Brainstorming Crypto Structures to Circumvent Offshore Clampdown

[DavidS]

Situation as of 2021:
FATCA (USA automatic snitching)
CRS (all non-USA automatic snitching)
EU's DAC6 (financial consultant relating to EU automatic snitching of suggested offshore structures and tax optimisation strategies)
Mandatory beneficiary owner declaration (required by all financial institutions).

And the trend of snitching will only INCREASE not LESSEN year by year.

This leads to believe that offshores are pretty much dying. Unless you run the state and have direct control over tax man (Putin, Assad, Xi, etc...) there is little use of an offshore structure for you because eventually you WILL get snitched. Maybe tricks like Double Irish with a Dutch Sandwich might still work for large corps, but not for your average run-out-of-the-mill millionaire.

First question:
1) Is this an accurate or an inaccurate assessment of current situation and future tendencies? If you think I'm exaggerating, please tell me. I PRAY I am wrong.

FUTURE PERSPECTIVES AND ALTERNATIVES:

Since the mere fact of registering offshore companies and bank accounts is so unsafe and becoming ever increasingly transparent, we have to look at a parallel system.

CRYPTOCURRENCIES

A real way to hide wealth.

Interesting moments:

- Volatility. This can be solved by holding a stablecoin like USDC, USDT or any of the other developing stable coins that are tied to value of EUR/USD or other currency.

- Exchange reporting. Coinbase, Kraken... they might be forced to report users in following years due to CRS/FATCA pressure. Coinbase is already reporting. Solution: Decentralised Exchanges (DEXes). But problem is - they don't allow fiat on-ramp/off-ramp. Solution: wait until DEX implements USDC/stable coin exchange.

- Cashing out is a taxable event still. So if you want to cash out big, you need to pay tax. But if you cash out into a stablecoin, you don't need to pay tax as you didn't really exchange your crypto for fiat. Now... how do you use stablecoin? What if you take a loan AGAINST your stablecoin or AGAINST your bitcoin and use that as COLLATERAL? Apparently, this is a trick many billionaires use to avoid selling their assets and avoid paying gains / income taxes. You just put up your assets as collateral and live off interest. What are problems with this?

- Holding stocks, ETFs. Many crypto people want to cash out into stocks. This is still a real problem with no clear solution, because as soon as you register brokers, they are required to report according to CRS/FATCA.


2) Did I miss something and do you see any other opportunities to use the decentralised crypto system as a new offshore 2.0 that would be out of reach of governments and preying eyes.

3) Maybe there are ways to combine offshore with crypto to make it more effective?

 

[Mercury]

- Cashing out is a taxable event still. So if you want to cash out big, you need to pay tax. But if you cash out into a stablecoin, you don't need to pay tax as you didn't really exchange your crypto for fiat. Now... how do you use stablecoin? What if you take a loan AGAINST your stablecoin or AGAINST your bitcoin and use that as COLLATERAL? Apparently, this is a trick many billionaires use to avoid selling their assets and avoid paying gains / income taxes. You just put up your assets as collateral and live off interest. What are problems with this?

At term, how will you refund the loan... or (in case you will never refund) just pay the yearly/monthly interests back?
Using cryptos to pay either loan or interests is a taxable event.

 

[DavidS]

At term, how will you refund the loan... or (in case you will never refund) just pay the yearly/monthly interests back?
Using cryptos to pay either loan or interests is a taxable event.

This probably depends on jurisdiction?

Check this video. Apparently casinos can also be used.
After you cash out.

1. Find stable investment portfolio. (your bitcoin/assets, that are held by "company")
2. Apply for equity line of credit (ELOC). The more money you have, the better ELOC terms can you get.
3. ELOC acts like giant credit card.
4. You can use that ELOC to spend money without selling your underlying portfolio (shares/bitcoins).

 

[DavidS]

Bump, anyone has any input on this? Would be really useful to develop a crypto offshore plan.

My gut says there is something in this.

 

[offshore xpert]

I was actually drawing up a strategy to replace the typical offshore asset protection (trust + foundation + bank account) for a crypto solution. Big flaws I saw were:
- crypto exchangers and wallets would require full KYC for personal accounts and extra due dilgience for corporates (not sure how would they approach a trust) and they might share information
- price volatility
- traditional clients have no knowledge of stable coins

So, in sum it's a hard sale and not bullet proof.
But if someone here has any experiences or ideas would be happy to hear.

 

[DavidS]

I was actually drawing up a strategy to replace the typical offshore asset protection (trust + foundation + bank account) for a crypto solution. Big flaws I saw were:
- crypto exchangers and wallets would require full KYC for personal accounts and extra due dilgience for corporates (not sure how would they approach a trust) and they might share information
- price volatility
- traditional clients have no knowledge of stable coins

So, in sum it's a hard sale and not bullet proof.
But if someone here has any experiences or ideas would be happy to hear.

Well, theoretically if you just use USDC you can find exchanges that will let you transact in smaller volumes without KYC.

Ideally in future a decentralised exchange, DEX could help one transfer BTC into a StableCoin anonymously.

 

[legrant]

- Cashing out is a taxable event still. So if you want to cash out big, you need to pay tax. But if you cash out into a stablecoin, you don't need to pay tax as you didn't really exchange your crypto for fiat. Now... how do you use stablecoin? What if you take a loan AGAINST your stablecoin or AGAINST your bitcoin and use that as COLLATERAL? Apparently, this is a trick many billionaires use to avoid selling their assets and avoid paying gains / income taxes. You just put up your assets as collateral and live off interest. What are problems with this?

As far as I know, the sale of crypto for another crypto is a taxable event. As an example, if you bought $1000 worth of BTC a few years ago and you sold it today for $50000 USDC, that is considered as a sale, and gains till that point will/need to be taxed

 

[CaptK]

Its a mine field that requires a lot of thought and I'm still trying myself to work it out myself.
On the loan idea my thinking is that when the client places BTC as collateral and then I, as the lender convert to USDT to safe guard volatility its not a taxable event. Then once the client pays off the loan then I would convert back to BTC then return them back to them.

I am exploring many different options and will update as I get a breakthrough.

 

[DavidS]

As far as I know, the sale of crypto for another crypto is a taxable event. As an example, if you bought $1000 worth of BTC a few years ago and you sold it today for $50000 USDC, that is considered as a sale, and gains till that point will/need to be taxed

Not in all jurisdictions.

 

[DavidS]

Its a mine field that requires a lot of thought and I'm still trying myself to work it out myself.
On the loan idea my thinking is that when the client places BTC as collateral and then I, as the lender convert to USDT to safe guard volatility its not a taxable event. Then once the client pays off the loan then I would convert back to BTC then return them back to them.

I am exploring many different options and will update as I get a breakthrough.

Update us if you figure out anything

 

[legrant]

Not in all jurisdictions.

You're probably right, but at least in the US, UK and most European countries (the ones that I could find info about it), do it that way and you're required to pay your taxes.