resident clients.
Zakhil Suresh, the founder, and co-founders Asif Kattakath & Vishnu Karthikeyan had started a brokerage service for Ethereum buyers in India. This was in the year 2017, when Bitcoin was the most popular and most available for investment in India. This led to an association with Koinex where they met Sajal Sarwar Sharma. The team spent those years testing, building & refining Koinex, India’s first and the then largest exchange for digital assets like crypto.
In 2019, Koinex had to shut down owing to certain RBI regulations. The team then spent the next few years upgrading their individual skills, earning certifications, and talking to industry experts. They launched BitSave in 2023, which has grown organically to have total assets under management (AUM) of USD 250,000.
The LinkedIn profiles of the founding team are:
Zakhil Suresh (CEO)
Sajal Sharma (CTO)
Asif Kattakath (COO)
Vishnu Karthik (CCO)
Shiv Pande (CBO)
Since 2017, Zakhil and his team has been helping people buy and sell crypto, advising on what and when to buy and providing the custody of crypto assets.
Business Proposition
Think of the Nifty 50 Index fund that holds the 50 companies in the Indian stock market. A retail investor can buy units of the index fund through platforms provided by AMCs such as SBI, HDFC, ICICI mutual fund and so on. BitSave, like the mutual fund AMCs, is the first and currently the only platform in India that offers retail investors the access to buy the units of crypto index fund.
Currently there are around 8000 to 9000 active crypto currencies such as Bitcoin, Ethereum, Litecoin & crypto tokens. Crypto tokens are digital assets created on the blockchain. However, researching, buying, selling, tracking & monitoring individual currencies and tokens is difficult for retail investors. Moreover, understanding the underlying technology, the complexities of each crypto asset is not everyone’s cup of tea.
BitSave provides the option of passive investing in a crypto index for the know-nothing investor. It provides a platform to invest in a crypto index that constitutes some of the best crypto tokens trading in USD. BitSave is currently the only licensed provider in India for Bloomberg BGCI - Bloomberg Galaxy Crypto Index. Retail investors can buy, sell, trade, hold the index units & monitor the performance through BitSave App which is available on both the Android and iOS ecosystems.
What is Bloomberg BGCI?
The Nifty 50 Index is managed by NSE (National stock Exchange). NSE has predetermined criteria & rules to include and exclude the individual stocks in the index. Similar to the Nifty 50 index, Bloomberg, a global financial software company and Galaxy Digital Capital, a digital asset management firm, launched the Bloomberg BGCI index in May 2018. The index is owned, administered by Bloomberg and co-branded with Galaxy Digital Capital Management.
Source: BitSave
The index is limited to 12 eligible crypto currencies. As on Sep 2024, the constitution of the index was as follows:
Source: Bloomberg BGCI factsheet
The eligibility of a particular crypto currency is based on the following criteria:
Should trade in USD
Invest in top 25 coins by market cap
Limited to 12 crypto currencies measured by market cap over the last 5 index days.
Priced by DAR from a minimum of two sources. (DAR or Digital Asset Research is the source of daily pricing, classification and market value of cryptocurrencies.)
Exclude exchange tokens, privacy coins, stable coins, wrapped tokens and meme coins
Investable for institutional buyers
Each constituent is limited to a maximum of weightage of 35% & minimum of 1% of the market cap. The index is rebalanced monthly and the new index constituents and weights are announced 4 days prior to the first index day of the new month.
Following comparison would give you an idea about the return potential of the BGCI crypto index.
Source: BitSave
How Does The Money Flow Work?
Investing through BitSave app is a 3 steps process.
A retail investor has to download the BitSave app and create an account on it. This of course involves a KYC process and a video KYC which hardly takes a few minutes. At the backend the company does the due diligence on the profile of the customer.
Once registered, the investor can load the app’s wallet. The wallet can be loaded directly from the bank account using our regular UPI transaction. The app automatically converts the money to USDT, a cryptocurrency stable coin, called Tether, which is benchmarked to the US Dollar.
Alternatively, the investor can also load the wallet directly with USDT through transfers from other wallets and crypto exchange accounts. The wallet also accepts payments from your Binance account through Binance Pay.
The minimum initial investment is 50 USD (approx. Rs. 4500), and future investments can be as low as 10 USD (~Rs. 900). The USD/INR rate difference is due to the premium on crypto prices in India. Like a mutual fund, the app shows an NAV for assigning Bloomberg BGCI units. The index follows US market timings, with a cut-off at 10:30 PM. Units are credited within 24-48 hours, and BitSave mints tokens on the blockchain to represent these units.
BitSave charges an expense ratio of 1.5% that gets deducted daily from the NAV. If an investor exits within 30 days an exit load of 1% is charged. If you are wondering that the expense ratio is too high, we would like to inform you that the world’s largest bitcoin ETF, Grayscale Bitcoin Trust, is also currently charging an expense ratio of 1.5%. The expense ratio charged by BitSave covers licensing cost for BGCI index, custody fees, trading fees, operational fees etc.
As you can see this is pretty much similar to investing in a regular mutual fund. BitSave is in a partnership with Liminal, a digital asset custody solution provider regulated in Abu Dhabi Global Market (ADGM), which offers institutional custody of digital assets to asset management companies.
