Buying citizenship with cryptocurrencies: myths and facts

It is not possible to get citizenship by direct investment in cryptocurrencies in any country in the world.

This is due to the legal status of digital assets. In most jurisdictions, digital assets are recognized as a commodity and not as a currency or money. This means that in order to use them to buy citizenship, the coins must first be sold.

As an analogy, assume an investor has a Lamborghini worth $500,000. Obviously, they cannot directly invest the car in the economy of another country. First, they need to draw up a sale and purchase agreement for the Lamborghini, sell it, receive the money and transfer it to a bank account, pay taxes, and only then can they use the money to apply for citizenship. The same procedure applies to cryptocurrencies. Legally, bitcoin is an analogous commodity to Lamborghini.

Banks are another reason a crypto investor has to cash out cryptocurrencies before applying for citizenship by investment. In order to participate in a citizenship program, an investor must pay an investment fee, as well as other fees and duties. However, banks cannot accept cryptocurrencies, only fiat money, i.e., ordinary currencies that are not backed by any standard.

An investor can use cryptocurrencies to obtain citizenship only to confirm the solvency and legality of their income. The only way to get citizenship for crypto capital is to cash out digital currencies.

In order to use the money from the sale of cryptocurrencies to participate in a citizenship by investment program, it is important to prove the legality of the origin of the money. Otherwise, the application for a second citizenship will be rejected.

Passing the Due Diligence check is an important stage of any citizenship by investment or bitcoin citizenship program. The government department running this program has to verify that the money earmarked for investment can be proved to have been earned legally.

To pass the Due Diligence check, the investor must show the legality of the source of the money with which they bought the cryptocurrency, as well as to whom, how and the price for which it was sold. The investor also needs to declare whether any taxes were paid on it. Moreover, it is especially difficult to document this.

An applicant cannot simply with a suitcase of money, say that it was received from the sale of bitcoins, and apply for citizenship. They will not pass the Due Diligence check.

❌ It is not sufficient for an investor to just show the coins in their wallet. This does not indicate how the investor came to own the cryptocurrencies: whether they bought them legally on the exchange or received them as a hacker. In addition, the investor may have “dirty coins” in their wallet: coins that were stolen from trading floors or used for illegal purposes. Regulated platforms cannot accept such coins.

❌ It is also not acceptable to sell coins through a non-regulated currency exchange or for cash to friends. The bank requires proof of the legality of the origin of this money.

When selling bitcoins for cash, the investor has to provide at least a sales contract. The fact of the receipt of money on the account is unlikely to satisfy the bank. In the case of exchanging currencies, the investor can only provide screenshots of the transactions, personal account or chat. Whether the bank deems this to be sufficient proof depends on the institution and its jurisdiction.

✅ Cryptocurrencies can be traded on a regulated marketplace operating in jurisdictions where such transactions are permitted. For example, on the US or Swiss stock exchanges. They require customers to undergo KYC/AML procedures, which confirm the identity and legality of the funds.

We do not have information on how such documents satisfy the migration authorities of countries that offer citizenship by investment. They may find them sufficient, or they may ask for additional documents, depending on the department of a particular program.

✅ Pay all taxes fully and on time. Some countries tax the difference (in case of a profit) between the purchase and sale amount. The tax rate depends on the tax policies of individual countries.

✅ Using the money from the sale of coins to start a business. This is another way of legalizing the income from cryptocurrencies. After a couple of years, the investor will have a source of income that is visible and acceptable to any migration officer. Several of our clients received citizenship by investment in this way.

Vladlena Baranova,

Head of Legal & AML Compliance Department, CAMS, IMCM

I cannot recommend a specific option for legalizing income from cryptocurrencies. It all depends on the situation, jurisdiction, and the investor’s willingness to pay taxes. To minimize the risks of an investor’s application being rejected, they should contact a lawyer who specializes in transactions with cryptocurrencies.

There are many advertisements on the Internet that offer to apply for citizenship by investment with cryptocurrencies. This is what intermediaries do. They convert the investor’s cryptocurrency into dollars or euros, and then transfer them to a national fund or invest them in the assets of the selected country. However, the investor can do this themselves, and then contact the investment program’s agent.

The crypto market is growing rapidly, and numerous governments are trying to take it into account. Regulators will have to develop legislation that recognizes cryptocurrencies as a fully-fledged asset or even a payment method. This will expand the opportunities for crypto investors and simplify the Due Diligence procedure for them.

Governments in the Caribbean are working hard to improve their reputation among cryptocurrency holders. The Eastern Caribbean Central Bank (ECCB), the central bank of eight Caribbean countries, has been developing the region’s single digital currency, DCash, since 2019.

The government of Antigua and Barbuda discussed with local companies the possibility of using cryptocurrencies for settlements and transfers in November 2020. The country already has a legal base for this. If the initiative is developed successfully, the government will be able to accept cryptocurrencies to cover the costs of the citizenship by investment program.

In Europe, regulators are also trying to fit cryptocurrencies into the existing financial system. The European Commission published a draft of the European Union’s unified cryptocurrency legislation in September 2020. It stipulates the issuance of a single license for crypto companies, stricter requirements for them and the need to publish reports and undergo audits.

We believe that in the long term this will also simplify the introduction of crypto investors in citizenship by investment programs. They will be able to legally buy and sell cryptocurrencies in full compliance with the legislation of the European Union, making it easier to prove the legality of their assets and money. Settlement and conversion mechanisms will also be formed, allowing investors to transfer money directly in a cryptocurrency.

Each country has its own terms for obtaining citizenship by investment. The amount, investment options and period, requirements for the applicant, cost and terms of participation in the program differ.

