Crypto’s Tax Shelter Problem

Playing hide-and-seek from tax havens is hardly a new game, but for blowup-prone crypto companies and investors, it’s an increasingly problematic one.

Playing hide-and-seek among crypto’s toy villages has become a hallowed pastime. Tether and its Bitfinex cryptocurrency exchange, charged by the U.S. Commodity Futures Trading Commission with serious regulatory violations and forced to pay tens of millions in civil fines in 2021, is owned and operated by iFinex, based in Hong Kong and registered in the British Virgin Islands. Meanwhile, Binance also dodged questions for years about exactly where it was based, with many believing it was in Malta before it was revealed that the crypto exchange was registered in the Cayman Islands. (When asked directly at a conference where his company was based, Binance’s co-founder and CEO, Changpeng Zhao, refused to say, quipping, “This is the beauty of blockchain, right, so you don’t have to … like, where’s the Bitcoin office, because Bitcoin doesn’t have an office.”)

The list of offshore crypto cataclysms traces as far back as crypto itself. However, FTX may be the worst yet. FTX was set up as an exchange in Hong Kong in 2019 before moving on to the Bahamas in 2021. But its holding company, FTX Trading Ltd., was based in St. John’s, the capital of the Caribbean twin-island nation of Antigua and Barbuda, which declined to give FTX a trading license, citing regulators’ failure to understand FTX’s business model. Late last year, Antigua and Barbuda’s prime minister, Gaston Browne, said that denying FTX a trading license had “spared us some embarrassment.” All of these places are renowned crypto tax havens.

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