The EB-5 Immigrant Investor Program, in effect since 1990, is a residency-by-investment initiative of the U.S. Congress designed to stimulate economic growth through foreign investment. The program offers Green Cards to eligible foreign investors and their dependents in exchange for a qualifying investment that creates at least 10 full-time jobs for American workers.
One of the main requirements of the EB-5 program, apart from the minimum investment and job creation criteria, is proving the lawful source of investor’s funds. This is an essential condition for the approval of an EB-5 petition, as the U.S. government wants to ensure that the program is not misused for money laundering or other illegal activities.
United States Citizenship and Immigration Services (USCIS), the federal agency that administers the program, has strict regulations in place to verify the legitimacy of an investor’s source of funds. It requires investors to provide detailed documentation tracing the origin and path of their EB-5 funds for national security reasons and to maintain the integrity of the EB-5 program.
Some common lawful sources of EB-5 funds accepted by USCIS include employment income, business profits, sale of assets, earnings from stocks, loans, gifts, and inheritances.
In recent years, many countries have imposed stringent regulations on international remittances, making it difficult for EB-5 investors to use traditional methods for transferring investment funds abroad. At the same time, the rising popularity of digital currency, also known as cryptocurrency, has offered investors an innovative way to transmit investment funds electronically without using a bank or a financial institution.
In this article, we will discuss cryptocurrency as an EB-5 source of funds and understand how investors can establish its legitimacy in compliance with U.S. laws.
How Does Cryptocurrency Work?
Cryptocurrency as EB-5 Source of Funds
- When Was the Cryptocurrency Purchased?
- Documenting the Crypto Purchase
- Establishing the Path of Cryptocurrency Transfer
- Complying With the Tax Laws
- Conversion of Crypto Coins
Contact EB5AN for Professional Assistance
How Does Cryptocurrency Work?
Cryptocurrencies are entirely electronic currencies that use cryptography to control and secure transactions, hence the name “cryptocurrency.” They operate on digital ledgers based on blockchain technology wherein all transactions are recorded. Users can access and manage cryptocurrency through a digital wallet.
Bitcoin, Ethereum, and Litecoin are leading cryptocurrencies traded on platforms such as Coinbase and Circle, which are exchange and brokerage platforms where users can buy, sell, trade, and store various cryptocurrencies.
Cryptocurrency is becoming increasingly popular as it operates on decentralized networks, allowing users to avoid reliance on traditional banking systems. Blockchain technology also provides a high level of security in transactions through cryptographic techniques, so the risk of tampering or fraud is also quite low.
As digital currencies become more widely adopted, an increasing number of investors are exploring the option of using cryptocurrency gains to fund their EB-5 investment capital.
Cryptocurrency as EB-5 Source of Funds
So long as investors comply with EB-5 program requirements and can provide the necessary documentation, USCIS accepts digital currency as a legitimate source of funds. However, petitions using digital currency as investment capital are subjected to greater scrutiny than those using traditional funding sources, making it even more crucial for investors to establish the legality of their cryptocurrency funds.
Here are some important factors for EB-5 investors to consider when using cryptocurrency as a source of funds.
When Was the Cryptocurrency Purchased?
To begin with, the timing of an investor’s cryptocurrency purchase is extremely critical. If the cryptocurrency exchange had not been licensed as a money transmitter by local authorities at the time the currency was purchased, the transaction would not be considered legal. In such a case, the investor will not be able to use the crypto money to fund their EB-5 investment.
Therefore, the first step is to ensure that the exchange used by the investor had a legal license to operate when the cryptocurrency was acquired.
Documenting the Crypto Purchase
Investors must be able to provide banking records to show the accumulation of wealth used to acquire crypto funds, the transfer of money to the brokerage account, and the purchase of digital currency.
For older transactions where banking records may not be available (due to anti-money laundering regulations or for other reasons), investors usually rely on affidavits and secondary evidence, such as W-2s, tax returns, employment confirmation letters, etc., to prove the legality of the funds.
Typically, this is acceptable to USCIS in the case of conventional sources of funds.
However, for crypto funds, the agency seeks more direct and substantial proof, such as digital wallet and ledger addresses, bank statements, etc., which clearly shows how and when the purchase was conducted. If the transaction falls outside the document retention period and providing satisfactory evidence is not feasible, investors are advised not to use cryptocurrency as a source of funds.
Establishing the Path of Cryptocurrency Transfer
USCIS requires investors to provide the entire history of the crypto purchase to explain how the funds moved into the investor’s account. If an investor cannot access the ledger records and exchange statements to show the path of funds, e.g., due to the exchange closing down, they will not have the necessary documentation to account for the funds.
If that’s the case, investors must avoid using crypto to fund their EB-5 investment, as USCIS views these gaps in the path of funds with great mistrust.
Complying With the Tax Laws
From the taxation point of view, crypto is considered an asset and is subject to capital gains and income tax laws in the United States. Investors are personally responsible for declaring their cryptocurrency sales, conversions, payments, and income to the tax authorities and paying the applicable taxes, regardless of whether the brokerage exchange issued them a 1099 form or not.
Non-compliance with tax laws can create problems for investors wanting to use their cryptocurrency gains for EB-5 investment. If they didn’t pay the applicable taxes earlier, they could still use crypto as a source by amending their tax returns and paying those back taxes.
Conversion of Crypto Coins
Getting USCIS approval may be difficult for investors who have converted their crypto funds from one currency to another and do not have clear statements to show it. Investors must be mindful of this aspect before using crypto as an EB-5 source of funds.
Often, investors are unsure regarding the nature of crypto transactions and find it challenging to understand the complexities associated with USCIS requirements.
It is highly recommended that investors considering digital currency as an EB-5 source of funds do so only after consulting an experienced immigration attorney who can guide them through the process.
Contact EB5AN for Professional Assistance
Cryptocurrency is no longer a speculative asset and is fast evolving as a legitimate financing alternative. Though it can potentially be used as an acceptable EB-5 source of funds, there are significant challenges in proving its legality through foolproof documentation.
To avoid requests for evidence (RFEs) from USCIS or an outright denial of their petition, investors must tread forward carefully when considering digital currency in EB-5 investments and seek professional assistance from experts in the field.
EB5AN, a leading regional center operator, has helped more than 2,300 families from 60 countries relocate to the United States as lawful permanent residents. With over a decade of experience, our expert team is well-equipped to assist you in every stage of your EB-5 journey, including the documentation process for your source of funds.
If you’d like to know more about using cryptocurrency in EB-5 investments, book a free call with our team today.
