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The Bitcoiners Who Live Off The Grid

Katie Ananina founder of Plan B Passport, a business that works primarily with Bitcoiners to obtain legal residency status in their choice of six tax-haven nations is building her citadel, and selling others on the dream.  The Bitcoiners Who Live Off The Grid

The Bitcoiners Who Live Off The Grid

Katie Ananina, Founder Of Plan B Passports, Helps The Crypto-Rich Gain Citizenship In Tax-Advantaged Nations.

For the past year, the Russian emigre has jumped among the U.S. cities of Miami, Houston, San Francisco and Denver, plus Puerto Rico, random islands in the Caribbeans and Guadalajara, Mexico, trying to find the right location to establish a base camp. It’s part of her lifestyle as well as her job.

Ananina is the founder of Plan B Passport, a business that works primarily with Bitcoiners to obtain legal residency status in their choice of six tax-haven nations. It’s an offshoot of Migronis Citizenship, a resettlement business, which itself has five offices globally.

“You go to the butcher that has the best meat, and farmer for the best fruits and vegetables, so do you shop for the lifestyle that you want?” Ananina said, dialing in from Guadalajara in April where she was awaiting an anarcho-capitalist meetup. “If it suits you better to own a passport from a tax haven, why wouldn’t you do that, right?”

While tax avoidance has been around since the first tax was levied, the crypto-rich – empowered by a technology that pays no heed to borders and driven by an ideology critical of all centralized authorities – are bringing it to the next level.

Like its larger parent company, Plan B offers information on “how to legally optimize” one’s tax strategies by moving lives, possessions or assets to the “best jurisdictions,” according to its website. Ananina also hosts free 20-minute consultations and the occasional web seminar. Recently, she’s been looking for ways to break into the private island real estate market, thinking the nouveau riche of the coming bull run will be able to afford such luxuries.

This open approach to tax avoidance is perfectly legal. And given that multinationals often shuffle money around to avoid paying billions in taxes, you could argue it’s normal these days.

“A lot of people are doing it. Like, more than you would think,” Ananina said.

Ronen Palan, an Israeli-born economist and Professor of International Political Economy in the Department of International Politics at the City University London and who studies tax havens and offshore finance, agreed it’s becoming more popular among the ultra-wealthy, but said it’s difficult to determine exactly how many individuals are eschewing their tax burdens by moving abroad. “People don’t usually identify themselves as tax evaders,” he said.

“The actual number of people that physically relocate is a small portion of those that avoid paying taxes,” Palan said over Zoom. But it’s common enough for there to be an established term: “We call these individuals PNTs, ‘permanently not there.’” 

“Wealthy individuals, you find they have three houses, three domiciles, to ensure they are never in one country sufficiently long to become a tax resident,” he said. There’s also a growing number of people willing to drop even the pretense of a residence.

Flag Theory

At the individual and family level, many of today’s expatriates and tax arbitrageurs follow the obscure advice of the libertarian financial adviser Harry D. Schultz. He coined the term “Three Flag Theory” to describe a strategic approach to life and citizenship where people “plant flags” in different countries based on their favorable tax, regulatory and economic frameworks.

Proponents get as many passports as necessary or obtain legal permanent residence status in tax haven nations, offering them the chance to shuffle capital and business documentation around. They become citizens of the world, or perpetual travelers, to maximize their profits and minimize their obligations to the state.

The Bitcoiners Who Live Off The Grid

You can have one foot in New York and one in the Cayman Islands and have responsibilities to no one but yourself, Palan said. While the roots to this “lifestyle” may be found in libertarianism – Bill Maurer, director of UC Irvine’s Institute for Money, called it “late capitalist nomadism” – Palan said it’s less complicated: “Many people enjoy the benefits of states. But they don’t like paying taxes.”

Others have taken Schultz’s theory and run with it. Frank M. Ahearn, author New York Times best-seller “How to Disappear,” translated it to “six flag theory.” Today, it’s common to see at least one flag representing an “electronic haven in cyberspace,” referring to a country with lenient regulations for maintaining private or corporate servers.

“Considering that the theory was first circulated over 30 years ago, you would think that by now most governments would have caught up with it and closed all the loopholes that enable it,” said Marc Gras, managing director of Far Horizon Capital, a company that works with businesses to relocate. “They have not.”

