What's being offered
Digital assets aren’t properly regulated in India but ANQ Finance and GoSats claim to have met all compliances
India is indisputably a price sensitive market and customers latch on to every new card offering that comes with marginally better points, cashbacks and rewards. It is only natural then that new card issuers try to offer even better rewards, be it in terms of zero forex fees or generous airport lounge benefits. How about cashbacks in the form of digital assets such as bitcoins? A lot of crypto investors would be interested.
Mint found out about two fintechs—ANQ Finance and GoSats.io— that offer digital gold and bitcoin as rewards for any spending done via their prepaid cards. Both the fintechs suggested that traditional card cashbacks are in the form of reward points which need to be accumulated for benefits that, however, depreciate over time. And it happens frequently whenever card issuers go in for devaluations of their popular cards, as in the case of Axis Magnus or HDFC Infinia.
However, both digital gold and crypto do not have well defined regulations in India. As per the stance taken by market regulator Sebi, digital gold is still an unregulated instrument. Last year in August, NSE asked all its exchange members to stop selling digital gold because it didn’t consider that as a security. Crypto, although under the purview of Sebi, is still not considered as a legal tender in India and the regulator generally has a cautious stance against it.
"Crypto as a cashback is a tricky proposition as you will have users who are gaining crypto rewards but don't understand anything about how the asset class works and what to do with them" said Dipika Jaikishan, co-founder of GetBasis, a prepaid fintech card with focus on women.
So, can offering digital assets as a reward on a regulated structure (prepaid instruments, or PPI) be considered legal? Both the fintechs say they are not considered as regulated entities
Digital gold is an unregulated instrument and NSE last year asked it's market participants to stop selling it. Crypto, although taxed, is not considered a legal tender in India.
User gets a RBI regulated prepaid card
Gets digital assets like digital gold & crypto as cashback
Fintech
PPI license partner Banking partner Type of cards offered Rewards offered
Rewards assignment
Rewards redemption
Taxation
Watch out
Loads money into the wallet
Crypto and digital gold taxation applies if asset is sold for cash in bank.
If asset is converted to digital vouchers, can be considered as rebate which is not taxable upto Ŕ50,000.
If fintech goes bankrupt, it's unclear how investor can recover their digital assets.
Earning crypto as rewards can be addictive for users to spend more money via the card. RBI prepaid card regulations have no clear rules on what type of rewards can be offered.
but work with an existing PPI licence holder and have met all due compliances by them. In this case, both PPI providers, Pine Labs and Livquik, declined comment on their tie-ups with the two fintechs.
Uses it for spending
ANQ Finance
Pine Labs
YES Bank
Prepaid card, credit card
Bounties in the form of digital gold and bitcoin, spenders can choose. Rewards are held in name of firm but assigned to user on app.
Spenders can convert digital assets to discount vouchers on various D2C Brands.
Can convert digital gold to physical gold once it reaches certain amount.
Can withdraw crypto to an external wallet once it reaches certain amount.
GoSats
LivQuik
NA
Prepaid card
Rewards in form of satoshis (bitcoin) and digital gold. Spenders can choose.
Rewards are held in name of firm but assigned to user on app.
Spenders can convert digital assets to discount vouchers on various D2C Brands.
Can convert digital gold to physical gold once it reaches certain amount.
Can withdraw crypto to an external wallet once it reaches certain amount.
Can reload existing prepaid card with more cash by selling assets.
ANQ Finance last week also launched co-branded Rupay credit cards called Pi & Phi in partnership with Yes Bank that offers generous rewards. These rewards can be converted into digital gold or Anq coin.
“We are replacing meaningless reward systems with wealth creation,” said Ashish Khandelwal, founder of ANQ Finance.
“I agree crypto is still a grey area in India, but that should not stop innovation. Regulators always follow innovation and once those concrete regulations come in, we hope to be in the right way and scale things from there” said Roshan Mohammed, co-founder of GoSats.
A detailed email sent by Mint to the Reserve Bank of India did not elicit any response.
Apart from the obvious regulatory risk, there are two things investors should be aware of before opting for these cards: First, that these digital assets earned as rewards will attract crypto and gold taxation, a fact that a lot of spenders may not be aware of. As per GoSats, if those digital assets are redeemed within the app to buy a gift voucher or reload the card, it will be considered as a rebate and the consumer can get ₹50,000 as a rebate every fiscal year. But hardly anyone can keep track of this across the multitudes of cashbacks/rebates they will receive across various apps in that fiscal year. That’s practically impossible.
Second is that these digital assets are always kept in the custody of the fintechs, which will not open a new bitcoin or digital gold wallet in your name. The fintech will keep it in their names but assign it to you and this will only be reflected on the app. In the event of a bankruptcy, it is unclear if investors will be able to claim their rewards. As per ANQ Finance, users are allowed to convert their digital gold into physical gold only after it reaches a certain threshold. GoSats says its users are allowed to transfer Bitcoin to an external wallet once it reaches ₹1,000 in value.
To be clear, both the fintechs don’t explicitly allow the buying and selling of bitcoin or digital gold on their app. They argue that a user can only accumulate them while spending money via their card and, as per GoSats and ANQ Finance, they are not violating any guidelines. For users keen on accumulating digital assets passively while spending on their cards, ANQ Finance and GoSats offer a newer, interesting option albeit while operating in a regulatory grey zone.