notes/finance/mpc-token-grant.md

So you've been offered an MPC token grant

What now?

1. You sign the contract. (Signing date)
2. Your tokens will start vesting at a date mentioned in the contract. Each vesting date represents the point at which point a fraction of the grant tokens are yours in a contractual sense. You do not control them yet, but in some sense you are owed them by the company. (Vesting date)
3. Shortly after the vesting date these tokens will be moved to your PBC account. At this point you fully own and control them. (Control time)
4. You sell the tokens, hopefully for bazillions. (Sell time)
5. You pay roughly half of your bazillions to Skat.

Obviously nothing in this document is financial advice. This is meant to give an overview of what and how is needed to cash out. Most of this will also be relevant if you want to keep an investment in MPC tokens, but I will not be covering that scenario in-depth. It assumes that you are paying danish taxes. Make sure you read up on the tax effects of cryptocurrencies yourself.

This article is written by me personally, and is not authored or authorized by Partisia or Partisia Blockchain Foundation.

Overview

Assuming a scenario where you want to sell your MPC tokens ASAP for fiat currency in the bank, you are probably looking on a flow of:

1. MPC Tokens are moved to your MPC account.
2. Transfer MPC tokens to Exchange A (Kucoin or gate.io)
3. Exchange MPC tokens for more liquid tokens (USDT)
4. Transfer liquid token to Exchange B (Kraken, Coinbase or Binance)
5. Exchange liquid token for fiat (USD, EUR).
6. Withdraw fiat to bank account.

Most steps above occur within exchanges and financial institutes, but step 2 happens directly on Partisia Blockchain, which requires BYOC (Bring-Your-Own-Coin) for transferring MPC tokens. There exists several BYOC, all of which must be transferred from another blockchain, with the easiest to acquire being MATIC, the native coin of Polygon Proof-of-Stake. I recommend buying enough to cover your entire token grant period:

1. Buy BYOC through exchange or payments processor. Around 40-50 USD worth should be enough for the entire period.
2. Transfer to MetaMask-accessible account. This can be either a Ledger Hardware Wallet account visible to MetaMask, or a MetaMask-native account (though I do not recommend the last option, see next section.)
3. Deposit into your MPC account using the Browser's built-in BYOC bridging page.

Setting up accounts

There are three primary ways for setting up accounts:

1. Using a Ledger Hardware Wallet. This is at the intersection of easy and secure. This is my recommended method, and probably the most relevant for people reading this guide.
2. Using a MetaMask account directly. This is something called a Hot Wallet, which is easy to use, but leaves you open to hacking. Not recommended.
3. Using a private key. Not easy, but can be made somewhat secure.

These accounts will be used for receiving MPC tokens, transferring them, and acquiring BYOC.

I will only be covering Ledger, as that is what I will be using.

Ledger Guide

Ledger Hardware Wallet only works in Google Chrome and Chromium.

Setup guide:

1. Acquire a Ledger Hardware Wallet, cheapest model is fine.
2. Setup your Ledger Hardware Wallet using the built in setup guide. Remember to backup your seed phrase as instructed.
3. Download Partisia Blockchain App from Ledger Live.
4. Install MetaMask for Chrome.
5. Connect MetaMask to your Ledger.

You are now ready for using your Ledger Hardware Wallet for acquiring BYOC and for transferring MPC Tokens.

Selecting exchanges

MPC tokens is currently only traded only on a few less reputable exchanges.

Ideally you would be exchanging to fiat currency and withdrawing to bank account at the same exchange, but not all exchanges allows for fiat withdrawing, and not all exchanges list MPC pairs, so you might need to do a multi-exchange setup.

In an multi-exchange setup you would exchange MPC for a well established token (USDC, USDT, EURC, BTC, ETH) at one of the above-mentioned exchanges, and transfer these to a more reputable exchange like Coinbase or Kraken. A stablecoin might be preferable as inter-exchange currency, as these (partially) reduce your exposure to crypto-related volatility, and can possibly ease your tax documentation burdens.

Exchange Overview

Includes exchanges where MPC is listed, and top 10 on both CoinGecko and CoinMarketCap. Information may be outdated, DYOR.

Ordered by relevance and personal preference:

Name	Country	MPC?	💱	Notes
KuCoin	🇸🇨	Yes		Medium risk of collapse.
Gate.io	🇨🇳	Yes
Bitfinex	🇭🇰	Yes	$10k+	MPC has low trading volume, may risk slippage! Medium risk of collapse.
Kraken	🇺🇸		Yes	Well-regarded and personal favorite. Low risk of collapse.
Binance	prev 🇨🇳		Yes	Largest crypto exchange after the fall of FTX. Some risk of collapse
Coinbase	🇺🇸		Yes	Second largest exchange, based in San Francisco. Runs USDC and EURC stable coins. Some risk of collapse.
HTX (prev Huobi)	prev 🇨🇳		Yes	High risk of collapse.
Crypto.com	🇩🇪		Yes	US specific? High risk of collapse.
Binance US	?		Yes	US specific? High risk of collapse.
Bybit	?		Yes
OKX	?		?
Upbit	🇰🇷		?
Bitget	🇸🇨		?