Top‑8 countries to get a passport by investment

Investments are divided into two groups:

• non-refundable contributions, which cannot be recouped;

• refundable investments, which can be recouped after a certain holding period. Investments in real estate, securities, a business, or a stake in a local business can be sold on average after 5 years and the investor can keep the profit.

Investors also need to pay state fees, as well as pay for the translation and legalization of documents and due diligence. When buying real estate, there are additional fees for realtors and notaries, as well as tax payments.

The requirements for an investor also vary. The main requirement is to prove that they have sufficient income or savings to live in the selected country.

Citizenship by investment can be issued immediately for the whole family: husband, wife, children, and parents of spouses. Additional fees have to be paid for each family member.

Dozens of countries offer citizenship by investment. Some of our clients have opted for Maltese citizenship for exceptional services by direct investment, as well as citizenship by investment programs in Montenegro, the Caribbean and Vanuatu.

10 popular programs to obtain citizenship by investment

All these programs also allow the investor’s family to obtain citizenship immediately. It is not necessary to know the local language or live in the country. It is also important that the legal framework of these countries is friendly or neutral in relation to cryptocurrencies.

Let us now consider the main features of investment programs that help our clients choose the country that suits them best.

Malta. Malta citizenship for exceptional services by direct investment is the most popular and safest way to obtain citizenship by investment in the EU. It can be obtained in 1–2 years.

Maltese Citizenship for exceptional services by direct Investment

Applicants must make a combined investment:

• €600,000 non-refundable contribution to the socioeconomic development of Malta;

• €10,000 charitable contribution;
  purchase real estate for

• €700,000 or rent a property for €18,000 per annum for 5 years.

A Maltese passport allows the holder to live, work, study and do business in the European Union, as well as travel without a visa to 180 countries throughout the world, including the United States, Schengen countries, Britain, Switzerland and Canada. Entrepreneurs can enjoy tax breaks and benefit from the advantages offered by European banks

Malta has a high standard of living, economic growth, political and social stability and a developed medical and educational system. As a result, investors do not have to worry about the safety of their investments or property. Moreover, investors are likely to make a profit when they sell their real estate. On average, real estate prices rise 5–7% per annum and renting out a property brings in another 5 to 15% per year.

Malta is a crypto-friendly country. The country has well-developed legislation regulating digital assets, there is no mining tax on cryptocurrencies and the tax rate on the sale of cryptocurrencies ranges from 0 to 5%.

There are numerous costs related to citizenship by investment. For many applicants who wish to live in Europe, a residence permit is much better suited. A Maltese residence permit requires the investor to buy property for at least €220,000 or rent housing for €8,750 per annum.

Individual cost calculation for Maltese citizenship

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Montenegro. Applicants for citizenship need to make a combined investment:

• €100,000 non-refundable contribution;

• €250,000 in a share in government-approved business projects.

Montenegro is not a member of the European Union, but it is a candidate for membership. The country’s passport allows entry to the Schengen zone without visas for stays of up to 90 consecutive days.

Montenegro is a country with a relaxed lifestyle. In the photograph, Budva is a small town of just 20,000 inhabitants on the Adriatic coast. By local standards, it has a vibrant social life, numerous beaches and several nightclubs.

Montenegro is a country with stunning natural beauty, a maritime climate and hospitable people.

The possibility of easily getting an E2 business visa to the United States and benefiting from tax breaks are additional advantages of Montenegro citizenship.

Program is unavailable from 2023.

Vanuatu. The country’s passport allows holders to travel freely within the European Union and Britain.

Vanuatu citizenship by investment is easier to obtain compared to other countries. Citizenship by investment requires a minimum non-refundable contribution of $130,000 and the process can be completed within a month. Investors can complete the entire process remotely without visiting the country.

Vanuatu offers the following tax incentives to investors: there are no taxes on income and inheritance, and international companies are exempt from paying taxes. This means that investors will not have to pay tax on the sale of cryptocurrencies.

Individual cost calculation for Vanuatu citizenship

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Caribbean countries. The Caribbean countries, Antigua and Barbuda, Dominica, St Lucia, Grenada, St Kitts and Nevis, also offer citizenship by investment. It is much cheaper than in Europe: citizenship by investment in the Caribbean requires a non-refundable contribution of $100,000 to 250,000 or an investment in real estate, a business or securities that can be recouped later. The registration process can take place remotely and takes 2–6 months to complete.

Citizens of Caribbean countries are allowed to travel to the Schengen countries without a visa, live in the European Union for up to 90 days in any six-month period and in the UK for 180 days in a year. They also benefit from tax concessions, they can register international companies and they can open foreign bank accounts.

Grenada citizenship allows investors to apply for an E2 business visa to the United States. However, in contrast to the citizenship programs offered by Turkey and Montenegro, only one applicant can get a visa, and not the whole family immediately.

In the Caribbean countries and Vanuatu, English is the official language, which makes it easier to mingle with the locals and communicate with government officers.

In the Caribbean countries, there is no capital gains tax (including on the sale of cryptocurrencies), inheritance tax, income tax or wealth tax.

For a more detailed understanding of the difference in the programs, please read our article "Caribbean countries and Vanuatu: comparison of programs."

Although St Kitts and Nevis has no specific legislation to regulate cryptocurrencies, it has signed up to participate in the ECCB pilot scheme for the digital version of the East Caribbean dollar, which will test the use of cryptocurrencies alongside the country’s national currency.

When choosing a citizenship by investment program, the investors should consider not only the size of the investment and whether the investment can be recouped but also the standard of living in the country, the mentality of the people there, the country’s political and economic stability, taxation of investors, and requirements on the minimum number of days that must be spent in the country.

Immigrant Invest will help you choose a program that suits you, prepare the required documents, submit the application for citizenship by investment, help you select real estate and assist you in carrying out the investment that you have chosen.