FATCA and ICOs: bad-tasting alphabet soup for Americans

Both the Mona.Co VISA card and Polybius bank ICOs are underway now, or soon will be. While US residents and those citizens living abroad may be keen to participate in those ICOs, they need to know that US tax laws will probably limit their ability to do so.

The culprit is the Foreign Account Tax Compliance Act (FATCA), which was became law in 2010. FATCA requires US taxpayers to report all income earned and all assets held in foreign countries. Additionally, it mandates all foreign financial institutions in countries who have signed a tax treaty with the USA to report to the IRS all accounts and assets owned by American passport holders. You can read the details here. https://www.irs.gov/businesses/corporations/summary-of-fatca-reporting-for-u-s-taxpayers

How does this affect ICOs? In the case of the two just mentioned, and perhaps others operating in FATCA-compliant countries, it means US taxpayers will not be allowed to participate in the ICOs. Mona.co's participation page, in fact, asks if you are a US resident. (See image below.) If you answer yes, then you can proceed no further. Polybius developers, meanwhile, have stated in their webinars and on the Slack channel that US taxpayers are also prevented from participating in their ICO.

It's not because they don't like us. Both projects are seeking licensing from the appropriate financial regulators in the EU, since both projects are trying to bridge the gap between traditional financial systems and cryptocurrencies. FATCA requirements are so restrictive and obtrusive that many foreign banks and financial institutions just refuse to do business with American customers. Given that Polybius and Mona.co are startups, they may be unwilling to jump through all the regulatory hoops necessary to include Americans in their ICOs.

Polybius developers have said, however, that they hope to include Americans as customers in the future. And I imagine Mona.co will, too. It's just that, right now, they can't.

So, what happens if you manage to buy some tokens during the ICO? Since I am not a lawyer, I cannot say for sure. It would be best to direct those sort of questions to the project leaders. But I would suppose you might be required to forfeit your coins, as having American investors could jeopardize the projects' licensing applications. Bad for you, bad for them.

I am an American living abroad, so FATCA is unfortunately a fact of life for me. I am not just blowing smoke here. This is not FUD, and I am not telling anyone not to invest in either Polybius or Mona.co's ICOs. But Americans need to be aware of certain ... complications ... courtesy of our over-zealous tax laws.