Investment Migration Solutions for Crypto Investors
To say that the crypto world has had a rocky few months is an understatement, but it also has a history of surviving previous crashes. As we appear to be heading into a ‘crypto winter’, there is hope among investors that if they sit tight, the market will recover. Prior to the downturn, a wave of crypto investors was seeking out the most tax-friendly jurisdictions to realize their newfound gains. As we wait for the next crypto spring, we thought it would be interesting to consider the underlying similarities between affluent individuals who invest in alternative residence and citizenship and those who invest in digital assets. They all seek optionality — the right to choose from a plethora of possibilities. In their pursuit for greater freedom, they strive to break the constraints that the citizenship of their birth might have imposed on them, and they seek to operate in a decentralized, digital ecosystem that is not directed by policymakers.
By: Dominic Volek, Group Head of Private Clients, Henley & Partners
A brave new digital world
The pandemic brought with it a new era of innovation, spurring the pace of change across innumerable industries. This effect was most visible in the digital asset sector, where the number of institutional investors grew exponentially. Cryptocurrencies’ prominence in high-net-worth individuals’ portfolios also increased as investors hedged their bets against record-high inflation and global instability.
Just as alternative residence and citizenship is fast becoming an asset class that is highly coveted by wealthy individuals, digital assets too are growing in popularity despite their volatility and nail-biting market fluctuations.
As governments scramble to draft new regulations that adapt to the shifts in the crypto sphere, traders, miners, investors, and cryptopreneurs are exploring investment migration strategies that can safeguard their interests. At Henley & Partners, we have seen enquiries from this segment of digital asset investors rise significantly. Our clients are looking at building a viable ‘Plan B’ to mitigate against any future bans on the trading or use of cryptocurrencies and to allay the risks of aggressive fiscal policies that tax digital assets at source, such as those passed in India earlier this year.
Although confidence in the crypto ecosystem and decentralised finance is at historically low levels, crypto advocates are drawn to the liberal constructs behind decentralized currencies and are motivated to build portfolios of alternative residences and citizenships to defend the liberties they value when choosing where they live, travel to, and what they invest in.
Malta – An island of innovation
Apart from the natural beauty and rich history of this strategically-located central Mediterranean European archipelago, Malta’s openness to digitization has meant that it offers crypto proponents a welcoming jurisdiction and the option to apply for the Malta Permanent Residence Programme. Alternatively, Malta’s Granting of Citizenship for Exceptional Services by Direct Investment Regulations (S.L. 188.05), under the Maltese Citizenship Act Cap. 188, LN437 of 2020, allows for the granting of citizenship by a certificate of naturalization to foreign individuals and their families who contribute to the country’s economic development by investing EUR 738,000 for a minimum residence period of 36 months or EUR 888,000 for a minimum of 12 months (including a property lease). Whether investors opt for residence by investment or Citizenship by Naturalization for Exceptional Services by Direct Investment, real estate investment is a requirement.
Malta was in fact one of Europe’s pioneers in establishing a regulatory environment that welcomed blockchain and techpreneurs, implementing a framework for crypto exchanges to be licensed and registered on the island seamlessly.
Portugal – Popular with crypto investors
Portugal offers one of Europe’s most attractive residence by investment programs, the Portugal Golden Residence Permit, which ranks 1st on the Henley Residence Program Index. The minimum capital requirement starts at just EUR 200,000 (EUR 280,000 for the real estate option) and Portugal offers a pathway to applying for citizenship after five years of residence. Portugal has been drawing interest from the digitally mobile crypto-investor class as it also offers those who relocate there the Non-Habitual Resident tax regime, a 10-year tax exemption on most foreign sourced income as well as enjoying zero wealth taxes and exemptions on gifts to family. Added to that, as Portugal does not currently apply VAT or income tax on cryptocurrencies, cryptopreneurs and affluent individuals have been drawn to this Iberian hub. In late May, Portugal’s congress rejected two bills that would introduce heavy taxes on crypto gains for individuals. However, the Socialist Party, which gained a majority in January’s parliamentary election, is looking to undertake a comprehensive review of tax legislation soon, and the finance minister has indicated that the country will move forward with the taxation of crypto. In early August it was announced that some of Portugal’s biggest banks had closed the accounts of several crypto exchanges, possibly indicating a clampdown on the digital assets sector.
