Europe in Crypto - Who is Crypto Friendliest of Them All?

Cryptocurrencies have been around for 14 years, and those of us who follow this lively ecosystem attentively realize the intricacy of the digital web that is growing rapidly in size. Some nations can be seen as anti-crypto while others welcome crypto adoption. This blog will encapsulate the "crypto-friendly" jurisdictions in Europe and their latest moves towards crypto adoption.

The European Union

After sitting on the fence for a long time, the EU has finally passed a breakthrough crypto legislation named Markets in Crypto Assets (MiCA).

With it, the European Union is the first to regulate this market ahead of everybody else. The legislation sets out to regulate providers, create a leveled playing field for all the players, and for customers to create a secure environment to operate on the crypto assets market.

Additional stated aims of the legislation include stabilizing the cryptocurrency market and encouraging investments into the EU market.

Europe’s crypto-friendly list

Germany

Germany is one of the most crypto-friendly countries in the continent when it comes to investments. The country is noteworthy due to its unique approach to cryptocurrency taxation. Germany favors individual investment and regards Bitcoin as private money rather than a currency, commodity, or stock.

Thus, in the eyes of German law, Bitcoin and other cryptocurrencies are exempt from capital gains tax if held for more than a year. What is more is that on sale and purchase, cryptocurrencies are not subject to VAT.

Switzerland

Switzerland’s banks were the first in the world to offer crypto companies business accounts in 2018, recognizing that banking channels would help to eliminate fraud and encourage legitimate businesses.

Switzerland’s crypto hub is called Zug: a city that is home to blockchain startups, enterprises, shops, and entrepreneurs. In this crypto valley, crypto investors reap all the benefits that come with a tax-free environment. Additionally, Zug was the first place in the world to accept Bitcoin payments in 2016.

Under Swiss law, cryptocurrencies are classified as assets, and Bitcoin is recognized as legal tender in some locations. Not just that, but if you trade or hold cryptocurrency as an investment in your own account and qualify as an individual trader, you will not be asked to pay capital gains tax.

Buying and selling crypto through authorized professional traders, on the other hand, is considered business income and is taxed accordingly.

Malta

Malta is a self-declared blockchain island and one of the few EU jurisdictions to have an explicit regulatory framework for crypto assets and services. As such, it has been utilizing cryptocurrencies for the longest time.

Now, cryptocurrencies in the country are recognized as a legal tender for trading purposes as the authorities have passed a slew of bills aimed to make the island a global leader in cryptocurrency regulations. Here is the fruit of their efforts:  The Innovative Technology Arrangements and Services Act, Malta Digital Innovation Authority Act, and Virtual Financial Asset Act.

Estonia

Estonia is one of Europe’s hotspots for crypto firms, and cryptocurrency’s popularity fits Estonia’s image as a digital trail blazer. In Estonia, transactions with Bitcoin and other cryptocurrencies are taxed in the same manner as any other corporate activity – there is no corporate income tax if the profit is not dispersed.

Estonia’s financial business is also more crypto-friendly than other European jurisdictions. LHV Bank in Estonia was one of the first financial institutions to embrace blockchain. The bank launched a cyber wallet app, which allows users to send digital representations of Euros.

Lately, Estonia’s pro-crypto stance has hit a bit of a snag. The nation introduced new rules in response to Europe-wide tightening of crypto regulation in the wake of the collapse of the TerraUSD stablecoin and its sister Luna token.

The Netherlands

The Netherlands is known for its open attitude towards cryptocurrencies. The authorities believe that this mindset could potentially help improve the economy of the country. As the country does not practice any strict cryptocurrency regulations on the books, people are pretty much free to use cryptocurrencies without facing any major obstacles.

They however should follow the guidelines set out in the Financial Action Task Force (FATF.)

What about the United Kingdom?

No longer part of the EU, the UK has also made strides for a more clearly defined crypto market rules. A testament to these efforts is the rising interest in the country from major crypto industry players.

One such recent example surrounds a top US tech investor and a venture capitalist firm, Andreessen. The company is looking to establish a presence in the UK after announcing a $4.5 billion fund to invest into crypto and blockchain corporations.

The head of crypto investing at Andreessen wrote in a blogpost: “While there is still work to be done, we believe that the UK is on the right path to becoming a leader in crypto regulation. The British Prime Minister Rishi Sunak seconded him, saying he was thrilled that the firm had chosen the UK, a move he said was “testament to our world-class universities and talent and our strong competitive business environment."

Some pushbacks still in the UK

There are signs of hostility to the crypto sector among some UK policymakers. The parliament’s cross-party Treasury committee said that UK authorities should regulate cryptocurrency trading as a form of gambling, warning in a report that digital assets such as bitcoin have “no intrinsic value”.

The UK financial regulator has also moved to toughen regulations, announcing new rules for crypto advertising, including the requirement that firms promoting crypto products or services carry a clear risk warning in their adverts.