The assets held by BitSave on Liminal and the tokens created for each units issued can be verified by investors using BitSave’s live Proof-of-Reserves and Proof-of-Liabilities available on the mobile app.
The units can be sold anytime on the app as there is no lock-in for the investment. The money in USDT is credited to the wallet within 24-48 hours. In the backend an equivalent amount of tokens, representing the units, are burned on the blockchain to maintain transparency. Money in the wallet can be seamlessly withdrawn by the investor in their bank accounts 24x7.
It is worth noting that in accordance with the Indian laws, a 1% tax would be deducted at source (TDS) for all transactions. Moreover, all gains from crypto are taxed at a flat rate of 30%.
Is BitSave A Regulated Platform?
Currently, crypto investments are not regulated by the Securities and Exchange Board of India (SEBI). Investments on this platform appear in the annual income statement on the tax portal. Recent budget rules define crypto taxation, making it unregulated but not illegal.
In Seychelles, BitSave’s operations are subject to a new bill regulating digital assets, introducing a licensing regime to prevent money laundering and fraud. This includes requirements for capital solvency, insurance, and cybersecurity.
However, the lack of regulation in India means no standard procedures for grievances exist, unlike the stock market. Investors face risks from market volatility, technology, and cybersecurity, as seen in the WazirX case. Crypto currencies are also driven by narratives, as noted by Zakhil Suresh in his quote below.
“Crypto is largely a narrative-based market. What looks good today may not look good tomorrow. Crypto assets are volatile and some of them can even disappear in a few months or years.”
How Does BitSave Help Retail Investors?
BitSave has brought the mutual fund approach for investing in crypto. Retail investors don’t have to choose between the multiple crypto options available, maintain different wallets, transact on different platforms and pay the fees. The benefits of passive investing & diversification of the risks across some of the best 12 crypto assets can be achieved through a single app. Moreover, the app’s user interface is easy to use even for the know-nothing investor.
The units purchased or sold are of the index and are visible in the AIS (Annual Income Statement) of the investor as a single line item. Compared to computing the tax on transacting of each individual crypto asset, computing it for the index units sold is a lot simpler. This is in the benefit of the retail investor as they don’t have to pay taxes on any rebalancing done within the index fund. You only pay taxes when you completely exit the index fund.
BitSave offers the gateway to invest in one of the top crypto index i.e. the Bloomberg BGCI through a transparent and safe route.
Things We Like About BitSave
Low barrier of initial investment of 50 USD (~4500 INR), which will attract more retail investors.
Regulated custody infrastructure through Liminal & insured cold storage against digital threats, but still take it with a pinch of salt as things can still go wrong on the cybersecurity front.
Company is seeking to maintain transparency & build trust by showing proof of reserves.
Have adopted Anti Money Laundering, KYC policy and own grievance redressal mechanism. They have submitted their application to the Financial Intelligence Unit (FIU) of India as per PMLA guidelines and maintain all relevant compliances including TDS and transaction monitoring.
Dedicated relationship manager to resolve queries and they are available through regular communication channel like WhatsApp.
Tax Efficient Structure since you only pay taxes when you sell the units of the fund and not when rebalances happen within the fund.
SIP Feature similar to regular mutual funds. You can invest some money every month, their RM will diligently send you the reminder.
Things We Don’t Like About BitSave
Convoluted transfer structure of assets between Seychelles and India. This contains some serious regulatory risk. We all know how strict the regulators are with respect to crypto and other alternative assets.
You have to pay 1% TDS every time to invest. This money goes directly to the government and not to your invested corpus. Although it can be claimed in tax filings, it is still a hassle.
Cybersecurity Risk is a major one. Their custody provider, Liminal, is under a lot of scrutiny as well due to the ongoing WazirX hack which led to the loss of 1000s of crores of investor money. But there are some differences in the custody infrastructure, you can read below if you really want to know more, but frankly its too much info to understand.
Custody of tokens is never with you. If you want to take these tokens away with you to another provider, you can’t at this stage.
Very very volatile asset class. Even when you have a diversified portfolio of crypto tokens, retail investors in India still don’t have that resilience to bear very strong moves in either direction. Crypto is a HODL story, you should invest only if you can bear with the volatility.
Conclusion
We started this article with Warren Buffett’s words on index investing. Let us then end it with the words of his long-term partner Charlie Munger.
Despite the naysayers, the potential of a decentralized, technology based currency is huge and is slowly being accepted across nations. The return potential despite the 1% TDS and 30% taxation on the returns is still significant. The challenge for the retail investors to understand the underlying technology, the projects, the digital assets is being solved by BitSave.
The efforts to choose a quality crypto index, provide transparency and build trust is noteworthy. However, it is prudent to avoid over-exposure considering the evolving regulatory landscape in the country. Well informed investors should consider to allocate not more than 3-5% of their overall portfolio towards this asset class. The volatile & narrative driven nature of the crypto assets also demand a long-term approach mindset towards these investments.
As always, the role of financial advisor is prudent in helping decide the asset allocation based on an individual’s risk appetite.
We hope this piece was helpful, we will see you in the next one. If you have any questions on this piece, please mention in comments below or join our WhatsApp Community to ask your questions directly. You can join the community by applying here.
Please note that this is an opinion blog and not official research advice. I am not a registered RIA in India, and none of these views reflect those of my current employer. This blog aims to promote informed decision-making and does not discourage you from investing in any deals.
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