A Guide to Offshore Crypto Banking
Crypto has exploded in recent years, being accepted as an official currency and making headlines in mainstream media. However, one area that needs more light and information is offshore crypto banking. In this article, we will give a brief explanation of crypto and digital currency. Then will cover how you can use an offshore company to bank your crypto and the benefits that come with doing so.
What is Cryptocurrency?
Simply put, cryptocurrency is digital money– the most popular of which is bitcoin. It uses cryptography to facilitate transactions and everything is saved on a shared ledger called a blockchain. The appeal of crypto comes from its transparency and lack of governing body that oversees the regulation, creation, and distribution of the currency.
Unlike traditional fiat currencies like the dollar or euro, there isn’t a physical representation of the money. It exists purely as data, where miners can “mine” crypto through advanced algorithms and powerful computers.
Here are some of the most popular cryptocurrencies available today:
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Bitcoin (BTC)
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Ethereum (ETH)
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Litecoin (LTC)
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Dogecoin (DOGE)
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Ripple (XRM)
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Cardano (ADA)
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Tether (USDT)
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Binance Coin (BNB)
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Solana (SOL)
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Shibu Inu (SHIB)
However, there are over 18,000 currencies that have popped up since the inception of bitcoin in 2009.
Although crypto is beyond the legal reach of most countries, that hasn’t stopped governments in areas like China and India from trying to regulate and/or ban crypto in some form or fashion. That’s why offshore banking is an attractive option for people and businesses wanting to get into crypto without fear of legal repercussions or government interference.
Let’s take a look at how you can use an offshore company to bank your crypto.
How Investors Create an Offshore Company That Can Be Used for Crypto Banking
Down below, we have laid out a few use cases we have noticed where an offshore company and entity can be used as a vehicle for storing digital currencies.
Use of an Offshore Trust
Investors with coins valued at more than a million dollars have been reported to create an international trust to protect and hold their crypto assets.
Create an Offshore LLC
For various investors, forming an LLC in a tax haven country is normally used to counter various audits scrutiny. There are simplest ways to address these barriers such as forming a self-directed IRA and then using that IRA as a conduit for investing in crypto through the LLC.
Create an IBC (International Business Company)
With an IBC, you can activate an offshore digital wallet to hold your cryptocurrencies. The digital wallet acts like a bank account, where you can transfer funds in and out and also make payments to other companies. In some jurisdictions, they have strict privacy laws that add another layer of anonymity and protection.
Split Responsibilities Between Two or More IBCs
You can also create multiple IBCs for various purposes. For instance, one IBC can be used solely for storing and banking crypto in the offshore wallet. Then another IBC can be formed that is used strictly for trading crypto.
Combine Your IBC with a Private Foundation
If you create a private charity foundation that accepts crypto as donations, then you can use your IBC to provide those funds as share capital.
By using these vehicles for offshore crypto banking, it adds multiple legal layers between prying eyes and your assets.
What are the Benefits of Offshore Crypto Banking?
There are quite a few advantages of offshore banking your crypto, especially if it’s bitcoin. However, to receive the full benefits, ensure you’re setting up your company or bank in a crypto-friendly country, which Feenix Consultant can recommend. Regardless of location, here are some of the benefits of crypto offshore banking.
As mentioned earlier, you still need to pay taxes in your home country but it can be greatly reduced depending on how they treat outside investments. Some countries, such as Finland or Belgium, treat crypto like stocks or other commodities versus treating it like a currency. For comparison, crypto in US-based wallets is subject to stringent tax laws such as treating bitcoin as an asset for taxation purposes.
The biggest benefit of offshore banking is better privacy and anonymity. In essence, if the bitcoin and the individual are separated geographically and legally, then it adds an extra level of asset protection and preservation. However, it’s important to remember that this doesn’t absolve you of your tax obligations, but choosing a tax-free country will mean you need to pay less. And you don’t need to pay taxes until you take profits. So, you are free to re-invest 100% in the correct country.
By using multiple vehicles for storing and using crypto, it gives you back financial sovereignty. When using a single bank or institution, you’re completely reliant on their systems and structures working as intended. As any experienced trader and investor will tell you, diversity is key and a powerful tool for asset protection.
What are the Disadvantages of Offshore Crypto Banking?
There are quite a few advantages of offshore banking your crypto, especially if it’s bitcoin. However, to receive the full benefits, ensure you’re setting up your company or bank in a crypto-friendly country, which Feenix Consultant can recommend. Regardless of location, here are some of the benefits of crypto offshore banking.
Bitcoin and crypto is still relatively new, meaning a lot of laws, regulations, and rules are still up in the air as people and governments decide how they want to move forward with the new technology. As such, many established banks and financial institutions are wary of fully committing.
One of its benefits is a double-edged sword. While the decentralized aspect of crypto increases privacy and anonymity, it leaves few options for recourse when things go wrong. In the countries that offer these types of protections, it often lessens the advantage that comes with anonymity and privacy.
Since there is little to no oversight of digital currencies and other virtual assets like NFTs, there is a high risk of volatility. While that increases the chance for larger profits, it also means there’s a chance for bigger losses.
Summary
Depending on your needs, creating an offshore company might be the best option for storing and holding your crypto assets. Regardless of your reasons, it’s still important to not make any decisions on a whim and carefully research the laws and regulations in your chosen country. With our help, when used correctly, offshore banking can be a powerful solution looking for better privacy and anonymity.
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