Hi ,

Cryptocurrency: It’s mysterious, it’s volatile and it’s all over the news. At the start of 2017, one Bitcoin (the most well-known cryptocurrency) equaled approximately $800. By the close of that same year, one Bitcoin approached $20,000. Cryptocurrency is so mercurial, in fact, that taxing and regulating bodies are just now starting to take a closer look.

The details of all cryptocurrency transactions in a network are stored in a public ledger called a “Blockchain,” which permanently records all transactions to and from online wallet addresses, including date and time. Taxpayers can use this information to determine their basis and holding period. Technology to assist taxpayers in this process is being developed currently and some helpful online tools are now available.

How operational trading, with regulatory compliance, would occur within an overseas retirement plan or a part of an offshore investment account, can be designed to meet your specific needs; apply within.

The one CRS and FATCA compliant ICO operational trading platform, exempt from SEC registration, is overseas retirement

Regulatory focus on ICO's: 2017 saw an enormous increase in the number of "Initial Coin Offerings" (ICOs) that have been arranged.

Over US$5.68 billion was said to have been raised in 2017, with over 1.4 billion in December 2017 alone, for example. The key advantages of ICOs for fund raisings have been:

• speed;
• lack of bureaucratic "red tape";
• interest generated by offerings; and/or
• low cost of the process.

In recent months, there has been an increased regulatory focus on ICOs.

Just to recap in very basic terms – the regulations we are dealing with differ between the various jurisdictions, but all are directed at the same policy objectives, namely investor protection from abuses that were rampant around the world before regulation was introduced.

Cryptocurrency trading is a registered security or exempted from registration:

The Securities and Exchange Commission (SEC) has defined who can have liability in an unregistered offer of securities that is not exempted:

"Those who have a necessary role in the transaction are held liable as participants". So, for example, it will be illegal for a broker, dealer, or exchange to effect any transaction in a token which is a security unless the offering and sale of the security and the relevant exchange it is traded on are either registered or exempted from registration.

The SEC’s final word:

"Those who offer and sell securities in the United States must comply with the federal securities laws, including the requirement to register with the Securities and Exchange Commission (SEC) or to qualify for an exemption from the registration requirements of the federal securities laws.''

''These requirements apply to those who offer and sell securities in the United States, regardless whether the issuing entity is a traditional company or a decentralized autonomous organization, regardless whether those securities are purchased using U.S. dollars or virtual currencies, and regardless whether they are distributed in certificated form or through distributed ledger technology [Note: blockchain is a particular type of distributed ledger technology (DLT)]. In addition, any entity or person engaging in the activities of an exchange, such as bringing together the orders for securities of multiple buyers and sellers using established nondiscretionary methods under which such orders interact with each other and buyers and sellers entering such orders agree upon the terms of the trade, must register as a national securities exchange or operate pursuant to an exemption from such registration."

[Note: blockchain is a particular type of distributed ledger technology (DLT)].

In addition, any entity or person engaging in the activities of an exchange, such as bringing together the orders for securities of multiple buyers and sellers using established nondiscretionary methods under which such orders interact with each other and buyers and sellers entering such orders agree upon the terms of the trade, must register as a national securities exchange or operate pursuant to an exemption from such registration."

The SEC position of interest to all proponents of a token sale:

"The touchstone of an investment contract [Note: an investment contract is a kind of security, and the SEC concluded that The Decentralized Autonomous Organization ( DAO)  was an example of an investment contract] is the presence of an investment in a common venture premised upon a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others."

Lest we think that is an invitation to devise an Initial Coin Offering (ICO) that evades one or more of these descriptions so as to take it outside the definition, the SEC further goes on to quote the seminal case of SEC v. W.J. Howey Co. (328 U.S. 293 at 299) which calls the definition a "flexible rather than a static principle, one that is capable of adaptation to meet the countless and variable schemes devised by those who seek the use of the money of others on the promise of profits".

Conclusion: SEC Registration or operate pursuant to an exemption from registration. An overseas registered retirement plan, in a regulated and recognized jurisdiction with Intergovernmental Agreements, is recognized by the U.S. Treasury and IRS listed as exempt from reporting by statute of code in section 402(b). Exempt from IRS Form 3520/3520a is an ICO operational trading platform (offshore fund) exempt from SEC registration and globally tax compliant (by CRS), IRS Form 8957 Foreign Financial Institution Secrecy & Privacy Rules apply.

BitGo’s Combined Offering with Kingdom Trust Provides the First Complete and Independent Qualified Custodial Offering for Bitcoin, Ripple, Ethereum, and More

PALO ALTO, Calif.--(BUSINESS WIRE)--BitGo, the leader in digital currency security solutions for institutional investors, announced that it has entered into a definitive agreement to acquire Kingdom Trust Company, a South Dakota-chartered, fully regulated trust company with over $12 billion in assets under custody. Under the agreement entered into on January 11, 2018, BitGo will acquire Kingdom Trust Company and Kingdom Services. The transaction is subject to customary closing conditions and regulatory approvals.

Kingdom Trust meets all applicable requirements of Internal Revenue Code 408 to serve as a qualified custodian as defined in the Investment Advisers Act of 1940. The custodial services offered by the trust company, alongside BitGo’s market-leading digital currency security protection software, will make the combined companies the only full-stack, at scale provider of onsite and online protection for digital currency investments held by institutional investors.

“Global financial markets have longed for an end-to-end solution offering both the technology to secure digital currencies as well as the legal and compliance controls necessary to integrate into mainstream financial portfolios,” said Mike Belshe, CEO of BitGo. “BitGo has established itself as the digital security leader, and Kingdom Trust has served as a 40 Act qualified custodian for almost a decade and has developed the expertise required by institutional investors necessary for compliance with the Act. Both companies are working toward safety of money and assets. BitGo and Kingdom are building products for the future - marrying the new technology with the safety and controls all investors require.”

BitGo is a blockchain software company that secures digital currency for institutional investors. Its technology solves the most difficult security, compliance and custodial problems associated with blockchain-based currencies, enabling the integration of digital currency into the global financial system. BitGo's customers, which include the world's largest cryptocurrency exchanges and financial institutions, conduct more than $10 billion in transactions monthly.

Kingdom Trust is an independent qualified custodian and a non-depository trust company regulated by the South Dakota Division of Banking. The firm is a leading provider of unique and innovative custody solutions for individual investors, investment sponsors, family offices, advisory firms, broker-dealers and various other investment platforms. Kingdom Trust is a passive, non-discretionary custodian. The firm does not provide, promote, endorse or sell investment products and does not endorse or promote any individual investment advisor or investment sponsor.

Historic structures: transfer pricing, diverted profit tax, carried interest no longer function for offshore tax planning.

Investment vehicles require a look at what the future is to be.

Governments and governance look through everything. Everything is considered a tax avoidance scheme except that which is formally recognized and registered as not.

Excluded does not mean to include it just in case.

Practical application examples of asking the right question:

1. Direct investment in Real Estate projects are subject to capital gains tax.
2. Providing project financing via a Clean Nominee Bank Account, pension fund structure, is entirely different than a direct investment into real estate. In other words, it depends on how the pension fund, which owns the finance company, is providing project financing. For example a profit share of a development is legally different to the sale of those properties by that pension fund.

Project financing is not a gain on real estate it is a gain on having put up the money and Double Tax Agreement* specifically deals with capital gains with exception.

* see s.323 Tax Exemption from FIRPTA for U.S. property exemption

Knowing the right questions for offshore tax planning and the right structure are reasons tax attorneys with experience need to be engaged.