Indian investors are finding ways to bypass domestic crypto regulations by using the Reserve Bank of India's Liberalized Remittance Scheme (LRS) to invest in US-based Bitcoin ETFs. This move comes as a response to the high taxation on cryptocurrencies in India, which has prompted affluent individuals to seek tax-efficient offshore investment options.

Despite the regulatory caution surrounding cryptocurrencies in India, the demand for Bitcoin ETFs remains strong, driven by wealthy investors and family offices. According to Bloomberg, these investors are leveraging the RBI's LRS to trade US spot Bitcoin ETFs, despite the central bank's warnings against cryptocurrency investments.

The launch of US spot Bitcoin ETFs in January has generated significant interest worldwide, with total inflows reaching $12.3 billion. Surprisingly, a considerable portion of this investment is coming from affluent Indians, who are using the LRS to remit funds overseas for Bitcoin ETF investments.

While the RBI has repeatedly warned Indians against investing in cryptocurrencies, wealthy investors are eager to gain exposure to real Bitcoin ETFs through the LRS. This program allows individuals to remit up to $250,000 for foreign trade in the financial year, making it an attractive option for those looking to invest in offshore markets.

The use of the LRS to invest in US Bitcoin ETFs highlights the regulatory challenges faced by Indian authorities in controlling cryptocurrency investments. As the demand for tax-efficient investment options continues to grow, it remains to be seen how the Indian government will respond to this trend.