A proprietary trading entity is great for active traders that trade crypto only using their own funds. When actively trading crypto it is best done from an entity rather than in your own name. The main reason is that entities are taxed lower.
The proprietary trading entity can also be owned by multiple people. This does mean that everyone makes investment decisions. If there is 1 person making investment decisions it will require a full fund setup.
| You can read more about the setup of a Crypto Hedge Fund [here]
The best jurisdiction to setup your proprietary trading entity depends on a few things:
* Type of trades you conduct
* Whether an non US Exchange account is needed
* Whether a bank account is needed
* Your jurisdiction
A third option is registering an Onchain Entity, this is mainly interesting if all trades are fully done on-chain. This can be DeFi trading, Liquidity providing on a DEX, staking, NFT trading, etc.
Check out OtoCo.io to learn more about registering an Onchain Proprietary Trading Entity.
The Delaware LLC is the cheapest and easiest option to register your Proprietary Trading Entity. We see Delaware as the preferable state as most investment funds are registered there as well. This gives you eventually the option to upgrade your entity into a fund which can invest on behalf of outside investors. Otonomos can assist with this as well.
The US is especially interesting for non-US residents as the US LLC is seen as a pass through vehicle. This means that you will only require to pay dividend tax once you pay yourself a dividend out of the entity. The amount of tax that needs to be paid depends on your personal tax regime. We always advice it is best to consult a tax advisor in your local jurisdiction.
The US LLC can be used to open US crypto exchange accounts that are available to the US. If your trading strategy mostly consists of long term trades of the top 10 tokens, this setup will be sufficient. These exchange generally limit the amount of leverage that can be used. Besides that not all coins are available on these exchanges. To trade more leveraged products and newly listed coins, you will require an offshore setup.
Otonomos can assist with setting up your Crypto Exchange account as well.
If you require an offramp for your crypto a US entity is aa good option. Opening a bank account for your US Proprietary Trading Entity is definitely possible. You can either do this by going into a banking office or do an online application with a neobank.
Otonomos can assist with setting up a bank account as well.
You can order the Delaware LLC directly from our website and pay in crypto if preferred. Once the payment is made you will receive an email to start filling out the entity details. The setup time of this entity is around 48 hours once we receive all your information.
The BVI is the most preferred location to setup an Offshore Proprietary Trading Entity. The BVI is preferred as you have the option to graduate your entity into an actual investment fund which can invest funds on behalf of outside investors. Besides that, you are able to invest on newly listed coins on Coinlist.co and invest in SAFTs / offerings that are geofenced outside of the US.
If your trading strategy also involves leveraged trading and the use of derivatives that are not available in the US, a BVI entity is the best way to go. Since these exchanges do not open accounts inside the US, you will need to make sure that the BVI entity has no ownership above 10%. Having a Nominee Director and Nominee Shareholder will not be enough to "hide" US ownership as these exchanges peer down to the UBO (Ultimate Beneficial Owner) level.
If you work together with a non-US partner you can register the entity with them as the major shareholder. To reflect the real ownership you can make use of a "Zero Cost Call Option" which gives the US owner the right to claim the actual ownership of the entity.
Otonomos can assist with setting up your Crypto Exchange account as well.
Opening a bank account from an offshore entity has become increasingly difficult. An option would be registering a US LLC which can be the subsidiary of the BVI Entity. From the US LLC you will be able to open a bank account. Please do note that offshore crypto exchange providers might see this as a red flag as they do not open accounts for entities that have ties with the US.
Otonomos can assist with setting up a bank account as well but we can not make guarantees about bank success especially for offshores.
You can order the BVI Entity directly from our website and pay in crypto if preferred. Once the payment is made you will receive an email to start filling out the entity details. The setup time of this entity is around 5 - 7 business days once we receive all your information.
BVI Entity Prop Trading Entity Pricing