Due to the broad definition of NFFE, companies that are not FFIs must consider whether they must register and report with the IRS as an NFFE. What does this mean for Foreign Blockchain Companies?
From digital asset mining pools, exchanges, custodians, and hedge funds, to companies developing cryptocurrencies, tokens, and platforms for smart contracts, all must consider the potential impact of FATCA.
In addition to a company’s operations, a company’s fund-raising method can also implicate FATCA. Raising capital using initial coin offerings (ICOs) or initial token offerings (ITOs) may involve trading, investment, or custodial activities that could bring companies within the purview of FATCA. Even access to traditional capital sources, such as venture capital or angel investors, may unwittingly trigger FATCA simply by having U.S. investors.
FATCA compliance is a fact-intensive inquiry in a rapidly evolving area. Until regulators address digital assets through formal guidance, companies will have to comply with regulatory frameworks that were promulgated without digital assets in mind.
Drew Hill is an attorney in Frost Brown Todd’s Blockchain and Digital Currency practice. He provides advice and counsel to companies on capital transactions (including ICOs, ITOs, and STOs), tax structuring, and general business matters.
Joe Dehner chairs Frost Brown Todd’s International Services Group with a focus on tax issues. He counsels companies on everything from investments and emerging technology to mergers and acquisitions and customs and trade issues.