EB5 Investors Magazine "Top 25 Awards Edition" Volume 8 Issue 1 - Page 16

for developing an argument for legitimacy of cr yptocurrency - originate d funds in light of the recent Zhang decision. WHAT IS ZHANG ABOUT? "As long as cryptocurrency trade fits into the legal framework of the jurisdiction where it commenced, the Zhang decision supports the proposition that assets generated through the legitimate blockchain technology could be used for EB-5 investment" The plaintif fs in Zhang claimed that USCIS’s interpretation of its own regulation was “arbitrar y and capricious” in violation of the Administrative Procedure Act (APA), 5 U.S.C. § 706, and the Immigration and Nationality Act (INA), 8 U.S.C. § 1153(b)(5); thus, denial of I-526 was improper. Additionally, the plaintiffs asser ted that USCIS engaged in improper rulemaking when it added another requirement to the definition of “capital” for EB-5 purposes without notice and comment procedure. The court in Zhang held that USCIS’s interpretation of the term “capital” was erroneous because it went beyond the structure and plain language of regulation 8 C.F.R. §204.6(f) (describing the “required amounts of capital”). Essentially, the decision turns to the interpretation of the “capital” that potentially may be expanded to the argument for legitimacy of cryptocurrency-originated funds even in absence of clear “path of funds” documentations. The regulations only exclude “[a]ssets acquired, directly or indirectly, by unlawful means (such as criminal activities)” from the permissible source of capital. 2 By including this one and only limit how investors may acquire capital, the regulation implicitly excludes other limitations. 3 Accordingly, as long as cryptocurrency trade fits into the legal framework of the jurisdiction where it commenced, the Zhang decision supports the proposition that assets generated through the legitimate blockchain technology could be used for EB-5 investment. 16 EB5 INVESTORS MAGAZINE CASH IS STILL THE KING Even though Zhang does not directly concern cr yptocurrency, the decision provides an especially impor tant observation regarding the property of “cash” that is also attributable to the cryptocurrency assets – “fungibility”. Citing the Oxford dictionar y definition, the court observes, “[c]ash is fungible, and it passes from buyer to seller without imposing on the seller any of the buyer ’s obligations to his own creditors. The buyer’s source of cash—whether paycheck, gift, or loan— makes no legal or practical difference.” L i ke c o m m o n s to c k , p r e c i o u s m e t a l , o r m o n ey, cryptocurrencies are also fungible assets. One Bitcoin is always equal in value to another Bitcoin, a unit of Ether is always equal to another unit of Ether in the trade. The fungibility characteristic is precisely what makes cryptocurrencies suitable for use as a secure medium of transaction in the digital economy. This quality combined with the court’s assertion in Zhang that the source of fungible asset “makes no legal or practical difference,” potentially introduces cryptocurrency to the EB-5 market in the status equal to cash or any tangible asset permitted by regulations. WHAT DOES “LEGALLY OBTAINED” MEAN FOR CRYPTO? The major condition imposed on the EB-5 petitioners is the requirement that the investment capital be obtained lawfully and clearly attributed to the investor. 4 The question remains open whether cryptocurrency as a source of the investment capital still constitute “cash” if it originated