As part of wider work that AIMA is undertaking on aspects of cryptocurrencies in the context of asset management, we have begun to consider the tax treatment, both for transactions in cryptocurrencies such as Bitcoin and for investment in “coins” or “tokens” issued through an initial coin offering.  

We consider that it is important to note that while in many respects these may be regarded as equivalent to dealings in currencies or transactions in securities for broader tax purposes, and a tax authority may have made a statement to that effect, it does not follow that these are a currency or a security for tax purposes. One consequence of this would be that reliefs or treatments available under tax legislation where an asset manager carries out specified transactions on behalf of a non-resident may not be available (although there may be ways in which transactions could be structured to comply, such as through the use of derivatives).

While we are not aware of any public ruling on this point, we believe that this may be the position which would be reached by tax authorities in the US (with regard to the safe harbor exemption under IRC Section 864(b)), the UK (the investment manager exemption), and Hong Kong and Singapore (with regard to the regimes there), and in other jurisdictions which identify specific categories of investments as eligible for exemption. We are setting up a Cryptocurrencies Tax Working Group with the objective of seeking clarification of the tax treatment of cryptocurrency transactions in relevant jurisdictions and invite applications to join this.

For further information, please contact Paul Hale or Anvit Jain.