Ever since China categorically banned cryptocurrency mining and trading within its borders, other locations around the world have popped up as hot cryptocurrency hubs. The United States has emerged as a heavyweight – specifically, San Francisco’s Silicon Valley and New York City.
A report by CB Insights ranked New York even higher than Silicon Valley as the metro area with the greatest venture capital (VC) investment in digital asset companies like cryptocurrencies and blockchain. Specifically, New York had $2.1 billion compared to Silicon Valley’s $1.6 billion investment in the first quarter of 2022.
But even in the U.S., the crypto market has expanded beyond these two cities. And even with a correction or “crypto winter” hitting the market, digital asset investment continues.
The cryptocurrency landscape has certainly diversified over the last decade, not just where it’s gotten adopted around the world but also how it’s used in everyday life:
Banks like Goldman Sachs, JP Morgan, and Morgan Stanley have dedicated digital asset groups, while cryptocurrency has hit mainstream investment portfolios across the U.S. Many forward-looking businesses have started taking cryptocurrency for payment. Companies offer NFTs (non-fungible tokens) in place of traditional securities to designate shares or ownership on the blockchain without an intermediary like a stock exchange.
As a financial asset, cryptocurrency can offer high returns for investors. But that’s not its only benefit. On its own, cryptocurrency offers a certain level of asset protection simply by virtue of its anonymity and privacy – especially if you hold your assets in a physical wallet. However, this doesn’t make cryptocurrency an airtight asset protection strategy.
If you own digital assets but fail to disclose them in a legal proceeding, courts could hold you in contempt or penalize you. Similar to assets like cash or gold, any cryptocurrency holdings in your name are exposed to all the legal risks and liabilities you face every day. If you or your business get sued, courts could freeze or seize your digital assets. A solid asset protection strategy could help protect your cryptocurrency from that fate.
If you’re watching for developments in the cryptocurrency market, keep your eyes on the following up-and-coming locations. Then talk to an asset protection attorney about how to best defend your digital assets from lawsuits, creditors, and government seizures.
The last couple of years have seen Miami rising in the world of cryptocurrency – from showing NFT (non-fungible token) art exhibits to hosting the world’s biggest crypto party, to selling the naming rights for Miami’s NBA arena to a crypto exchange.
- Miami’s Mayor Francis Suarez invested heavily in cryptocurrency both personally – taking his city salary in Bitcoin – and politically, encouraging the industry’s local growth.
- Miami Beach hosted Bitcoin 2022, proclaimed the “biggest Bitcoin event in the world” and one of the largest and oldest cryptocurrency industry conventions.
- The city touts more than 650 bitcoin ATMs and tellers.
- New hotel and residential real estate developments have started allowing payment with cryptocurrency, even for down payments.
- LinkedIn data showed that Miami was 4th in the U.S. for cryptocurrency industry hires per capita for the first nine months of 2021.
- Over the pandemic, Blockchain.com moved its headquarters from New York to become the largest cryptocurrency company based out of Miami.
- Venture capital deals in cryptocurrency surged to $745 million in Miami in 2021, compared to just $6 million in 2020.
Non-traditional networking took off in Miami around this time, with crypto industry happy hours and Web3 networking events nurturing an enthusiastic environment for venture capital.
However, recent market corrections have affected the growth of crypto in Florida. FTX filed for bankruptcy in November 2022 and Miami’s NBA arena is now looking for a new name. Mayor Suarez championed a token called MiamiCoin that has fallen 94% from its peak value. But with a lower cost of living than some other major cities in the U.S. and beneficial policies like low real estate taxes, it’s likely that Miami will continue to attract crypto investors.
For several years, Puerto Rico has attracted cryptocurrency entrepreneurs with strong tax incentives like no personal income taxes, no capital gains taxes, and low business taxes while continuing to enjoy the benefits of living in a U.S. territory. So much so that by 2021, Puerto Rico touted the most crypto coins concentrated in one place in the world.