It is anticipated that all EU member states will in the near future be adopting the Markets in Crypto-assets (MiCA) Regulation, a regulatory framework defining how crypto assets are treated, which could impact the status quo in each EU member state.
Montenegro – Welcoming the future
Further afield in Europe, Montenegro has been endorsing a policy of modernization in efforts to attract location independent investors and techpreneurs to its shores. Vitalik Buterin, Ethereum’s co-founder, recently made the headlines when he obtained Montenegrin citizenship, highlighting the country’s crypto-friendly attitude.
Buterin remains philosophical about the current trials in the cryptocurrency market, highlighting the positives in the crypto space in a recent Fortune article: “I think the loudest applications of crypto are, in reality, far from the most common ones. There are definitely people trading USD 3 million monkeys. There’s definitely things getting hacked for USD 20 million once in a while. All of that stuff is real,” he said. “But the more common stuff that I think crypto does is not that…just stuff like random people around the world who are now finding it easier to just move money internationally and have businesses that collaborate across borders or store their savings and so forth. People who do them, do them quietly, but it’s also very real.”
Montenegro’s Citizenship by Investment Program has a minimum financial requirement of EUR 450,000 (a minimum real estate investment of EUR 250,000 and a donation of EUR 200,000 to the country) and a processing time of eight to ten months. It is an EU candidate country and grants passport holders visa-free access to Europe’s Schengen Area among other key jurisdictions, and its investment migration program is ranked 3rd on the Henley Citizenship Program Index. But investors should act now to ensure they apply before the current program ends on 31 December 2022.
Antigua and Barbuda – A forward-thinking digital asset leader
A Caribbean investment migration program that is most sought after by digital asset investors is the Antigua and Barbuda Citizenship by Investment Program. Eligible applicants can contribute a non-refundable sum of USD 100,000 to the National Development Fund, USD 150,000 to the University of the West Indies, invest from USD 200,000 in approved real estate, or purchase an eligible business for a minimum amount of USD 1.5 million.
In 2020 Antigua and Barbuda passed forward-thinking legislation to position itself as one of the Caribbean’s tech hubs. The Digital Assets Business Bill enables techpreneurs with digital asset businesses, exchanges, wallets, service providers, financiers, and lenders, to get licensed and establish themselves in this paradisical location.
St. Kitts and St. Lucia – two more Caribbean paradises for crypto millionaires
The St. Kitts and Nevis Citizenship by Investment program has also drawn numerous high-profile investors to its shores thanks to its hospitable approach to tech and cryptopreneurs as much as its pristine beauty. In a bid to adapt to innovation in the financial service sector, the Virtual Asset Bill was passed in 2020 creating a framework for entrepreneurs to license their blockchain or crypto businesses. Those who wish to become citizens of St. Kitts and Nevis can pay a non-refundable contribution of USD 150,000 into the Sustainable Growth Fund or USD 175,000 to the Alternative Investment Option for a single applicant or a family of up to four members, or invest a minimum of USD 200,000 in real estate.
Wealthy individuals interested in securing a citizenship in the Caribbean to protect against political and fiscal instability at home may also consider the St. Lucia Citizenship by Investment Program, which has four options: a non-refundable contribution of USD 100,000 to the National Economic Fund, investment in government bonds with a minimum value of USD 250,000 under the limited offer Covid-19 Relief Bond (valid until 31 December 2022) or alternatively, bonds with a minimum value of USD 500,000, purchase of real estate with a minimum value of USD 300,000 from an approved development that must be held for at least five years, or participate in an approved enterprise project with a minimum contribution of USD 3.5 million plus the creation of at least three permanent jobs.
Henley & Partners welcomes enquiries from digital asset investors who want to craft a tailored portfolio of alternative residence permits and citizenships that protects both their lifestyle and wealth in these disruptive and volatile times.
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