Attorney Adam Tracy responds to inquiries regarding the efficacy of starting a cryptocurrency related company in the Cayman Islands.
So the Cayman Islands, right? I get a lot of questions. I did a previous video on the best place is to incorporate your crypto company, and I get hit with well, how about the Cayman Islands? And there’s nothing inherently wrong with the Cayman Islands, but here’s the deal in the Cayman Islands… 90% of the hedge funds in the world (significant hedge funds in the world) are domicile in the Cayman Islands. The primary reason is twofold. One, there’s no tax. There’s no tax on corporations, partnerships, or individual tax. So, these hedge funds can operate tax-free. Also big with captive insurance companies. They also operate tax-free. You only pay a tax if you are a US citizen, and you repatriate the money, meaning you’re in the money down there, then you bring it back and then pay tax at the regular rates, but you keep it down there you don’t pay tax. Number two, it’s a stable place. A lot of these offshore jurisdictions aren’t very stable. The Cayman Islands is a British protectorate. It’s a British territory. It has its own government, but it’s very stable. And as a result, it has very significant banking relationships. Every major bank has a branch or, you know, has a sister bank in the Cayman Islands, which makes it very safe to keep your money down there.
Depending on how you look at it, the Cayman Islands is non-factor compliance. So what they do is they report to the Cayman Islands government any US accounts which have more than $50,000 in it. And then the Cayman Islands government then reports that back to the IRS, which is good and bad depending on what degree of anonymity you’re concerned with, right? If you don’t care then you don’t care — you’re going to pay a tax when you bring the money back over anyway. But that that is one factor that a lot of people, you know, shy away from because of the non-factor compliance. My previous take on places like the Cook Islands, Nevis, Belize, I think you have is you have non-factor compliance, but you also have major banks like in the Cook Islands, which I really espouse is a great place to set up your your crypto company. They have large money center banks. They’ve got Barclays, HSBC, and ENZ bank, and it’s very stable.
Places like Belize, you may not have liked the most significant banking regulations, but it’s a fairly stable country. Same with Nevis — they’re very small, they’re very stable. There’s no geopolitical issues that would really interrupt what you’re doing. So, you know at the end of the day the Cayman Islands is viable. It’s certainly stable. There’s nothing wrong with it. Right but if you had to sort of rank what you’re going to do, and think about where the best places are there, may I stick to my earlier discussion there are better places. But, you know, you can’t deny the fact that nearly every major hedge fund in the world is located there. Right? So they’re inherently is a familiarity from an investor standpoint. There is definitely a degree of security that investors get, by using the Cayman Islands. And, there’s definitely a very robust, and clean, and very stable financial system. And, just from the perspective of being in the United States, you can get to the Cayman Islands in relatively short time. If you had to jump on a plane, you’d be there in four hours. So it’s not that I don’t espouse it, it’s not that I haven’t set up funds there, because I certainly have, I think it’s very useful. But I think you have to understand what comes with it, and you have to understand the information sharing agreements. You also have to understand how the repatriation your of profits work right with respect to whatever country you’re in, because when you bring the profits back whether it’s the UK, US, Canada, you’re going to have to pay a tax and in most cases one type of penalty. So, you know my take on the Cayman Islands is obviously it can’t be a bad place considering what’s already there, considering the amount of money that goes through it. It’s certainly a stable and great place to set up a company especially a fund or insurance company. So I wouldn’t shy away from it. You know, I would add it to my list of the top 5 offshore places to definitely go ahead and undo something in the crypto space with, if you were looking for an international business Corporation.
A former competitive rugby player, serial entrepreneur and, trader attorney, Adam S. Tracy offers over 17 years of progressive legal and compliance experience in the areas of corporate, commodities, cryptocurrency, litigation, payments and securities law. Adam’s experience ranges from commodities trader for oil giant BP, initial public offerings, M&A, to initial coin offerings, having represented both startups to NASDAQ-listed entities. As an early Bitcoin adapter, Adam has promoted growth of cryptocurrency and offers a unique approach to representing crypto-clients. Based in Chicago, IL, Adam graduated from the University of Notre Dame with dual degrees in Finance and Computer Applications and would later obtain his J.D. and M.B.A. from DePaul University. Adam lives outside Chicago with his six animals, which is illegal where he lives.
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