With great waves of change coming from governments looking to tax and regulate the cryptocurrency market, bitcoin investors have suffered in some jurisdictions. However, smart investors will be diligent and thorough, looking at options abroad so they can avoid government taxation in their home countries. They will need to adapt.
Bitcoin is a unique part of an investor’s offshore plan. But they need to be discerning about where to look and invest, as there are few cryptocurrency-friendly countries that investors can choose from to protect their assets. This is even more true for investors coming from Western countries.
For investors looking to seriously adapt — for their own benefit and survival — to an upcoming wave of government regulations, legislation and taxation, it’s highly recommended to use a chunk of cryptocurrency investment for a value commodity that will last generations: a second citizenship, second passport or legal residency abroad.
Here are the top 5 reasons why cryptocurrency investors should be pursuing these valuable global mobility assets.
1. Opportunity Costs
Having a passport from the United States is becoming a large downside for crypto investors. Many are noticing this and looking for fixes to the situation. Consequently, the first entry in this list is most relevant to citizens of the United States, although it can apply to any country currently stepping up their ICO regulations or trying to use crypto as a new source for tax revenue.
A variety of U.S.-based investors have complained that they’re unable to take part in some ICOs simply because the people in charge of the ICO’s fundraiser aren’t interested in letting those who have a United States passport or address participate.
Some investors are able to find shortcuts and loopholes in rules like these. However, the regulations imposed by the government are getting larger quickly, and will soon grow large and detailed enough that there will scarcely be any corners to cut. The U.S. Securities and Exchange Commission, as well as institutions similar to it, are doubtlessly going to keep making it hard to invest in the ICOs you’d like.
The opportunity cost of this has increased to the point where some U.S. citizens say they are losing millions of dollars simply because they’re unable to take advantage of buying the ICOs and coins that they are fond of. On the ICO’s side of things, allowing Americans in is simply too much risk because Americans must adhere to a variety of tax laws and regulations imposed on ICOs.
2. Exposure to Taxes
The IRS is starting to crack down on crypto records. There may soon be an abundance of laws and regulations pertaining to crypto that will no doubt set back investors a pretty penny. For those who are able to find crypto deals ready for investment, or if you’ve already invested the funds you’re allocating to crypto, you’re certain to undergo tax exposure.
Although this isn’t for the crypto-anarchists among us who favor offline methods of storage and such, if you’re going to put your cryptocurrency on any exchange, or turn them into another kind of asset such as real estate, then you won’t like the government taxing you during the process.
In order for crypto to survive, it will be necessary to work together, and quite a few investors are going to be getting knocks on their door, as very few crypto-based profits were reported to tax agencies in the past. If you’re a U.S. citizen doing crypto trading, or attaining capital gains from crypto, regardless of where you’re based, you’re going to face taxation like any other citizen of the United States.
The only option left for those United States citizens who are looking to get around this immense taxation is to renounce their citizenship. If you do this, you will need another passport to go where you’ll be treated best, such as crypto-friendly countries that won’t impose taxes on your gains. It’s possible for you to be based in and become a citizen of a country that won’t be taxing your capital gains when you sell.
If you’re not from the U.S., but instead from a different Western country like Canada or the U.K., there’s a chance you won’t need to renounce your citizenship in order to be rid of taxes. However, simply having a resident permit can help you live outside of your home country and stop taxation.
3. Lack of Certainty
Crypto is just starting to get regulations imposed on it, and it’s anyone’s guess what the governments of the world are going to do about it.
Several questions remain that are nearly impossible to know:
- What will the United States do?
- What will the SEC do?
- What will other countries do?
- How will these changes affect our ability to hold assets?
- What changes will be imposed on the banking system and our ability to convert fiat and crypto between each other on these platforms?
- What rules and regulations will be imposed for those turning crypto into other assets?
No one is certain about any of this. Considering all these unanswered questions, it can be a great help to take a step back, distance yourself from your current location and choose another country that’s less interested in taxing your financial moves.
Even if you don’t make the switch right away, it’s always good to have a backup, regardless of whether that’s for a place where you’ve got another residency or a second passport. Having a plan B lets you go away from your usual country if the regulations start cracking down on you too hard.
4. Liquidity of Crypto
Another important factor affected by the market’s uncertainty is liquidity. With more and more regulations being imposed, how are banks going to react when you’re looking to cash out? This is further intensified if you’ve got the wrong citizenship.
Sure, there’s an abundance of ways to use crypto without involving banks. However, if you’re someone who wants to own other assets down the line, you might find yourself facing problems with the liquidity of your crypto amidst increasing regulations.
5. Moving Away as an Active Firm
Imagine this scenario: A U.S. citizen successfully raised a lot of money with an ICO, but that comes with a big tax bill. Despite the fact that he lives outside of the United States, the guy is now forced to shell out millions in taxes, just because he’s the CEO of an active crypto-related business.
If he had simply cut his ties with the U.S. before doing this, he would’ve saved millions of dollars and been able to invest those funds in his next venture — or do whatever he wanted with those millions. If you’re looking to take your cryptocurrency investing to a higher level and turn it into an active business, secure an offshore plan beforehand.