2021 and the Crypto Revolution
2021 saw a meteoric rise in the common adoption of cryptocurrencies worldwide. As humanity navigates through an increasingly polarized world, skewed by political machinations in Europe, an ongoing and seemingly endless pandemic and accelerated progression towards a global climate crisis, its eyes focus outside establishments; political, economic, and social.
Last year saw the exponential rise of Bitcoin prices, and an end-of-year all-time price hike for both Bitcoin and Ethereum, caused mainly by uncertainties in traditional fiat linked markets, compounded by a rapid rise in institutional investment in the crypto space, and general adoption of crypto as recognized tender in the mainstream and by various important global firms.
Coupled to it are the ever-increasing popularity of NFTs (Non-Fungible Tokens), an entirely new asset class stored on the blockchain, and the advent of the Metaverse and Play-to-Earn gaming. DeFi or decentralized finance and Web 3.0 have gathered momentum in the past year, with new entrants to the market promising a digital revolution like never seen before, offering a borderless flow of information and assets.
But with such great popularity comes greater scrutiny. Governments across the world are waking up to the reality that cryptocurrencies may well and truly be the only legitimate tender in the not-too-distant future, replacing in swathes the centuries of banking, accounting, and forex trading establishment.
New Regulations on the Horizon for Crypto
While many developing economies are still coming to grasp the implications of cryptocurrencies and their usage, 2021 saw the world’s major economies push for significantly greater regulation in this field.
New Regulations for Crypto coming to The United States
In 2021, the United States passed legislation that expanded the requirements for reporting third party information for transactions involving the broad term “digital assets”. On November 15th, 2021, President Joe Biden signed into law the Infrastructure and Investment Jobs Act, which includes several provisions relating to tax information reporting of cryptocurrencies and digital assets. From the year 2023, most individuals involved in cryptocurrency transactions will be required to report transaction information to the IRS (Internal Revenue Service of the United States of America), in a manner similar to that of securities brokers. Additionally, the Act expands the current requirement for a trade or business to report the receipt of more than $10,000 in cash to include the receipt of digital assets.
Here are some of the ramifications of this new act:
- Reporting of cryptocurrency trades to the IRS will no longer be based on an honour system.
- All transactions greater in value than US$10,000 Fiat equivalent will need to be reported to the IRS.
- All digital asset transactions including crypto staking, defi, long term investments, short term trading and NFT trading will be taxable.
- Creating a digital wallet will require a lot more personal information, making anonymity a thing of the past.
New Regulations for Crypto coming to The European Union
Introduced in 2021, DAC8, or Directive on Administrative Cooperation 8, issued by the European Union will offer it’s financial authorities and regulatory bodies several new options for taking action against those suspected of tax evasion or fraud, focusing on the crypto and digital assets marketplace.
EU Commission launched a public consultation on the 21st of March 2021 with an intention to identify avenues for strengthening the rules on administrative cooperation and expanding the reporting of information regarding digital assets.
Delving deep into the crypto ecosystem, this consultation collected several key data points including the types of digital assets currently in use, the status of registry or licensing of issuers and traders of such digital assets, the value of such investments and trades, and most importantly the tax residency of such individuals and firms.
The consultation also covered salient features of current reporting obligations on digital asset trading service providers. While some EU countries have already imposed or are planning to impose reporting obligations on service providers trading digital assets, in many other European jurisdictions, this activity remains largely unregulated.
The Union’s goal is ultimately to limit the possibilities of digital asset and cryptocurrency traders using potential loopholes to avoid their reporting obligations.
DAC8 will be implemented within the next 12 to 18 months from the date of publishing this article and will affect cryptocurrency and general digital asset owners, both corporations and individuals, as well as their creators and distributors.
It will also mean adding a slew of regulatory requirements including in-depth KYC and reporting requirements for digital asset creators and distributors, and a disclosure obligation for owners.
Vanuatu: The New World for Crypto Investors in 2022
While the tiny island nation of Vanuatu, tucked away in the South Pacific near Australia may not ring bells in the minds of digital asset owners and traders today, this nation is set to gain incredible prominence within the crypto space in the coming years.
A Brief Introduction to Vanuatu
Located off the Northeast coast of Brisbane, Australia, Vanuatu is a nation in the Pacific Ocean, comprised of 83 islands, with a total land area of 14,700 square kilometres, and territorial waters extending to 450,000 square kilometres.
