A chart displaying bitcoin’s drop in value in the past month. (Graphic: COINDESK)

The prices of some of the world’s most high-profile cryptocurrencies have dropped significantly in the past two weeks due in part to cooperation between a cryptocurrency trading platform and the Virgin Islands International Tax Authority, according to multiple trade publications.

Earlier this month, Bitfinex, a prominent VI-based company that offers services for digital currency traders and global liquidity providers, sent a letter to some of its customers asking them to fill out self-certification forms for the United States’ Foreign Account Tax Compliance Act and the Organisation for Economic Co-operation and Development’s Common Reporting Standard.

Both the FATCA and CRS are designed to ascertain tax residences.

The forms, Bitfinex’s letter explained, would be given over to the VI’s tax authority and in turn potentially exchanged with the tax authority of the customer’s country of residence.

The company — which claims to be the world’s largest and most advanced cryptocurrency trading platform — gave its customers only seven days, until May 24, to respond.

Bitfinex’s customers — who often value being outside state regulations — weren’t happy: The bitcoin trading group Whalepool called for a boycott.

“Bitfinex is now requiring users to give their tax information so that it can send it to BVI, which will exchange it with your country’s tax authorities,” Whalepool wrote on Twitter to its 36,000-plus followers. “We strongly disavow. If you also disagree with this decision, peacefully protest it by withdrawing your money from Bitfinex.”

The resulting sell-off by investors on the trading platform contributed to declining cryptocurrency prices last week, according to CCN, a Norway-based cryptocurrency news website.

On Monday morning, bitcoin — the most widely traded cryptocurrency — was dealing at around $7,142, a 6.5-week low, according CoinDesk, a New York-based digital currency news website. Another notable currency, Ether, was trading around $526.50 on Monday afternoon, a 6.4 percent decrease over the previous 24-hour period and a nearly $170 drop from about the same time the week before, Bitfinex reported.

Bitfinex also responded to Whalepool’s tweet, saying that it had not sent the request out to all its customers.

“We have deliberately targeted users that we believe have an obligation to self-disclose,” the trading platform wrote. “If a user has not received a message from us, she need not self-certify anything to us at this time.”

Cryptocurrencies in the VI

Offshore financial jurisdictions like the VI have attracted digital currency business because of their lack of cryptocurrency taxation policies and favourable regulatory regimes, CCN reported.

This includes the use of zero-tax-rate VI business companies as vehicles to launch crowdfunding mechanisms called initial coin offerings. ICOs are spinoffs of traditional companies’ initial public offerings, where startup firms sell off new cryptocurrency tokens to investors in exchange for cash or units of a more established cryptocurrency like bitcoin.

The new cryptocurrency tokens will often be the sole method for purchasing goods or services from the startup firm, though many investors tend to buy the new tokens purely to hold onto them in hopes the firm’s success will legitimise the cryptocurrency and increase its value.

ICOs, however, have also attracted international controversy. Because they skirt the regulations of international financial authorities like the US Securities and Exchange Commission, investors have little legal recourse to regain lost cash if they are duped into supporting a fraudulent initiative.