What You Can Do About The U.S. Crypto Crackdown

For cryptocurrency investors in the U.S., life has gotten more difficult lately.

In June, the SEC filed lawsuits against the two largest crypto exchanges, Coinbase and Binance, accusing them of selling unregistered securities.

In response, Binance announced it would suspend deposits and withdrawals in U.S. dollars, becoming merely a crypto-to-crypto exchange. Effectively, this means there is no way to liquidate your assets and turn them into spendable currency on Binance.

In these circumstances, it’s reasonable for U.S.-based crypto traders and investors to wonder:

“Is the grass greener elsewhere?”

In other words, if you weren’t living in the States—or if you had residency or citizenship in another country—would you enjoy more favorable conditions for investing and trading crypto?

Well, that depends.

Governments’ response to regulating crypto varies greatly around the world.

In 2019, China made global headlines when it completely banned cryptocurrency trading. (Although, the country still allows some debts to be settled in crypto.)

Several other countries (including Egypt and Morocco) have also banned crypto completely.

On the other end of the spectrum… in 2021, tiny El Salvador created a stir by becoming the first country to make bitcoin legal tender. It has since been joined by the Central African Republic.

My point is, the response that crypto traders and their digital assets receive varies greatly country by country. It goes without saying that simply looking anywhere outside the U.S. is not a solution.

Recently, the Micronesian island of Palau has been advertising a program that would give you “digital residency” there for one year for $248, without needing to be present in the country.

Some cryptocurrency traders and investors have wondered if a program like this—“digital residency” in another country—could allow them to bypass ever-more-stringent crypto rules back home.

I’ve been researching overseas residencies and second passports for more than 30 years, and in my view, if a residency option sounds too easy to obtain or too good to be true, it usually is.

Indeed, the Wall Street Journal reports that, while Binance founder Changpeng Zhao at first expressed support for the Palau program, Binance halted any further association after “conducting due diligence.”

Between an outright ban vs. a wholehearted embrace—the China option for crypto vs. the El Salvador option—the U.S. is currently falling somewhere in the middle.

Just two weeks after the SEC filed its lawsuits, Fed Chair Jerome Powell told the House Financial Services Committee that “crypto appears to have staying power as an asset class”—resulting in a price rally.

Crypto industry insiders have been calling for comprehensive regulation for some time. This would give their assets and platforms clear guidance and legal boundaries, they say.

In this regard, the European Union is well ahead of the United States.

The EU’s Markets in Crypto Assets (MiCA) regulations, passed 517 to 38 by the European Parliament in April and officially signed into law in May, is the world’s first comprehensive set of crypto regulations.

The law allows for the licensing of crypto exchanges and imposes certain requirements around customer authentication and data retention. It has been widely supported by the crypto industry.

So, should American crypto investors consider a move to Europe?

Whether you’re a crypto investor or not, the lifestyle in many parts of Europe can’t be beat. Over 300 days of sunshine on Portugal’s Algarve… the simple, laidback pleasures of Greek island life… or be a pioneer and settle somewhere like Montenegro, which is actively seeking to become a blockchain hub.

A previous Montenegrin prime minister even recommended that Ethereum
ETH
founder Vitalik Buterin be granted citizenship of the country so he could work with the government to make Montenegro a destination for crypto innovators.

Among European Union countries (Montenegro is not yet in the EU, though it’s working toward membership in the next decade), Spain, Portugal, and Malta are among the most interesting for cryptocurrency enthusiasts.

Malta was dubbed “Blockchain Island” after passing laws to encourage crypto activity in 2018, including establishing a Digital Innovation Authority. Portugal’s historic capital, Lisbon, is home to the annual Web Summit as well as frequent crypto events. Lisbon was named in a recent survey of founders (by investors’ firm Greenfield) as the crypto capital of the world. And Spain has just launched a new visa to attract tech types and digital nomads.

“Digital nomad” visas are one way to go if you’re seeking residency overseas. A raft of countries—including multiple European countries (Portugal, Spain, Greece)—have launched these in the wake of the pandemic. They’re designed to encourage remote workers to relocate for a period of a year or more.

Many countries in Europe also offer “passive income” visa options. If you can prove you have a certain level of income from outside the country (pension, dividends, etc.), you will be granted residency. The minimum income required can be as little as €1,200 a month (Portugal) or as high as $50,000 per year (Ireland).

Some European countries continue to offer so-called “Golden Visas,” where an investment in the country will give you the right to live and work there. In Malta, if you buy a property worth €350,000 (or €300,000 in lower-income parts of Malta or on the sister-island Gozo), you can obtain permanent residency. In Greece, a property investment of €250,000 (or €500,000 in Athens or the popular tourist islands) will get you a Golden Visa.

European Union residency is a valuable commodity—especially because it can lead over time (after several years of residence) to a second citizenship and an EU passport. If you hold a European Union passport, you have a permanent right to live and work in any of the 27 countries.

My husband and I both have two citizenships (American and Irish). A second passport is in many ways the ultimate “backup plan” for your lifestyle. It gives you another country you can escape to (or multiple countries, in the case of an EU passport) if you don’t like how things are going back home… as crypto investors may be thinking right now.

There are other benefits to holding a second passport, too. For example, Americans will soon need a visa again to enter Brazil. But Europeans will continue to have access to Brazil visa free. So, a second passport can give you visa-free access to more countries, saving you the hassle and time of applying for a visa.

It can also help you avoid travel restrictions. For example, during the pandemic, Americans were banned from traveling to Europe and vice versa. But because my husband and I held both European and American passports, these rules didn’t apply.

There are three routes to obtaining a second passport. The first is naturalization—obtain residency somewhere and spend enough time in that country to become eligible for citizenship.

The second is through ancestry. This is a route that’s open to many Americans. For example, if you had an Irish or Italian grandparent (or even great-grandparent), and can prove when and where they were born and your lineage, you could be entitled to European citizenship—without having to spend significant time in Europe (or spend much money).

A third route to a second passport is the citizenship-by-investment programs offered by several Caribbean island nations. A donation, business investment, or property purchase (usually a couple hundred thousand dollars) in islands including St. Kitts and Nevis, Antigua and Barbuda, Dominica, Grenada, or St. Lucia can entitle you to a passport and citizenship.

Though sometimes controversial (you are “buying citizenship”), these Caribbean programs are an established and legitimate route to getting a second passport. Indeed, the U.S. government acknowledged as much earlier this year, following a roundtable meeting with five Caribbean citizenship-by-investment jurisdictions, with a statement declaring the programs “provide a legitimate service and have assisted in the survival of the participating economies.”

At least one website is promoting these Caribbean passports to bitcoiners on the basis that crypto enthusiasts are naturally distrustful of government, and so a second citizenship means you’re not beholden to just one government. You’ve “decentralized” your life. You have options.

I’m all in favor of giving yourself more options in life. After all, that’s the whole reason to look overseas for alternatives to your current lifestyle or investment portfolio.

In short, an overseas residency or second passport makes sense—whether or not you’re concerned about the U.S. government’s recent crackdown on crypto.