Tax eats away more than half of the profits? 3 legal strategies of encryption whales

Wealthy investors rarely sell their crypto assets directly; instead, they use methods such as collateralized lending, immigration strategies, and offshore entities to legally protect their profits and avoid hefty taxes. This article is based on a piece by JetStart, organized, compiled, and written by Foresight News. (Background: Crypto tax heading towards “global reporting”! Switzerland approves sharing of crypto income information among 74 countries) (Additional context: Is MicroStrategy going to sell Bitcoin? CryptoQuant warns: New accounting and tax regulations force Strategy to pay taxes) If you sell your crypto assets the wrong way, you could end up paying taxes on more than half of your profits. Imagine this: earning $200,000 but having to pay $110,000 directly to the IRS. Here are ways wealthy investors legally preserve their profits. Making big money can lead to big troubles. Banks will scrutinize every transaction, and tax authorities will be watching your every move. Even buying a car or a house can turn into a nightmare. Without proper planning, profits can vanish quickly. Strategy 1: Borrow money instead of selling Use your Bitcoin (Bitcoin) or Ethereum (Ethereum) as collateral to borrow cash or stablecoins. This way, you can put your funds to work without touching your holdings. For example: With $1 million in Bitcoin, at a 30% collateral rate, you could borrow $300,000. This allows you to hold onto your tokens while obtaining funds tax-free. The reason this method works is simple: loans are not considered income. When borrowing, the IRS does not view this as a taxable event. Your crypto assets remain under your control and do not trigger capital gains tax. Whales will borrow money with low collateral rates for safety. Strategy 2: Move before selling Different countries have varying rules for taxing crypto gains. Moving to these places before cashing out could save you millions in taxes. Popular choices include Puerto Rico (where the tax rate is 0% under Act 60) and the UAE (where income and capital gains are tax-exempt). Strategy 3: Use offshore entities Establish a company in tax-free zones like the Cayman Islands, British Virgin Islands, or Seychelles. Hold your crypto assets through the company rather than personally. When the company sells crypto assets, it does not trigger your personal capital gains tax. As long as the structure is set up correctly, this method is entirely legal. You don’t even have to withdraw profits personally; your offshore company can lend you the funds. Loans are not considered income, so there’s no tax liability. You can use this funding for real estate purchases, salary payments, or investments. This operation brings a series of benefits for crypto whales: Personal wallets remain private and harder to trace. Bank statements show loan repayments rather than taxable income. On-chain activities can avoid the operational traces of directly selling crypto assets. If the structure is set up properly, it can legally minimize tax liabilities, even eliminating them entirely. Summary Wealthy investors almost never sell their crypto assets directly. They use collateralized lending, immigration strategies, and offshore entities to protect their profits. Understanding these rules is more important now than ever. Related Reports The offshore “feast is over”: From US stock tax payments to on-chain pricing power, the “route dispute” of crypto exchanges $1 billion bet on Solana! Is this big dump a buying opportunity for crypto institutions? Trump’s eldest son reportedly invests $10 million in Polymarket; compliance licenses + political capital will help Polymarket issue tokens or IPO? “Taxes devour over half of profits? Three legal strategies for crypto whales to protect profits” This article was first published in BlockTempo, the most influential blockchain news media.