In brief VC-backed startups are worried they’ll be left out of UK relief efforts.

Peter Smith, CEO of crypto wallet provider Blockchain, signed a letter to the Chancellor.

While Blockchain has some employees in London, it's registered in a tax haven.

UPDATE: This story was amended after publication to include comments from Blockchain.

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, according to LinkedIn data, 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.

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 existing 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.

However, in response to questions from Decrypt, Blockchain denies it is seeking any kind of handout. In an email, the company explained that it is simply rallying behind its peers:

"We believe it’s important to use our voice in support of policies that protect the UK's thriving tech sector especially during these uncertain times and are proud to join our peers in the letter to the Chancellor. We are profitable and given the nature of our business do not expect to directly benefit from the UK’s lending schemes. We do feel strongly, however, that we have an obligation as a leader to ensure that other startups that are not in our position do not get left behind," the company said.

Luxembourg, a tax haven

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."

That's true, the company claimed in its response: "All of our business operations and business revenue are generated through our two UK entities, Blockchain Access and Blockchain G.B. Blockchain.com is the definition of a UK homegrown company. We were founded in 2011 in York and are proud to have called London home since 2014. The majority of our staff sit in our London Headquarters and we’ve consistently been recognized as one of the top companies to work for in London. We along with signatories, Babylon, Benevolent AI, and Bulb are all part of TechNation’s FutureFifty program and our CEO, Peter Smith is on the board of UK Finance which is the leading body for the UK's financial sector."

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

Blockchain said that the LinkedIn data is incorrect. "In terms of actual numbers, we have over 2x the employees in the UK (80+ vs. 40 in the US). We also have employees in Luxembourg, Lithuania, and then distributed across the globe," the company said.

So does the company pay most of its corporate taxes to the UK? In response, the company said: "We do pay UK taxes including: employee taxes, health services, business taxes etc."

As far as its Luxembourg registration, Blockchain is not the only crypto company to be registered in a tax haven. As Decrypt has reported, many of the biggest crypto companies in the world 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.

In its statement, Blockchain said the fact that it's registered in Luxembourg is largely immaterial: "Blockchain.com is a global financial services company with customers worldwide and like many other UK-based firms, such as Barclays, have corporate registrations in other countries. This is common practice, but doesn’t take away from the fact that we operate our business in the UK."

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.

Does Blockchain really need the financial 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.