While western nations continue to fail to close the gaps, poorer countries, primarily in the global south, but also wealthy nations like Monaco are attracting high-net-worth individuals with simplified immigration policies and lenient definitions of residency. The ideal “haven nation” will enable visa-free travel with a number of countries, and have limitations on taxing income earned outside their borders. Many have low, or non-existent, tax policies on wealth and capital gains.

“Countries are literally competing for your wealth,” Ananina said. It’s why she’s excited to do the work her career enables.

“I’ve been looking at my past and feel like my whole life has been preparing me for bitcoin, anarchy and flag theory,” she said. “If I can’t be absolutely stateless, I will hold some papers that will help me lead the life that I want to live. I will get as many papers as I can and it’s going to give me more freedom,” she said.

Ananina is not alone in her pro-bitcoin, anti-state and very online convictions. One of the Bitcoin network’s earliest advocates, Roger Ver, is also a follower of Flag Theory and an example of living to maximize one’s personal autonomy – understood by having zero debts to the state.

“Go where you’re treated best,” Ver said during a recent phone call. Ver has been a Kittician, a citizen of St. Kitts & Nevis, since 2014 after leaving the United States for good in 2006.

“From the moment they tossed me in prison, I knew I was never going to live in the U.S. again,” he said. (Ver was convicted in 2002 for selling explosives over eBay). “The day I was allowed to leave, I left. It took a further eight years to renounce my citizenship.”

He said many of his “cryptocurrency friends” are citizens of the small Caribbean island nation, population 52,441. Though he’s clear “citizen” doesn’t necessarily mean “his neighbors” have ever stepped foot on the island. “About two years ago, there were about 100 of us that met up,” he said. “We spent the afternoon pounding on our laptops in tropical paradise.”

Ver said he gets queried on how to move abroad at least once a week. His advice? Deal with reputable agents “that know the people and the process,” he said. Speaking from the experience of being scammed twice for “substantial sums of money,” he said, “unscrupulous people will try to trick you. … You want feet on the ground.”

A veritable cottage industry of businesses like Ananina’s Plan B has sprung up to prevent situations like Ver’s.

These businesses work with government’s “citizenship by investment” units, so people can pay a fee, fill out a few forms and claim their benefits. While the process varies by nation, in most cases, citizenship can be bought for six figures. “It’s not cheap,” Ver said.


The Bitcoiners Who Live Off The Grid

Plan B Passport Works With Individuals In The Crypto Community To Find Legal Tax Avoidance Strategies.

While Plan B Passport is likely the first to cater exclusively to the crypto-rich, many companies view it as a profitable new sector within the “immigration industry.”

Migronis has helped resettle approximately 500 people since August 2012, Martyn Kovalko, head of marketing for the firm, said over email. Of those clients, about 10% came from the crypto community before Plan B was spun out, he estimated.

Far Horizon also boasts early crypto investors, exchanges and initial coin offering (ICO) operators among their clientele, Gras said. While he declined to name names, he did confirm many “have accumulated substantial amounts of cryptocurrencies.”

Crypto Links

It’s not difficult to imagine a perpetual traveller holding non-state-backed currencies, or someone into crypto thinking favorably of Flag Theory.

“One could say that the Flag Theory concept and bitcoin (or cryptocurrencies) were both originally based out of libertarian principles such as freedom, autonomy and a disinclination to accept authority and centralized power,” Gras said.

The concepts amplify one another. Distributive tools like the internet have led to an interest in the philosophy, Gras said, adding the number of flag theorists “stand at a record high.” And crypto has only made it easier to escape the boundaries of the state. Moving hundreds of thousands of dollars through the banking system is bound to raise an eye, according to Ronen Palan.

“There are various rules, particularly anti-money laundering rules, that have been introduced which require compliance. Essentially, banks have to know who owns the account and the source of the money,” Palan said. “They ask questions.”


The Bitcoiners Who Live Off The Grid

“Countries Are Literally Competing For Your Wealth,” Katie Ananina Said.


But with bitcoin’s “radical ownership,” people can move their wealth instantly without checking in with compliance officers, Ananina said. “You don’t have to worry about selling your assets in the U.S. or figuring out how to move them through the banking system to an offshore account,” she said. “You just pick up ‘calculator,’ move to another country and you have your wealth with you.”


