Cryptocurrency – digital money not backed by any nation – has taken the world by storm. There has been an increasing rise in using offshore structures to boost the advantages for crypto-based ventures. Especially, offshore company formation in crypto-friendly jurisdictions is a highly suggested option for entrepreneurs.
In this article, we’ll look at some of the common applications and license requirements of offshore crypto structures, along with some general considerations for success.
1. Trading vs Investing – Which one to choose for offshore cryptocurrency company?
There are a few ways to establish an offshore crypto-based company, but the 2 most common methods are through trading, investing, and funding.
Cryptocurrency trading is the buying and selling of cryptocurrency with the goal of making a profit. Cryptocurrency investing, on the other hand, is holding cryptocurrency for the long term with the goal of growing one’s investment.
These 2 methods are vastly different, but both can be done using an offshore company. Below are some examples of how to involved in cryptocurrency by using an offshore company.
Offshore cryptocurrency company for trading
You can set up the offshore company as a cryptocurrency trading company. This would allow the company to buy and sell cryptocurrencies, as well as offer cryptocurrency investment services.
When you trade cryptocurrency through an offshore company, your identity is much more difficult to track. This is because most offshore jurisdictions don’t public information about a company’s beneficial owners or shareholders, which can be a major advantage when it comes to protecting your personal information.
Moreover, trading cryptocurrency through an offshore company means you can enjoy certain tax exemptions. To be specific, profits from offshore cryptocurrency trading may be exempt from income tax, capital gains tax, and value-added tax. In addition, an offshore company may be able to take advantage of lower corporate tax rates.
For instance, you can set up an International Business Company (IBC) in an offshore country like Saint Vincent and Grenadines (SVG) to trade crypto outside and enjoy certain tax benefits within the jurisdiction.
Offshore cryptocurrency company for investing
An offshore structure can be used as a holding company for cryptocurrency investments.
You can use it to hold cryptocurrency investments and provide cryptocurrency investment services. It can even be used to hold other assets, such as property or stocks. This flexibility can be a major advantage if your cryptocurrency trading goals change over time.
One of the biggest advantages of using an offshore company for cryptocurrency investing is that it can help you protect your assets from volatility. If the value of your cryptocurrency holdings drops suddenly, your offshore company can help you shield those assets from loss.
Offshore cryptocurrency company for 3rd-party funding
You can also use an offshore company to establish a 3rd-party fund (e.g. asset investment fund or broker). By doing so, you can pool money from different investors to purchase cryptocurrency and trade on their behalf.
This would enable you to trade or invest in cryptocurrency without having to go through the process of setting up a cryptocurrency exchange or mining. Better yet, you can receive salaries or commissions from the investors.
2. Do you need a license to launch an offshore cryptocurency company?
In some countries, you may need to apply for a license to set up an offshore crypto business; yet, this is not always the case. For instance, you don’t need a license to trade or hold cryptocurrency in SVG.
Depending on each country’s regulation, the requirement for a crypto license may vary, but some common types include broker-dealer license, crypto-exchange license, money management licenses, and so much more. You need to do research beforehand and find out what the requirements are in the country where you’ll be incorporating your company.
It is also important to do your due diligence and ensure that you are compliant with the relevant laws and regulations for crypto-based offshore companies.
This means scrutinizing the anti-money laundering (AML) legislation of your licensing jurisdiction. The AML/KYC standards are among the fundamental steps for the mass adoption of cryptocurrencies in many crypto-friendly countries. By following these protocols, you can avoid any unpleasant surprises down the road.
If you register an IBC in SVG for a 3rd-party fund, you don’t need to obtain a crypto license.
Discover more in our article IBCs in SVG: The Ideal Match for Your Crypto Ventures.
3. What to consider when opening an offshore cryptocurrency company?
There are a few things you need to carefully consider before setting up an offshore company for cryptocurrency.
Choose a jurisdiction that is favorable to cryptocurrency
You will need to choose a jurisdiction that has a favorable attitude toward cryptocurrency and crypto-based businesses.
Some jurisdictions to consider include SVG, Nevis, Cayman Islands, Panama, and BVI.
SVG is particularly welcoming for cryptocurrency companies. The country is currently putting in place clear regulations for cryptocurrency exchanges and ICOs.
Choose a suitable offshore structure
It’s important to choose a structure that is beneficial to crypto-based businesses to ensure smooth operation as much as possible.
The 3 most common are Limited Liability Company (LLC), International Business Company (IBC), and International Trust. Each has its own advantages and disadvantages, so it is important to consult with a professional before making a decision.
Among the three options, LLC may be ideal for crypto ventures due to the favorable tax policy; that is, any income-generating activities outside of the jurisdiction territory will not be subject to income taxes. Moreover, an LLC is allowed to hold assets (e.g., intellectual, property, capital, etc.) and negate the effect of Economic Substance regulation in offshore countries such as St. Vincent.
Maintain compliance with AML/KYC
One important thing to remember when opening an offshore company for cryptocurrency is compliance with Know-Your-Customers and Anti-Money Laundering protocols. This means that you will need to provide identification and other personal information to the company in order to establish your identity.
Be sure to also follow all other regulations related to cryptocurrency trading in order to avoid any legal issues.
Stay up to date with changes in cryptocurrency regulations
Another important factor is to closely monitor changes in the cryptocurrency market. Even though the crypto business can be very profitable, it is also very volatile.
For example, the Chinese government recently announced a ban on cryptocurrency trading. This instability makes cryptocurrency a risky investment and you could end up losing a lot of money if you are not careful.
However, by using an offshore company to hold and trade cryptocurrency, you can reduce your risk while still benefiting from the potential upside of this digital asset.
Cryptocurrencies have been on the rise in recent years, with more and more people investing in them every day. If you’re looking to get involved in this exciting new market, setting up an offshore cryptocurrency company can be a great way to do so.
To ensure success for your offshore crypto company, make sure you build a careful plan before you move. This includes deciding on the right jurisdiction, setting up the appropriate corporate structures, and complying with all regulatory requirements. With a well-thought-out plan in place, you can rest assured that your cryptocurrency trading business will be off to a strong start.
Ready to set up your offshore company to trade crypto? Chat with us so we can discuss your specific situation or drop us a message via firstname.lastname@example.org for practical advice.