Article

Can cryptocurrency be approved as a source of funds?

  • Written by GCBI Team Posted on July 1, 2020 | Updated on July 1, 2020 | 3 min read

An article from EB5 Investors Magazine explores the phenomenon of cryptocurrency as a legitimate source of funds for investors. Unknowns make many  EB-5 professionals wary of dealing with such cases;  but with robust documentation and simple explanations for adjudicators, this new source of funds can be approved by USCIS.

Cryptocurrency as a legitimate source of EB-5 funds presents both challenges and opportunities, advises immigration lawyer Natalia Polukhtin. Though during the last decade many pundits predicted the collapse of this digit asset and medium of exchange, it continues to be a global economic factor with a value of over $240 billion today. And there are foreign nationals who have accumulated wealth with Bitcoin and other cryptocurrencies who wish to be players in the EB-5 program. 

The challenges of cryptocurrencies and EB-5

What makes cryptocurrency appealing to the people who trade in it is what makes it a tougher sell as a source of funds for the EB-5 program: anonymity. A person can buy and grow wealth in this manner without having his or her identity made known. It’s little wonder then that many immigration lawyers will not take on cases where cryptocurrency is the source of a potential investor’s funds.

The fear is that a U.S. Citizenship and Immigration Services (USCIS) staff member adjudicating such a petition won’t see this as an approvable origin of the investor’s capital. The U.S. government, through the Securities Exchange Commission (SEC), has denied applications to list Bitcoin exchange-traded-funds, therefore supporting the notion that cryptocurrency is not viewed as a legitimate asset. But this isn’t the final word on the matter.

Start with the potential investor’s homeland

To determine if cryptocurrency may be approved as a source of investment capital, the first step is to review where the potential applicant acquired the asset. While there has been significant efforts by governments across the globe to regulate cryptocurrency, certain nations present obstacles. Some countries, like Bolivia and Vietnam, ban all cryptocurrency trading. Other countries, like Qatar, ban domestic trading; and some countries, like Columbia and Iran, ban financial institutions from participating in cryptocurrency transactions. This is a vital starting point for what will be required — sufficient documentation.

Different countries treat the regulation of cryptocurrency differently — tax implications, securities laws, anti-money-laundering regulations. Therefore, documentation of cryptocurrency transactions will differ according to where such a transaction occurred. 

Polukhtin declares that “the key to successfully documenting source of funds is to identify how cryptocurrency is classified within the regulatory framework of the particular country.” That particular classification (asset, money, commodity, etc.) will entail specific documentation regarding the transaction, such as sales receipts, sales-purchase agreements, and tax reports.

Provide abundant documentation and ‘educate’ the adjudicator

Best practices in documenting cryptocurrency to USCIS include providing an abundance (lean on the side of too much rather than too little), as well as trying to “educate” the agency adjudicator who is probably not well versed in this sphere. Polukhtin also advises “to simplify this exchange for the adjudicator describing it in the terms usually applicable to conventional transactions.”

She goes on to state that while receipts or tax records may not always be enough to prove lawful source of funds, collateral evidence may be the answer. An example would be bank statements paired with the market value of the cryptocurrency at the time of acquisition of the digital asset. Also, online exchange entities can offer CSV files to prove the facts behind the transaction. 

Standard of proof: ‘preponderance of evidence’

How far does a petitioner and his or her immigration lawyer need to go with documentation? The USCIS standard is a “preponderance of evidence’ that shows that a claim is “more likely true than not.”

In addition, a petitioner’s compliance with digital exchange regulations and an education or professional history that appears “consistent” with cryptocurrency trading can support the case. For example, an investment portfolio that shows that the petitioner is a savvy trader is a plus.

Consult a lawyer before converting cryptocurrency

A potential EB-5 investor should, if possible, speak with their immigration lawyer before converting cryptocurrency into traditional currency for the purpose of making an EB-5 investment. Polukhtin suggests that structuring the transaction with a lawyer’s counsel may help solidify the case for the petitioner.

The future of cryptocurrency & EB-5

While USCIS doesn’t yet offer the policy guidance needed for absolute certainty in the matter of cryptocurrency, and we don’t have enough case histories to create a bullet-proof handbook on using the digital asset as a source of funds, two things are undeniable: Cryptocurrency is here to stay and it will be offered more and more as the basis for an EB-5 investment. 

Read immigration lawyer Natalia Polukhtin’s article “Cryptocurrency trade as a source of funds for an EB-5 investment: Is it that “cryptic?”