While jet-setting may appeal to some, there’s a certain type of Bitcoiner who prefers to stay close to home, building out local systems independent of, and adversarial to, the state.

Justine, who goes by MsHodl on Twitter, is doing that in the Sierra Nevadas, the mountain range straddling the border between California and Nevada. She’s refurbishing an old farmstead owned by her family, with help from her stepfather and mother, and the occasional electrician and plumber.

“I was dreaming of a citadel before I heard the word,” Justine said. “Citadel” is used in the Bitcoin community to refer to an idyllic version of tomorrow where individuals come together voluntarily to work and live off the land. The idea is to build systems that can exist with minimal contact with governments and corporations. When discussing the practicality of building a citadel on an unimproved private island, Katie Ananina said, “We’re anarchists, we do not care about running water.”

Citadels are both the antithesis and corollary of the concept of the “digital nomad” that the larger tech sector has embraced. Bitcoiners build citadels to shield their vast troves of wealth from governmental overreach – and the hordes of no-coiners – but they are also purposefully situated somewhere specific, somewhere worth defending.


The Bitcoiners Who Live Off The Grid

Justine Is Refurbishing An Old Ranch In The Sierra Nevada Mountains.


While Justine agrees with people who flee the state to avoid their taxes, she said financial autonomy is just one aspect of self-sovereignty. To become truly independent, sometimes it means settling down and building. “Ultimate freedom comes with a lot of responsibility, and taking ownership,” she said.

The owner of a small business in the United States, Justine says she dutifully pays her taxes. “I work as hard as humanly possible to pay as little as possible, and find every loophole,” she said. “We live in an abusive relationship with the government and taxes are one part of it. But you can’t avoid it when you have something to lose.”

Updated: 3-10-2021

Crypto Havens Lure Firms Fleeing Regulator Fear

The world’s biggest cryptocurrency scam of last year was a jolt to South Africa’s regulator — and not everyone will wait to see how it shakes out.

As major financial hubs like Singapore redraw legislation to lure crypto firms and with the U.K. government facing calls to embrace digital currencies, South Africa’s burgeoning exchanges say they are having to move headquarters abroad due to uncertainty over potential government regulation.

Behind the frustration is a lack of oversight and limits on marketing to potential customers. Revix, a Cape Town-based operator specializing in bundles of different coins, is shifting its head office to the U.K. and planning another location in Germany to fuel growth. Luno, Africa’s largest digital-currency platform, is registered in London and has a presence in Singapore.

South African authorities “have been incredibly slow in terms of regulation in the industry and that leads to businesses looking internationally,” Revix Chief Executive Officer Sean Sanders said in an interview. “In an unregulated environment, a customer arrives at our platform with skepticism, and rightfully so.”

Digital currencies are moving from the periphery of the finance world to the mainstream, with Elon Musk’s Tesla Inc. plowing $1.5 billion into Bitcoin and wealthy hedge-fund managers like Paul Tudor and Stanley Druckenmiller supporting the currency.

The interest from institutional investors has propelled Bitcoin to a record of more than $58,000 last month before the token pared some of its gains, emerging as a hedge for inflation risk just as fears about price pressures escalate. The currency traded at a two-week high on Tuesday, and has risen for three days in a row.

But in a watershed for the industry in South Africa, a suspected Ponzi scheme may have caused investors to lose as much as $1.2 billion worth of the most famous cryptocurrency.

Scam Of The Year

Mirror Trading Investments was placed in provisional liquidation in December and has since been described as the world’s biggest crypto crime of last year by blockchain researcher Chainanalysis. The firm allegedly collected over 23,000 Bitcoin from investors, and its CEO is thought to have fled to Brazil.

“South Africa has a sad history of pyramid and Ponzi schemes and crypto was the obvious new format for this,” said Earle Loxton, CEO of Digital Currency Index, a platform he co-founded with former FirstRand Ltd. head Michael Jordaan.

“Honest operators welcome regulation as it makes it possible for their clients to invest with confidence, especially at institutional level.”

South Africa may be frustrating its entrepreneurs, but it is seen as ahead of the rest of the continent, given regulators and industry are working together to table proposals. In Nigeria, plans to regulate the sector have been suspended until operators open bank accounts in the West African nation.

The priority for South African regulators is to seek better protection for consumers rather than businesses, according to Brandon Topham, head of enforcement at the Finance Sector Conduct Authority of South Africa. Further proposals are expected in the next two months, he said.