Because Puerto Rico is a semi-autonomous territory, the IRS considers it a foreign jurisdiction. at the same time, the Foreign Account Tax Compliance Act (FACTA) does not apply. As a result, Puerto Rico enjoys a unique middle ground when it comes to taxation.
Puerto Rico became so popular for cryptocurrency enthusiasts that since 2016 some entrepreneurs have pushed for a crypto utopia called “Puertopia” or “Sol,” a city where all transactions would involve digital currency and blockchain technology.
U.S. investors must normally pay taxes up to 37% on short-term and 20% on long-term capital gains like digital assets, plus a federal corporate tax of over 20%, plus state taxes. These taxes do not apply to gains earned after you’ve become a resident of Puerto Rico.
When these favorable tax policies were implemented a decade ago, they started an influx of wealthy investors. Puerto Rico continues to encourage these policies to bring in new investors and money to the island. As a crypto investor, you may also consider Puerto Rico as a place to take your wealth. But you should still take steps to protect your digital assets.
Switzerland has long been a major player in the world of finance in the traditional sense. As cryptocurrency has grown, the country has developed a “Crypto Valley” in the town of Zug – a collection of companies and foundations about an hour away from Zurich.
- Zug has many business-forward policies, including a 14% corporate tax.
- Local firms have partnered with the local government (called a “canton” in Switzerland) to convert cryptocurrency tax payments into Swiss francs, allowing locals to pay their taxes with digital assets like Bitcoin or Ether.
- The Swiss Financial Market Supervisory Authority (FINMA) has licensed 2 cryptocurrency banks in the country: Seba and Sygnum.
- In 2018, the city successfully carried out a blockchain-based voting system.
As Switzerland has carved a place for itself at the top of the traditional financial sector, it will no doubt continue to play a big role in the world of cryptocurrency. In 2020, the country passed the “Blockchain Act” to implement legal reforms, upgrade the nation’s infrastructure for these new financial markets, and regulate the cryptocurrency and digital securities industry.
What does all of this mean for investors in Switzerland? It means that cryptocurrency and blockchain are there to stay. It hopefully means lower costs, faster trading, and a greater variety of blockchain products, payment options, and alternative assets.
Even with all of the market volatility, Switzerland continues to see potential in crypto and has taken an innovative role in regulating this new and exciting industry.
St. Kitts and Nevis
Not only is the Caribbean island country St. Kitts and Nevis an excellent location for asset protection, but it’s also an early adopter of cryptocurrency and blockchain technology. Antigua is also a leading jurisdiction for digital asset regulation.
- Nevis was one of the first countries to introduce crypto legislation which provides favorable oversight and regulation of the crypto industry.
- In 2022, Nevis announced its plans to accept Bitcoin as legal tender.
- By taking up citizenship in St. Kitts and Nevis, investors can take advantage of many favorable tax policies – such as no income tax, no inheritance tax, no capital gains tax, and no wealth tax on worldwide income or assets.
Wherever you decide to invest your digital assets, it’s critical that you also consider how you’ll protect your investment. Even with their anonymity and privacy, cryptocurrencies can still be seized or frozen by courts, creditors, or plaintiffs. A solid asset protection strategy put into place ahead of time can help stop that from happening.
Asset Protection Strategies for Cryptocurrency
If you hold cryptocurrency or other digital assets in your name, you must legally disclose those assets if a court orders you to do so. Failing to disclose your digital assets in a legal action such as a divorce, contract dispute, or civil lawsuit could expose you to civil and criminal fines and penalties.
Just like cash, stocks, bonds, and precious metals, cryptocurrency is an asset that you can and should protect from the legal risks you face every single day. But in order to effectively protect your assets, you must start early – before you face any legal action.
Whether you choose to protect your cryptocurrency and digital holdings domestically or internationally in an offshore trust, you must work with an experienced legal professional who can help you properly navigate the world of asset protection. At Blake Harris Law, we can help. Contact us now to get started on protecting your digital assets.