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Luxembourg-based Blockchain seeks UK government handout

Blockchain CEO Peter Smith has signed a petition for the UK government to issue more relief to companies. But Blockchain’s registered in Luxembourg.

Crypto wallet provider Blockchain is seeking a handout from the UK government, even though the company is registered in the tax haven of Luxembourg and most of its employees are in the US. 

The UK government is providing relief loans to help many businesses stay on their feet during the COVID-19 pandemic. But several of the country’s VC-backed startups are worried they are getting left out in the cold.

Peter Smith, CEO of Blockchain, has included his signature alongside those of a dozen other startups (most of them so-far unprofitable) in an open letter to the Chancellor published Thursday. 

UK government bails out companies
How generous should the UK government’s bailout be? Image: Shutterstock.

The letter, signed by the “founders and CEOs of leading UK companies,” urges the Chancellor to set up a task force to help high-growth tech companies who aren’t able to access various government support programs because they’ve “invested in technology and growth rather than short term profitability.” (Techcrunch offers the full letter.)

The letter is signed by the principals of a dozen top UK startups, including Babylon, Bulb, Citymapper, and Deliveroo.  

Blockchain Luxembourg S.A (the full legal name of the company) was initially incorporated in the British Virgin Islands on June 20, 2013. It transferred its registered office to Luxembourg on August 27, 2014, according to documents pulled up by FT Alphaville. Still, the firm refers to itself as a “London-based company.” 

According to LinkedIn, Blockchain has 77 employees in the UK, but the majority of its employees—more than 200 of them—are spread across the US.  

Clearly, Blockchain does have a base in the UK. But does it pay most of its corporate tax to the UK? That is the question.  

Blockchain is not the only crypto company to be registered in a tax haven. As Decrypt has reported, many of the biggest crypto companies are based in tax havens, including Binance in the Cayman Islands, Bitfinex in the BVI and BitMEX in the Seychelles. Many of these companies have “decentralized” offices with staff working in multiple countries around the world. 

At the moment, cryptocurrencies are largely unregulated assets in the UK so crypto companies can register in tax havens and serve UK citizens without registering with the Financial Conduct Authority, the country’s regulatory task force, as long as they do not advertise in the country. However, due to recent 5AMLD European guidelines, crypto exchanges now need to register with the FCA by January 10.

Also, does Blockchain really need the help? According to Crunchbase, since 2014, the firm has raised $70 million over four rounds, with backing from Digital Currency Group, Lightspeed Venture Partners, Google, and Sir Richard Branson. As if that was not enough, in September, the company was reportedly seeking an additional $50 million for a venture capital fund to invest in both equity and crypto coins in the sector. 

It appears Blockchain is looking for new revenue sources beyond banner ads. In July 2019, Smith told Fortune that his company was pulling in “six figures a month in advertising revenue” alone from its blockchain explorer tool. At the time, the firm also announced a crypto trading platform called “the Pit.” 

Several executives left the company over the last year, some citing concerns over the future direction and growth of the firm. 

Decrypt reached out for comment from Blockchain before publishing this story. We will update this story if the firm responds.

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