Regulatory Momentum

The top banks in South Africa have all backed regulatory efforts to develop a framework for crypto assets but are currently split in their approach to industry players.

While Standard Bank Group Ltd. has not barred crypto-asset firms from any of its services, FirstRand’s First National Bank has no banking relationships with virtual-currency exchanges or traders, the lenders said in response to emailed questions.

As unregulated entities, South Africa’s crypto firms find it difficult to market on Facebook Inc. and Twitter Inc., setting back their prospects for growth, according to Sanders. South Africa’s revenue collection service is another loser from the lack of policy, he said, as moving head offices means paying tax in different countries.

The lack of regulatory framework has also made it difficult for crypto platforms to operate bank accounts, said Luno head Marius Reitz. “In turn, this makes it very difficult for customers to buy Bitcoin with their local fiat currency.”

There are signs of movement. Draft rules to have crypto assets declared financial products have been published by the regulator. But that runs the risk of ignoring the novelty value of crypto, Sanders said.

“South Africa seems to go in the opposite direction of some of the more developed market pioneers and innovators in this space,” he said. “For regulators to apply hundred-year-old securities regulations to the novel cryptocurrency asset class seems lazy.”

Update: 7-12-2021

Former Pro Sailer Brokers Tax-Haven Passports For Wealthy Crypto Clients

Rich crypto investors are purchasing passports in tax havens for less than $200,000.

A Russian expatriate and former professional sailboat racer, Katie Ananina, Plan B Passport — a firm that brokers citizenship through investment schemes for tax-haven nations that don’t impose capital gains on crypto holdings to wealthy investors.

According to a July 11 report from CNBC, Plan B brokers hundreds of passports for predominantly western clients each year. Customers select from one of seven jurisdictions: Saint Kitts and Nevis, Antigua and Barbuda, Dominica, Vanuatu, Grenada, Saint Lucia, and Portugal.

“If the government starts affecting me, I will take all [my assets] into my hands and go elsewhere,” said Ananina, adding:

“I was smart enough to figure out that $200 in bitcoin will be worth $100,000 at some point. I don’t think the government should have 40% of that.”

The safe-haven states offer citizenship through investment schemes requiring six-figure investments into local businesses, real estate, or government bonds. Some jurisdictions accept payment as donations, with Ananina estimating most passports cost between $100,000 and $150,000.

“It’s basically a donation into the sustainable growth fund of the country. So, clients make a $100,000 or $150,000 donation, plus some due diligence fees, government fees, and then $20,000 for my legal fees,” she said.

Plan B’s clients will also incur exit taxes should they revoke their existing citizenship.

Ananina became a Bitcoin maximalist after witnessing a 50% crash in the price of Russian rubles while living in Spain and competing for Russia’s national sailing team in 2015.

“My macroeconomics professor wasn’t able to explain that to me. There was no chance I could run my equations and figure out what happened there. I realized I wasn’t happy with how money works.”

Citizenship through investment schemes have come under increasing scrutiny recently, following a series of investigations by Al Jazeera that revealed wholesale corruption among the officials overseeing the programs in Cyprus and the Caribbean — with some Caribbean states being found to offer diplomatic passports for the right price.

Cyprus abolished its citizenship through investment scheme in October 2020.

Updated: 7-22-2021

Get A Passport, Pay Crypto, Live Tax-Free?

Most transfers of cryptocurrency are taxable, unless the transfer is qualified as a gift or a charitable contribution.

Way back in 2014, the United States Internal Revenue Service (IRS) ruled that cryptocurrency is property in Notice 2014-21. That classification as property has some big tax consequences accentuated by wild price swings. Buying and selling crypto can trigger gain or loss and be taxable. Yes, buying something using crypto — a house, a car, a new suit — can trigger taxes. Even paying taxes in crypto can trigger taxes.

If you owe $5,000 in taxes, you could pay the $5,000 in dollars. However, if you pay with $5,000 worth of Bitcoin (BTC), as long as the crypto is worth $5,000 when you pay, you’re home free, right? Not really. You need to consider the sale you just made. The transfer of the crypto to the tax man is a sale, and that could mean more taxes for the year of the payment. If you bought the crypto for $5,000 the day you pay your taxes, there’s no gain.