Home to some of the world’s most amazing beaches, pristine forests, and majestic landscapes, Vanuatu is a tropical paradise attracting tourists and investments from around the world. The average midday temperature in Port Vila (the capital) is 29°C in summer and 25°C in winter, and rainfall is about 235 centimetres (90 inches) annually.
The population is approximately 280,000, of which some of Vanuatu 95% are indigenous “Ni -Vanuatu” of Melanesian origin with the remainder consisting of Europeans, other Pacific Islanders, and Asians. English and French are the official languages of the country, whilst Bislama (local dialect ) is the national language.
Depending on daylight saving, Vanuatu is 11 to 12 hours ahead of GMT (i.e., 1 hour ahead or the same time as Sydney and, 3 hours ahead of Hong Kong). Business hours in Port Vila are 7.30 am to 11.30 am and 1.30 pm to 5 pm, Monday to Friday. The Global Happiness Index has consistently ranked Vanuatu as one of the happiest countries on Earth.
Crypto Specific Initiatives in Vanuatu
In 2021, Vanuatu introduced the Financial Dealers Licensing (Amendment) Act No. 9 of 2021 providing for issuance of an additional class of license (Class D) to trade in digital assets. The VFSC considers as a Digital Asset, any token in electronic/binary form which is representative of either the holder’s access rights to a service or of the ownership of an asset. A Digital Asset, in this respect, includes a digital representation of value which:
- Is used as a medium of exchange, a unit of account, or store of value but which is not legal tender, even if it is denominated in legal tender.
- Represent assets such as debt or equity in the promoting company; or
- Provides access to a blockchain-based application, service, or product.
With this new law, Vanuatu provides legitimacy to crypto investors globally looking to move their tax residencies to Vanuatu, an almost entirely tax-free nation (save for the very limited scope application of service taxes on products purchased onshore in Vatu currency).
Tax Residency in Vanuatu Through Citizenship by Investment and Its Benefits
Vanuatu’s Citizenship by Investment program allows for individuals willing to invest US$135,000 into Vanuatu’s economy through the Government Development Support Program to apply for Direct Citizenship in the country.
Vancis Global is the Government Authorized Agent for the Vanuatu Citizenship by Investment program and processes hundreds of applications each year through its offices in Port Vila, Vanuatu.
Vanuatu launched its citizenship program in January 2017 along with the Development Support Program (DSP). The DSP was enacted by the Vanuatu Government under the Citizenship Act (CAP 112) with the powers conferred on the Prime Minister by Section 20 of the Citizenship Act (112) Order No.215 of 2016.
Vanuatu has the only Citizenship by Investment Program in the Asia-Pacific.
Vanuatu Passport through Investment in the DSP Program
General Benefits of a Vanuatu Passport
- Outside the jurisdiction of the EU and the United States, Vanuatu does not mandate any mandatory reporting of crypto trades
- Vanuatu provides visa-free travel to several countries, including the UK, Hong Kong, Singapore, Russia and e-visa to Australia and New Zealand.
- It is the quickest way to secure Citizenship in the world today, and most applicants receive Citizenship approval within 45-60 days from the date of submission.
- Vanuatu has no income tax, wealth tax, capital gains tax, or inheritance tax.
- Spouses, children, and dependent parents can be included in a single application.
- Addition of family members after the main applicant is granted Citizenship.
- Citizenship by descent to future generations.
- Well-positioned geographically for individuals looking to do business in the South Pacific.
- No restrictions on dual citizenship.
- No minimum stay requirement.
Benefits for Crypto Investors and Trades
- Zero Tax
- Personal Income Tax Rate : 0%
- Capital Gains Tax Rate : 0%
- Investment Income Tax Rate : 0%
- Property Tax : 0%
- Inheritance Tax : 0%
- Net Worth Tax : 0%
- No reporting to country of origin when applying for Citizenship
- Applicability of Crypto assets towards Asset Report when applying for Citizenship
- Entirely digital application process from end to end through Vancis Global’s secure DSP application portal
- Payment for Citizenship accepted in Bitcoin, USDT or USDC (through Vancis Global)
Vanuatu is the ideal choice for Citizenship and Tax residency for any crypto investor looking to ensure the protection of their crypto wealth. The country’s leadership proactively supports digital assets including cryptocurrencies and is looking to shape their domestic economy around end-to-end digital payment solutions. Vanuatu is increasingly becoming a popular destination for crypto investors, with several new projects including the hugely promising Satoshi Island project taking shape in the country.
If you are a crypto investor looking to bring your taxes down to 0% through tax residency by Citizenship in Vanuatu, get in touch with us to find out more.