The CBI Index: the cryptocurrency challenge
Some jurisdictions have been quick to embrace cryptocurrencies while others have been wary to do so, yet all will have to deal with applicants who have exposure to the phenomenon
Citizenship by investment is rapidly expanding and taking different shapes across the globe. In devising new economic citizenship programmes, governments must be mindful of the issues and doubts that their programmes could inherently generate. But even countries with tried-and-tested programmes must react and adapt to the challenges that come with the world’s rapidly shifting socio-political, economic, and even technological landscape.
Further reading
2017 and 2018 saw the rise of cryptocurrency – virtual currencies that enable financial transactions between persons without the need for banks, or other centralised financial intermediaries. Crucially, cryptocurrencies allow secure transactions through advanced cryptography recorded on a blockchain ledger.
How have citizenship by investment jurisdictions responded to the cryptocurrency revolution?
In July 2018, Antigua and Barbuda’s Lower House of Parliament passed an amendment to the Antigua and Barbuda Citizenship by Investment Act, enabling receipt of payments via cryptocurrency.
In October 2017, Vanuatu was widely publicised as the first citizenship by investment nation to accept bitcoin – the world’s most recognised cryptocurrency. Shortly after the media storm however, Vanuatu’s Citizenship Office denied the reports, stating that Vanuatu would only accept payments in US dollars as prescribed by its regulations.
In July 2018, Antigua and Barbuda’s Lower House of Parliament passed an amendment to the Antigua and Barbuda Citizenship by Investment Act, enabling receipt of payments via cryptocurrency. Forewarnings of the move had generated anxiety as to the projected use of bitcoin cash payments, the liquidity of large cryptocurrency assets, market volatility, and the complexities associated with tracing the origin of cryptocurrency.
In Malta, while cryptocurrency and citizenship by investment have yet to be formally intertwined, the government has voiced its intent to be at the “frontline” of blockchain technology, something it described as a “crucial innovation”.
Just like countries considering cryptocurrency, countries adverse to mingling their economic citizenship programmes with digital currencies will have to contend with the ‘bitcoin millionaire’ and ‘bitcoin billionaire’ whose source of funds is an investment in bitcoin (or its equivalent).
A survey released in May 2018 showed that, out of more than 600 high net worth respondents, 35 per cent had already gained exposure to cryptocurrency or intended to gain such exposure by the end of the year. Countries will also need to contend with programme agents who accept cryptocurrencies and convert them into legal tender for purposes of fee payments.
Instituting strict due diligence checks on applicants and agents alike, including enhanced due diligence, is therefore essential to the sustainability of citizenship by investment in our cyber age: an old solution to a new problem.
