Buying citizenship with cryptocurrencies: myths and facts

Obtaining citizenship by a direct investment in cryptocurrencies is impossible due to the legal status of digital assets. In most jurisdictions, digital assets are recognised as commodities rather than currency or money. This means that in order to use them to buy citizenship, the coins must first be sold.

As an analogy, suppose an investor has a Lamborghini worth $500,000. They cannot directly invest the car in the economy of another country. First, they must draw up a sale and purchase agreement for the Lamborghini, sell it, receive the money, transfer it to a bank account, and pay taxes. 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. To participate in a citizenship program, an applicant must pay an investment fee and other duties. However, banks cannot accept cryptocurrencies, only fiat money, i.e., ordinary currencies 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.

To use the money from the sale of cryptocurrencies to participate in a citizenship by investment program, it is essential to prove the legality of the origin of the funds. 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 challenging to document this.

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

❌ Showing the coins in the wallet is insufficient. 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.

❌ Selling coins through a non-regulated currency exchange or for cash to friends is also unacceptable. The bank requires proof of the legality of the money’s origin.

When selling bitcoins for cash, the investor must provide at least a sales contract. The fact that money was received in 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 proof sufficient depends on the institution and its jurisdiction.

✅ Cryptocurrencies can be traded on regulated marketplaces operating in jurisdictions where such transactions are permitted, such as the USA or Swiss stock exchanges. These marketplaces require customers to undergo KYC and AML procedures, which confirm the identity and legality of the funds.

Immigrant Invest lawyers do not have information on how such documents satisfy the migration authorities of countries that offer citizenship by investment. Depending on the particular CBI Unit, they may find them sufficient or ask for additional documents.

✅ Pay all taxes fully and on time. Some countries tax the difference between the purchase and sale amount in case of a profit. 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 legalising 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 legalising income from cryptocurrencies. It all depends on the situation, jurisdiction, and the investor’s willingness to pay taxes. 

To minimise the risks of an investor’s application being rejected, they should contact a lawyer specialising in cryptocurrency transactions.

There are many advertisements on the Internet offering to apply for citizenship by investing in 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 convert cryptocurrencies themselves and then contact the investment program’s agent.

In the autumn of 2017, the media reported that the Vanuatu government was ready to grant citizenship through investment in cryptocurrencies. However, a week later, the Vanuatu CBI Unit denied this, stating that all payments would continue to be made in dollars.

In July 2018, the Prime Minister of Antigua and Barbuda announced that the country was ready to accept bitcoins to pay for investment citizenship. However, payments with cryptocurrencies have not been implemented since then.

Numerous media reports stating that other countries intend to allow applications for citizenship to be made using cryptocurrencies have all turned out to be rumours or false.

The crypto market is growing rapidly, and numerous governments are trying to take it into account. Regulators must develop legislation recognising cryptocurrencies as a fully-fledged asset or payment method. This will expand the opportunities for crypto investors and simplify their due diligence procedure.

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.

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

In the long term, all these measures will also simplify the introduction of crypto investors to citizenship through investment programs. Investors 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.

Investments are divided into two groups:

• non-refundable contributions, which cannot be recouped;

• refundable investments, which can be recouped after a certain holding period. For example, 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, translation and legalisation of documents, and due diligence. When buying real estate, there are additional fees for realtors and notaries and tax payments.

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

Citizenship by investment can be issued immediately for the whole family: spouses, children, and parents. However, additional fees must be paid for each family member.

Malta citizenship for exceptional services by direct investment is the fastest and safest way to obtain the country’s passport. The process takes 1 or 3 years instead of 5 years in the case of the standard naturalisation.

Applicants must make a combined investment:

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

• €10,000+ as a charitable contribution;

• €700,000 as a purchase of residential real estate or €16,000+ annually for 5 years as rent.

The Maltese passport allows the holder to live, work, study, and do business in the European Union and travel without a visa to 160+ countries worldwide, including the United States, the Schengen states, the UK, 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 profit when selling their real estate. On average, real estate prices rise by 5—7% per annum and renting out a property brings in another 5—15% per year.

Malta is a crypto-friendly country. It has well-developed legislation regulating digital assets, no mining tax on cryptocurrencies, and a tax rate on the sale of cryptocurrencies ranging between 0 and 5%.

Vanuatu citizenship by investment requires a minimum non-refundable contribution of $130,000. Another option is to invest at least $157,000 in the development of the coconut oil production.

The process of obtaining citizenship can be completed within a month.

Vanuatu offers investors the following tax incentives: income and inheritance are not taxed, 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 states of Antigua and Barbuda, Dominica, St Lucia, Grenada, and St Kitts and Nevis also offer citizenship by investment.

The investment threshold for a non-refundable contribution is $200,000—250,000, depending on the country. Returnable options may include a purchase of real estate or securities.

The process of becoming a Caribbean citizen is remote and takes at least 6 months to complete.

Citizens of Caribbean countries are allowed to travel to the Schengen Area without a visa and spend up to 180 days a year in the UK. Caribbean passport holders also benefit from tax concessions, can register international companies and open foreign bank accounts.

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.

Caribbean states have no capital gains tax, including on the sale of cryptocurrencies. There is also no inheritance or wealth tax.

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 country for second citizenship, investors should consider not only the investment amount and whether it can be recouped but also the potential freedoms and benefits, the country’s political and economic stability, taxation rules, and the minimum number of days that must be spent in the country.

Immigrant Invest helps to choose citizenship that will meet the investor’s goals and budget, select real estate if necessary, prepare the required documents, submit the application for citizenship, and assist at each step until the investor receives their passport.