Crypto As A Gift

Paying employees or independent contractors in crypto results in taxes to them when they receive it. And when you pay them, you too can have a tax hit since, on your side of the equation, you just sold your crypto. If you are paying with crypto, remember that most transfers of crypto are taxable, unless the transfer qualifies as a gift or a charitable contribution.

You can give crypto as a gift, and it doesn’t trigger income taxes. That’s right, no income tax to you as the donor, and no income tax to the recipient.

Of course, when the recipient transfers or sells it, there would be income taxes then. And at that point, the donee would need to calculate gain or loss. What is his or her tax basis, since it was a gift?

The tax basis is the same as it was in your hands when you made the gift. However, keep in mind that to avoid income taxes, a gift has to actually be a gift. The tax law is littered with cases of people who claimed something was a gift, but who got stuck with income taxes.

With gifts not being subject to income taxes, it can seem tempting to try to characterize money or property you receive as gifts. But be careful: The IRS hears this “it was a gift” excuse a lot. And the IRS is unlikely to be persuaded unless you can document it.

Plus, the IRS usually expects a gift to occur in a normal gift-giving setting. For example, if an employer or former employer gives a loyal employee $10,000, is that a gift? No, it is a bonus, treated as wages. Even trying to document it as a gift may not change that result.

True gifts may not trigger any income taxes, but there could be gift taxes involved. If you give crypto to a friend or family member — to anyone really — ask how much it is worth. If the gift is worth more than $15,000, it requires you to file a gift tax return. For 2021, $15,000 is the amount of the “annual exclusion.”

You can give gifts up to this amount each year to any number of people with no reporting required. Any gifts over that $15,000 amount require a gift tax return, even though you may not have to pay any gift tax. Rather than paying gift tax, you normally would use up a small portion of your lifetime exclusion from gift and estate tax.

What if your gift isn’t to a person, but to charity? If you give to charity, that can be very tax-smart from an income tax viewpoint. If you give crypto to a qualified charity, you should normally get an income tax deduction for the full fair market value of the crypto. If you bought it for $500, and donate to a 501(c)(3) charity when it is worth $15,000, you should get a $15,000 charitable contribution deduction.

What’s more, you won’t have to pay the capital gain or income tax on the $14,500 spread. That’s a good deal. It’s why most savvy people — think Warren Buffett — want to donate appreciated property rather than money to charity. Remember, if you use crypto to buy something, the IRS considers that a sale of your crypto. You have to calculate gain or loss. You might have bought something with your crypto, but you made a sale in the process.

How About Buying A New Passport?

Plan B Passport offers clients who hold crypto a way to use their crypto to buy a second passport. Customers can take their pick of seven tax-haven nations that happen to exempt crypto holdings from capital gains taxes. You are buying into a citizenship by investment program, which is not illegal. You can keep your U.S. passport, or you could give it up if you wish. A key feature of the deal is the notion that you are making a donation of $100,000 or $150,000 to the sustainable growth fund of the country, plus some fees.

However, it is worth asking if this is a real donation or is rather the purchase of citizenship. If the latter, one might expect the IRS to say that using appreciated crypto for the purchase triggers U.S. taxes. Remember, the IRS is still very much on the hunt for taxpayers not paying taxes on crypto.

Having a second passport would be nice, but what about people who decide to give up American citizenship along with U.S. taxes?

Ironically, that can bring yet another tax: the U.S. exit tax. To exit, you must prove five years of IRS tax compliance, and getting into IRS compliance can be expensive and worrisome. If you have a net worth greater than $2 million, or have average annual net income tax for the five previous years of $171,000 or more, you can pay an exit tax. It is a capital gain tax, calculated as if you sold your property when you left. A long-term resident giving up a Green Card can be required to pay the exit tax too.

Most people exiting the U.S. arrange gifts, use formal valuations, pre-exit sales, and devise other plans to try to avoid or minimize their exit tax. But heck, if you do have to pay exit tax, perhaps you could pay with crypto? Well, as long as it was clear that the crypto would not trigger even more tax…


Related Articles:

The Homes Where Families Go Off the Grid (#GotBitcoin?):

Dropping Off The Grid: A Growing Movement In America Part I

Dropping Off The Grid: A Growing Movement In America Part II:

Dropping Off The Grid: A Growing Movement In America Part III:

Dropping Off The Grid: A Growing Movement In America Part IV:

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