Here’s how to invest in crypto without having to comply with the new regulations

Here's how to invest in crypto without having to comply with the new regulations

Here’s how to invest in crypto without having to comply with the new regulation but without doing anything illegal: indirect investment is the way to go

The new Spanish anti-fraud law complicates a lot the task for those who invest in cryptocurrencies. On the one hand, any capital gain or loss has to be declared in the Income Tax and on the other hand, cryptocurrencies held in foreign exchanges have to be declared in the 720 model (it remains to be seen if it will be from a specific amount).

It is therefore interesting to know alternative ways of investing in cryptocurrencies in Spain that simplify the paperwork. Indirect investment is the way but be careful because not all indirect investment is exempt from having to comply with bureaucratic obligations.

Investing in mutual funds with exposure to cryptocurrencies

The first and simplest option is to invest in investment funds that have exposure to cryptocurrencies. If what we want is to invest directly a specific amount in crypto, this is certainly not our option, since investment funds have diversification regulations and there cannot be a fund that, for example, invests 100% in Bitcoin.

In Spain, the CNMV has authorized investment funds to invest in cryptocurrencies (through derivatives) for a few months now and it will not be long before there are funds that do so. Right now there are only funds that do so indirectly, investing in companies that have some exposure, such as Numantia Patrimonio Global.

There are funds abroad that invest in cryptocurrencies, but investing in them would not free us from having to do paperwork, since if the balances exceed 50,000 euros we would be obliged to declare the 720 model, the D6 model and of course to fill in by hand the data of capital gains and losses in the case of divestment.

Investing in shares with exposure to cryptocurrency prices

Another option is to invest in companies that have exposure to the price of cryptocurrencies. This is a classic investment strategy. For example many investment funds that want to have exposure to gold invest in gold mines: their price evolution is similar to the price of the metal but with greater liquidity and through a conventional financial instrument.

The advantage, moreover, of this type of indirect investment is that by choosing a competitive or outstanding company, the investment may even be better than directly in crypto.

Examples of companies that have a correlation with cryptocurrencies are exchanges such as Coinbase or payment platforms that accept cryptocurrencies such as Square. If you invest from a Spanish broker there is no paperwork to do with Hacienda except in the case of sale, but be careful if you use an online broker that operates in Spain from abroad (such as Degiro or eToro): if you have shares abroad you not only have to fill in the 720 form if you have more than 50,000 euros abroad but also fill in the D6 form every year explaining the specific positions you have. You can also read an article on our blog about Bitcoin Games in USA Casinos and Around the World.

Investing in cryptocurrency ETFs

There are more and more ETFs that replicate the behavior of the main cryptocurrencies. It is a way to invest in cryptocurrencies exactly like investing in stocks, with liquidity and easy trading.

It is important to find ETFs that invest directly in cryptocurrencies in a physical form, as there are some products that are synthetic replicas and we are really betting that the issuer will be able to effectively replicate the particular cryptocurrency.

The problem with this type of indirect investment is that these ETFs are quite recent and are not offered by all Spanish brokers. And we already know, if we invest through foreign brokers we will have to fill in the D6 form and maybe also the 720, so we are not free of paperwork.

Investing in cryptocurrency CFDs

CFDs are a derivative product that allows exposure to an underlying asset. They are classically used to invest in commodities and therefore are now also offered for cryptocurrencies.

The main problem is that it is a leveraged product and although this allows to multiply profits also losses. There is also the issuer risk, as we are actually buying a contract.

Another problem is that this type of derivatives are usually offered by foreign brokers, so we will not get rid of the paperwork. Therefore, for the moment they are not a good alternative to investing directly in crypto.

Pure and simple indirect investment, without losing sight of ETFs as a more direct type of exposure if they are finally offered through our trusted broker.

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