Heads Up on External Entities
Just an FYI for those interested, as some have asked...
I have spent the month exploring starting an overseas entity to get access to the crypto wild wild west, mainly access to Bitmex and Deribit. On one side, when I spoke to exchanges, they said they'd willing setup legitimate accounts with me. The cost was fine with setup for an overseas entity ranging from $900-3500 and yearly renewals at $600-1200. Note that doesn't add in the cost of tax complexity.
Where I landed into trouble was with CFTC rules. The Dodd Frank act prevents overseas 'swap' facilities from doing business with Americans, even if in an overseas entity. They define 'US persons' as I understand from the CFTC's legalize as those a company controlled by an American. Some exchanges understand this. Some seem not to. The only exception is if you have $5M in capital and are classified as an 'Elligle Contract Participant'. This was all invented in the financial crisis and
Note, that you could seemingly do this, get tied up with an un-wellread exchange, and do OK, until the CFTC will come calling. They will not punish you, so long as you pay your taxes. But they will go after the exchange, and rumor is they are going after Bitmex right now. So, my main 'fear' is just spending the money for nothing. So, I am not going forward.
None of this is a recommendation, or am I sure, I understand the law completely. But I am convinced of my own decision. I may explore this further, as there may be legal loopholes. But for right now, if I want leverage, it is Kraken, or the new exchange LedgerX which is CFTC regulated, which I have joined. Note as of right now LedgerX is not true leverage, as it is options. The futures are not working yet, but the interface is there, but I believe they are fully collateralized, so no leverage.