Taxes and Paper Trails

First and foremost: Document absolutely everything, and keep a paper trail. This will be useful for when Skat and your bank comes knocking, asking about your sudden acquisition of bazillions of kroner.

Examples of documents to maintain and send to relevant authorities:

• Maintain a spreadsheet of what you did, when and why.
• Emails and documents from exchanges
• Links to (and maybe screenshots of?) transactions in the Browser
• Your MPC token grant contract is crucial in explaining the arrangement
• Contact information for your boss and Partisia Applications.

Secondarily, read up on rules:

• Skat på krypto: Kend reglerne, så du undgår et skattesmæk. The official guidelines from Skat for personal taxation.
• EY: Hvordan beskattes investeringer i kryptovaluta?
• cryptoskat.dk: Skatteregler. This is a company that provides software for navigating the crypto tax situation in Denmark. Their analysis of the relevant rules are probably biased towards being crypto bullish, so take their advice with a grain of salt.

Thirdly: The construction used in the contract is untested and might have unintended tax consequences. The contract was meant to mirror a traditional danish stock-based bonus contract, and attempts to fit into a known rule (for stocks at least) where taxes are delayed until the sell time, but with a clause that the asset must be paid back if the employee dies.

There are to my understanding two ways Skat can interpret the contract:

1. The contract more or less fits the rule, and taxes are computed at the sell time, amounting to roughtly 52% of the price.
2. If the rule is not accepted, it would be most natural for taxes to be computed at the control time, based on the most recent price, as this is the point where you actually gain access to the tokens. This interpretation incurs volatility risks, both for the employee, as they in effect acquire a huge tax debt at the same time they acquire their tokens, and are motivated to sell ASAP to cover this debt, but also for the MPC token ecosystem, as the associated selling pressure may drive down prices.

The first interpretation would be preferable, as it would allow the employee to cash out in stages and speculate with no risk of indebting themselves, and would allow the employee to delay steps 1. through 7. for as long as they liked. As of writing (marts 2024) it is still unknown which interpretation Skat will employ, and I recommend acting as if the second interpretation is in effect.

Example flow and report

Below is an example flow of cashing out, using Kucoin and Kraken. Amounts and prices are made up.

What	Input	Price	Fee%	Fee of Input	Output
PBC deposit	N/A	N/A	N/A	N/A	10000 MPC
Kucoin deposit	10000 MPC	1/1	0%	0 MPC	10000 MPC
Kucoin exchange	10000 MPC	0.4 USDT	0.2%	20 MPC	3992 USDT
Kucoin withdraw	3992 USDT	1/1	0.8 + 0%	0.8 USDT	3991.2 USDT SOL
Kraken deposit	3991.2 USDT	1/1	0	0 USDT	3991.2 USDT
Kraken exchange	3991.2 USDT	€0.91	0.4%	€15.9648
Kraken instant SEPA withdraw	3991.2 USDT	1/1	2	€2	€3617.464032

Contrast with a theoretic value of 10000 MPC * (0.4 USDT/MPC) * (0.91 USDT/€) = €3640, resulting in €22.535968 lost to fees, and €3640 * 52% = €1892.8 in taxes, giving you €3640 - €1892.8 - €22.535968 = €1724.664032, giving you 0.473809%.

Discussion: Letting it ride

This section assumes the second tax interpretation above, and makes the case that you should prioritize your personal financial situation over HODLing.

It might be tempting to letting your MPC possessions "ride", e.g. paying off your tax burden by selling half, and keeping the rest in MPC. While this is definitely a possibility, you should not be blinded by greed or by emotional attachment: By doing this, you are converting your bonus to an investment, and you should consider the consequences of this.

1. The price of MPC now is known, but the price in the future is unknown.
2. For the first few installments you are already heavily exposed to price changes to MPC, and will get almost the same upside or downside whether you hold or not.
3. If you have already decided to invest, consider that there might be other investments which have better characteristics. Crypto investment can be rough.
4. Consider this scenario: Instead of getting MPC tokens, you got the equivalent amount in fiat currency. Would you in that case choose to invest in MPC tokens?
5. From a diversification point of view consider that you are possibly possessing an incredibly lopsided portfolio, due to the MPC grant.
6. Also regarding diversification: You are already heavily invested in the well-being of Partisia and Partisia Blockchain, due to working there. The price of MPC and the financial situation of Partisia is likely to correlate.