Seven steps: Cashing out Bitcoins into private banks

Bitcoin whales are struggling to convert their coins into fiat money

The term cashing out derives from the gambling industry. It means to exchange gambling chips for money when finished gambling. With respect to cryptocurrencies, to cash-out means to exchange all or a substantial part of Bitcoins and altcoins into fiat money (Euro, US$, etc.) and exiting the cryptocurrency investment.

Crypto-billionaires are typically early miners, early adopters, traders or, as the case may be, persons who have to hide their ill-gotten gains. Crypto-owners are very privacy-oriented and experience that high-value digital asset wealth is not easy to be converted into traditional currencies on a do-it-yourself basis. Not only funds from illicit activities are lying dormant, waiting to find effective means of cashing out.

 

Cashing out in an ultra-wary private banking sector

To avoid the cash-out blues and to be aware of the requirements, the following seven steps should be taken into consideration:

#1. The crypto wealth origin: To sell land, company shares, sports cars, and other mobile or immobile property, requires the proof of ownership. The seller must not be the legitimate owner and his acquisition in good faith might or might not qualify him as the true legal owner. With respect to cryptocurrencies, the ability to transfer them is by itself the proof of ownership. 

Another question is the proof of the legitimate origin of crypto wealth. In the old days, Bitcoin had been used in the dark web, at Silkroad and other highly criminal marketplaces. When the Bitcoin price exploded, even small gangsters of the past had a good chance to become billionaires of the present. Therefore, there is a natural suspicion around how the coins were first acquired by the owner.

As a consequence, the origin of the digital assets has to be clarified, documented and proven. There are ways and means which are accepted by private banks and other institutions, and there are other attempts which raise red flags. 

#2. The crypto wealth tracking: Bitcoin had entered the stage in 2008 and early adopters or early miners should have some evidence, how the coins have been continued in their possession until today. The Blockchain as time-stamped global digital ledger can be the perfect piece of evidence for this, as the case may be.

#3. Proof of tax compliance in the past: While crypto wealth might have been hidden in a wallet or even a crypto exchange unnoticed and invisible from the tax authorities, to cash-out might disclose hidden tax obligations to the revenue department.  Therefore, not only the involved banks and other participants will typically require the proof of tax compliance. Also, the coin owner should be aware of his tax obligations from the past as well as tax planning opportunities.

#4. Proof of tax compliance of the cashing out: To cash-out might trigger additional tax obligations. The tax planning opportunities should be carefully examined.

#5. The opening of a private bank account: The selection of the bank jurisdiction and the specific bank, its compliance requirements and the best way to get the cash-out amount from the exchange to the bank and, subsequently paid-out by the bank, are highly sensitive steps as well.

#6. The use of a crypto exchange: The decision for an appropriate crypto exchange has to be made based on a comprehensive comparison of jurisdictions, tax framework, compliance requirements and more.

#7. The Plan B: For various reasons, the straight execution of the steps described above might not be possible. The Bitcoin whale might not have the opportunity to open the bank account in the legislation of his choice. He might fear the security risk of compromising his keys, might be not able to evidence the origin of the coins, might insist of an anonymous cash-out or have other issues of concerns. 

Time is not the friend for a silent cashing out task. The compliance requirements are increasing and the availability of banks and other participants is decreasing. 

Professional services in Thailand’s Fin-Tech sector

The PUGNATORIUS group offers cryptocurrency transaction support services from its Hong Kong office. The Bangkok law firm provides these seven legal and tax services:

  • Thai crypto-compliant company formations
  • Regulatory-avoiding and tax-efficient cross-border structuring
  • Digital asset and financial services licensing
  • Blockchain and ICO advisory services
  • Thai and cross-border tax structuring
  • Cryptotransaction support services
  • Legal opinions and professional statements

Details can be found at “Legal advice, tax structuring, transaction support services and business matchmaking on Fintech, cryptocurrency and digital asset ventures“.


Disclaimer: A little knowledge is a dangerous thing. This low-resolution high-level outlook constitutes neither legal advice nor an attorney-client relationship.

Comments are now closed for this article.