PROTECT YOUR CRYPTO FROM GOVERNMENT SEIZURE
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In this Blog we discuss some means and methods to help you avoid the seizure of your crypto assets by the US and Canadian governments. We have for a long time been advising clients that their cryptocurrencies are not safe from the reach of the United States and the Canadian government. In the last week we saw exactly how the governments can attach your cryptocurrency. Read on and we explain a means we can help limit this exposure.
THE PROBLEM: CRYPTO ATTACHMENT
On February 8, 2022 the US government proceeded seize over 94,000 bitcoin This seizure was allegedly made as a result of the alleged owners having previously hijacked a crypto account in 2016. The alleged offence has not been proven in court. The individuals are simply accused. Although we do not believe crypto theft should be condoned, we also do not believe that the government should be able to unliterally seize your assets. The US Government has proceeded to do so.
In Canada this month we have seen the Canadian Government declare an emergency under the Emergency Act. As part of that declaration, the Canadian government sent notices to various Crypto Exchanges asking for certain accounts to be frozen and provided a list of crypto investors (alleged by the Canadian government to have been part of or to have funded the Canadian truckers protest convoy). We see again, the government using extraordinary powers to freeze accounts.
Your exposure is made clear by the following statement from the Canadian federal government. Canadian Deputy Prime Minister and Finance Minister Chrystia Freeland stated:
“The names of both individuals and entities as well as crypto wallets have been shared by the RCMP with financial institutions, and accounts have been frozen and more accounts will be frozen…Crowdfunding platforms and payment service providers have started their registration process with FINTRAC,” (The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) is Canada’s financial intelligence unit).
Lastly, we have seen banks (arguably as a result of pressures levied on them by the US and Canadian governments) freeze accounts they believe are involved in cryptocurrencies.
To take it even further many countries have entered into agreement (treaties) with one another which requires them to assist each other in tracking and freezing assets in that country. As such, although we are not aware a current case, we see in the future the US and Canadian governments approaching other countries asking for seizure of accounts domiciled in those countries.
What all of this means is your crypto is not safe. Perhaps more correctly your crypto is somewhat safe, until you try to move it. Once you try and move it, the Crypto Exchange or your bank may be subject to a government order to freeze your account or remit the funds to the government.
In the United States and in Canada financial institutions and the Crypto exchanges are subject to “know your client” laws and are required to report suspicious activity. In some cases suspicious activity can be simply your conversion of over $10,000 worth of cryptocurrencies. Essentially owing crypto provides some protection from the potential manipulation of fiat currencies. However, until crypto can be used to purchase more goods and services, you will always need an exit ramp to convert it into a fiat currency (like US dollars or Canadian dollars). It appears that when you try to exit into fiat currency is when the exposure of seizure or freezing of your accounts can arise.
Even allegations of breach of securities laws have seen banks chose to close bank accounts. This results in it being difficult for you to locate a local bank to transact with.
The above examples are government enforcement are for sure extreme. But we often see these techniques trickle down to be used in more common place enforcement measures used by governments. For example freezing for alleged breaches of tax legislation. As the governments begin to enact more laws in relation to crypto, the potential for government attachment to your crypto increases. For example more tax regulations and more securities regulations are being put in place by the United States and Canadian regulators.
We have advised numerous clients who come to us after the “shit has hit the fan”. It is often too late to protect the crypto at this point. Just like we stated in our blog of February 2021 in regard to crypto tax planning, the asset protection strategy almost always has to be put in place at the outset. In short, an ounce of prevention is better than a pound of cure.
OUR RECOMMENDATION
To help avoid the exposure of seizure or freezing of your crypto or bank accounts we recommend you “domicile” your crypto currency in a more “friendly” crypto country. We have heard from some of you that you transact under an ISP locating in another country. Given the treaties in place throughout the world this likely does not avoid your exposure.[1] The safer route is to actually move your crypto to be domiciled in a “friendly” crypto country. As well, a country that has banking secrecy laws which almost completely remove the potential for the Canadian or US government to determine if you own the account in the “safe haven” country. Our strategy is to incorporate a company and obtain a bank account for you in that safe haven country. You then commence to conduct all of your crypto transactions through that company in the safe haven country.
Now (as we expect that the US and Canadian governments are reading this Blog), this does not mean you do not have to pay tax on your worldwide income. As a United States or Canadian taxpayer you are required to disclose your worldwide income. In both the US and Canada you are taxed on your worldwide income.[2] Similarly, you cannot lie or commit fraud just because your assets are held “off sore”. Although given secrecy laws of the safe haven countries, it is very difficult for the government to determine on their own what assets you may have, we are not recommending that you do any of the foregoing. We do recommend however, that you take steps to protect your assets from occasional over-reach of the governments.
CONCLUSION
Many of us are seeing gains made through our insights into the cryptocurrency world. Unfortunately, as always, the governments tend to want to regulate where value is created such as the crypto currency marketplace. As we see, they are starting find ways to attach or seize your crypto assets. We recommend that you take steps to protect your crypto assets.
JZ Law[3] has experience in developing asset protection plans and tax plans for clients. In most cases the set-up cost is $12,000.
The first step is contact us at Jzanglaw@gmail.com or by Signal, text or call to 403 680 9264.
[1] Many crypto investors assume that their identity will not be revealed by their Crypto Exchange or Trading Platform (we will simply refer to them as a “Crypto Exchange”). That is incorrect. Your information can be obtained from any Crypto Exchange whose locating country (and every Crypto Exchange has a locating country) is a member of the Organisation for Economic Co-operation and Development (the “OECD”). The OECD’s 37 members are: Austria, Australia, Belgium, Canada, Chile, Colombia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Latvia, Lithuania, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the United States. Therefore any Crypto Exchange having its location in one of these countries in most instances will be required to deliver any information held by them (including your name). Other bilateral treaty with other countries will prove the same result. [2] US: https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion#:~:text=If%20you%20are%20a%20U.S.,%2C%20and%20%24107%2C600%20for%202020%29. Canada: https://www.canada.ca/en/revenue-agency/services/forms-publications/tax-packages-years/general-income-tax-benefit-package/non-residents/5013-sa.html [3] JZ Law (a division of John C. Zang Professional Corporation) is a law firm providing legal services in Alberta. Where necessary legal counsel in your jurisdiction will be retained to assist you with guidance from JZ Law.