US Clamps Down on Crypto: Nevis to the Rescue

The latest news from the United States of America is not the most optimistic for crypto investors. The US government plans to tighten control of cryptocurrency investments, which may lead to a sharp outflow of entrepreneurs and wealthy people to countries with a more loyal policy on Bitcoin and digital finance (or a lower tax burden). 

Today, cryptocurrency has a serious impact on investors’ income as US crypto regulations are minimal as compared to more traditional financial spheres. However, the country is going to elaborate and adopt a new legislative framework to control the digital finance sector, which means that the epoch of the free circulation of assets on crypto exchanges and other similar websites may be nearing its end.

Currently, the control exercised on the basis of US crypto regulations does not follow any general procedure: standards differ from one federal agency to another, and it would be wrong to speak about any global coverage. Meanwhile, changes seem to be looming on the legislative horizon, and offshore crypto havens can start playing a much more important role in the crypto world.

Despite the fact that virtual currency is treated as private property for US tax purposes and requires reporting in the same way as funds on foreign accounts, the IRS does not have full access to such assets. And this is something that will be changed at the legislative level in the near future.

U.S. Cryptocurrency Control and Regulation Policy and Laws

The U.S. government has amended the latest draft of the federal individual income tax return for Form 1040 for 2022 in an attempt to somewhat strengthen control over the virtual assets of the country’s taxpayers. In the latest edition, the issue of cryptocurrency transactions has been significantly expanded to allow for the collection of information about digital assets. In particular, interchangeable tokens have been added to virtual currency.

The US seems to be heading for total control as it began to develop new laws and regulations regarding the crypto industry at home and abroad. The first thing the government announced was the plan to launch the digital currency of the Central Bank in the near future.

In the spring of 2022, the presidential administration issued an order requiring the Treasury, the Attorney General’s Office, the Commerce Department, Homeland Security, and National Intelligence to provide a report on the crypto regulations at home and abroad by autumn. The document also focuses on possible cooperation with foreign governments and agencies.

After this order, the U.S. Securities and Exchange Commission announced its intention to register cryptocurrency exchanges and take control of them with increased attention to investor risk.

More recently, bipartisan state legislators have submitted detailed bills on digital assets, including:

• The Lummis-Gillibrand Responsible Financial Innovation Act will establish the country’s first comprehensive regulatory framework. The Act covers many areas of the U.S. economy and regulation, including taxes, securities, commodities, consumer protection, payments, banking legislation, and interagency coordination. The primary purpose of the new U.S. Cryptocurrency Act is to provide “regulatory clarity” between agencies to incorporate cryptocurrency and digital asset rules into the existing U.S. tax and banking laws.
• The Digital Commodities Consumer Protection Act of 2022 (DCPA) is being revised to reflect changes to the supervisory role of the Commodity Futures Trading Commission, which will take the lead in overseeing the two largest cryptocurrencies (Bitcoin and Ethereum), as well as online platforms (such as Coinbase) where they are traded.

FTX, one of the largest cryptocurrency exchanges with the parent groups Alameda Research LLC and Clifton Bay Investments LLC, as well as West Realm Shires (WRS) headquartered in the United States of America, went bankrupt in November 2022. The fall of crypto led to the financial collapse of many investors, and an investigation was started following the incident.

Is the IRS Trying to Protect Crypto Investors from Risks?

U.S. regulators focus on the legitimacy of investments in securities and digital assets, and therefore closely monitor possible fraudulent transactions. It is important for the Tax Service to prevent tax evasion and have access to all information on the financial assets and property of its residents, and they intend to add cryptocurrency to this list. 

Some analysts say that many American residents see the requirements and control imposed by the IRS as too intrusive. But in fact, the IRS seeks to protect its taxpayers from risks. However, it will not be possible to do this without toughening the regulations, and this is exactly what is happening in the United States today at the political and economic levels: we see the laws and rules of the game for cryptocurrency and financial investors changing on an almost daily basis.

Investors themselves are trying to solve the issues of taxes and protection of their capital in a slightly different way by simply moving their assets offshore, and this option retains the first place in terms of confidentiality and tax burden. At the same time, it is important to take into account not only the degree of protection of the beneficiary’s personal and financial information but also the legitimacy of cryptocurrencies in a particular state.

How Can Offshore Nevis Help Solve the Problem?

Important information for crypto investors in the US and other countries: the authorities of Saint Kitts and Nevis intend to legalize Bitcoin Cash (BCH) and make this coin an official means of payment in the countries by March 2023, as announced by Prime Minister Terrence Drew.

In addition to this advantage, it should be noted that Nevis is one of the few countries that offers a friendly corporate and tax environment for foreign founders, including in the field of cryptocurrencies. These facts make the country a really important offshore crypto haven whose significance may grow due to the changes.

The advantages of Nevis as a secure corporate/cryptocurrency center are quite diverse: 

• There is no capital gains tax, income tax, or other fees associated with cryptocurrency for entities created in the form of a multi-profile fund, trust, or limited liability company.
• You can issue, sell, and provide services in the field of the primary supply of coins or tokenization. This lays the foundation for crypto exchanges and investors. 
• Foreign courts will have a hard time getting to you. Their decisions made outside Nevis will entail state consideration of the case after a foreign creditor files a claim and pays a mandatory contribution in the amount of 100,000 US dollars.
• In Nevis, you are free to establish offshore financial enterprises in areas such as banking and captive insurance. Taken together, this helps make a smooth transition to the crypto business.
• High level of confidentiality with regard to the information on foreign beneficiaries, which you can take full advantage of after alienating business and capital through a trust.

You can also open a corporate account in Nevis for another offshore or foreign company, and it will in no way violate any of the laws of other states, including the United States and the EU. American investors can take the opportunity to transfer their Individual Retirement Account (IRA) offshore. 

Nevis: An Offshore Crypto Haven for US Crypto Investors

If you intend to work with cryptocurrency, we recommend considering Nevis and its corporate law to create profitable business structures, protect assets, and preserve family wealth. The most popular forms of business in Nevis for foreign founders include:

• Nevis Multiform Foundations
• Registration of an LLC in Nevis
• Nevis Trust: Asset Protection on Steroids