Digital currencies are gaining a foothold in the world of finance and are slowly being integrated into the financial system. Though Bitcoin can be converted to cash through traditional financial institutions, people are still faced with many complications when dealing with conventional banks.
The distrust is largely due to the unregulated and unpredictable nature of the crypto market as well as the ever-changing laws coming from governments and institutions as they learn how best to monitor and regulate the crypto space.
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Crypto has been embraced as a way to reclaim individual autonomy from a system dominated by corporate centralisation. Moving your crypto assets offshore is but one solution for those looking to secure their wealth as it provides additional layers of confidentiality, security and protection ensuring your assets will be there tomorrow.
Before we get into the somewhat heady banking and crypto space, we need to mention, that crypto banking is a rapidly changing and emerging sector, the rules and laws given one day may very well change the next.
This can be seen in a letter published by the Office of the Comptroller of the Currency (OCC) in July of 2021 giving banks the ability to become a custodian of clients' wallets. In the same month, the collaboration between Finserv and New York Digital Investment Group (NYDIG) giving some 10,000 banks the ability for their customers to buy, trade and sell coins, directly from within the mobile banking interface.
This is just one of a series of events bringing crypto closer to consumers. As of now, only a few selective banks work in the crypto space many of which are more 'fintechs' than traditional banks.
This new agreement allows commercial banks to hold crypto assets, though it is still unclear how this will all unfold. Banks will likely first enter into a role as a general custodian, mentioned in the OCC letter, where customers store their private keys.
Although if we take the recent announcement by Finserv seriously it will not be too long before paying in crypto through mobile apps will be part of our everyday lives.
This is precisely where using an offshore structure comes in. As both crypto and banking services become more integrated so to will our need to protect and secure those assets not just from hackers, but from other threats such as lawsuits, creditors and negligent third party's.
As crypto remains categorized as a physical property (for tax purposes) it is subject to judgments and lawsuits, much like any other piece of property.
Despite what you may think, crypto is not truly anonymous, your transactions might be, but ownership is recorded. Because the assets are tied to you as an individual, they are exposed, making your virtual assets not as secure as you would like to think.
The solution is to create a separate legal corporate structure outside of the country where you live. What this does is create separation between you and your assets. By creating a corporate structure such as an:
You are effectively creating an entity that has all the rights and responsibilities of a natural person. As such they have the right to take on debts, loans and carry the same responsibilities as an ordinary person.
This is important because this creates a 'second individual', that is separate from you. And as a separate individual, it can take on its own debts and liabilities that remain separate from your personal assets. Separation is the key ingredient here.
The second advantage in creating a corporate entity offshore in comparison with incoporating a domestic entity is that you get the added protection of a second legal system. As a country with its own legal and court system it has a sovereignty that can not be influenced by the courts in another country. Very few judgments carry any weight outside of the country's court system where it is made unless there are serious criminal allegations or cross-border illegal activities. In order for a suit to be brought against offshore assets, a claim has to be filed in the country where those assets are held.
Why? Because each country has national sovereignty and with it its own codes, laws and regulations that govern the bodies in that country. A judgment arising from a court in a foreign nation does not have global authority. Any court has limited jurisdiction and any attempt to intervene in another country's court process compromises the sovereignty of that nation-state.
For example, If you are a UK citizen, live in Thailand and have an offshore trust in Nevis, and are sued by a person in Taiwan who is looking to go after you personally, the only assets liable would be those that are held under your personal accounts. In order to go after the Nevis trust, the party must file a claim the Nevis, which has several barriers to entry such as two-year statute of limitations for fraudulent transfers. A creditor must prove without any reasonable doubt that you moved assets to the trust to specifically hinder the specific creditor.
Corporate entities, such as Foundations and Trusts can be structured in such a way that though you own the assets and control them they are separate from you as an individual. Use of nominee and signatory services provided by a qualified attorney also helps protect the individual from having his/her name publicly affiliated to the assets.
There is a difference between protecting your assets and hiding it. Asset protection is a legal process by which assets are secured so that they are not subject to unnecessary risk; and as crypto assets are considered physical property they can be held by an LLC, Foundation or Trust just like any other assets.
While we discussed that banks are now starting to integrate crypto within the traditional banking model, it is unclear how this will play out. As of now, you can not hold your bitcoin like you can USD in any old account.
Securing your crypto assets takes a little bit more than that. What we advise is to use a holding company offshore. Forming a holding company outside of the country where you live, and then opening a corporate bank account under the name of the company is one of the simplest and most effective ways that you can limit the exposure of your assets to creditors as well as effectively hide your assets from prying eyes.
Putting your account in a:
Gives you a number of benefits that otherwise would just not be possible. This type of arrangement gives you the privacy, protection and autonomy you need to secure your assets.
For more: Crypto-Friendly Banks
This arrangement may not make your offshore bank account completely anonymous, nor your crypto for that matter, as you would still have to give your name to the company registry. However, if the registry is closed to the public (as many offshore tax haven countries are) then it would be closed from the prying eyes of the general public; though, your information is still available to tax authorities and your government.
Anonymity should be used for protection and not for evading your tax responsibilities. By using a proper structure, in a country with strong banking privacy, with the right passport and live in a tax-friendly country, you might, however, be able to remain completely anonymous.
Nominee and signatory services can also be used to create another layer of privacy around you and your assets that can help if you are in a public role, a member of a rival political party or a doctor or lawyer and receive a lot of unwanted attention.
One of the many advantages of opening a corporate account and it being held by a private holding company is that you can reduce your liability. Having all of your assets exposed is a dangerous game - especially in today's litigious world.
In order to secure your financial longevity, minimizing your exposure to risk is something you must do before you get into a problem (not after). Diversifying your assets across accounts, assets classes, banks and countries help to reduce your risk.
Having a plan B is not just for doomsday conspiracy theorists. If a bank collapses, a country breaks into civil unrest or an economy tanks you want to be prepared and not tied to the fortunes of a particular institution.
Offshore structures help to bring back self-sovereignty. Over-reliance on any single institution makes you dependent upon the continuity of that particular institution. Exercising your self-autonomy is about making you less reliant upon any outside actor for your well-being. Whether that is a bank, app, or government, not diversifying your assets, makes you a liability.
Opening an offshore company with an account whether that is an LLC or Trust for your crypto is definitely not something you should do on a whim. It would be wise to consult with an experienced tax and legal professional that can help plan the structure that best suits your needs. Offshore banking is the single most powerful tool in your arsenal for financial freedom, privacy and anonymity.
Without a customised legal strategy, you put yourself at risk.
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*Note for U.S. citizens: US citizens are limited in their tax reduction possibilities due to FATCA and CFC laws. Opening an offshore company can increase privacy and asset protection, but you can not eliminate your taxes without giving up your citizenship. If you are a US citizen you are obligated to pay taxes on all worldwide income. Read more here about FATCA and CFC laws.
Disclaimer: Offshore Protection strives to keep information on this website updated, however, laws and circumstances are subject to change. All information on this website is for reference purposes only and does not constitute legal or tax advice. Contact Offshore Protection for specific advice regarding your situation.
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