Since the dawn of crypto time, nations have struggled to fit blockchain-based systems in their existing frameworks. Countries’ reactions can be placed on a spectrum from considering it a threat and forbidding it altogether, to realising its potential and creating crypto-friendly policies and regulations.

Cloudbet explores the five friendliest countries known for their legal openness to crypto, light-handed crypto tax policies, and efforts to promote blockchain development and crypto adoption.

5 - Europe’s Silicon Valley in Slovenia

Slovenia may be small, but it’s already making huge steps in blockchain tech and crypto adoption into daily life. Its largest and most significant commercial area BTC City in the capital, Ljubljana, has over 100 shops where cryptocurrencies are accepted as a form of payment. It’s also home to a high concentration of blockchain tech developers and startups. Slovenians may pay for food and drinks, sports and leisure, travel, online stores, and cab services with crypto.

The country is very welcoming towards cryptocurrency. Prime Minister Miro Cerar promoted Slovenia as friendly to blockchain back in October of 2017, praising crypto startups and revealing that the government was investing in the application of blockchain tech for its own purposes.

Since then, the creation of the European Blockchain HUB in October of 2018 has placed Slovenia at the forefront of gathering successful Slovenian blockchain projects, governing bodies, academia, and individuals from the business sector under one roof to grow and support a sustainable blockchain ecosystem.

What about crypto taxes?

Bitcoin and crypto are classified as virtual currencies, which means Slovenia does not tax Bitcoin as either money or a security. They are also exempt from capital gains tax, and mining, too, is VAT-exempt.

4 - The Crypto Rock of Gibraltar

This tiny country in the south of Spain attracted blockchain startups with a regulatory framework issued in early 2018 that granted formal license to crypto companies. Gibraltar then took another step by becoming the first financial authority within Europe to draw up regulations governing ICOs. In many nations, ICOs exist in a grey area unless otherwise banned, so these rules attract many companies to launch their tokens from Gibraltar.

Gibraltar’s Stock Exchange also announced BitcoinETI, an Exchange Traded Instrument based on bitcoin, all the way back in July of 2016. As the first of such instruments of its kind in Europe, it was quite clear early on that the Gibraltar Financial Services Commission (GFSC) was fully onboard with cryptocurrency.

Local authorities also continue to focus on creating legislation that will provide strong oversight and investor and customer protection without stifling innovation.

A trade association and working group have been established in order to support the industry. The Gibraltar Association of New Technologies (GANT) facilitates the development of relationships between crypto companies and authorities, while the New Technologies in Education (NTiE) aims to address the growing demand for crypto and blockchain tech-related skills by organising courses to prepare employees and specialists for the industry.

What about crypto taxes?

Gibraltar has an established reputation as a low taxation environment. Crypto exchanges are subject to a business-friendly 10% corporate income tax rate, and neither capital gains nor dividend taxes are imposed on cryptocurrencies.

3 – Japan: strict-but-fair pioneer approach

Known for its openness to new technologies, Japan arguably became the first country to recognise bitcoin and other digital currencies as legal tender under the Payment Services Act in early 2017. Not only did this eliminate the consumption tax on crypto sales, it spurred an increase of demand for cryptocurrency investors and paved the way for the use of BTC as a payment method in retail stores.

Japan is home to some of the biggest hacks in crypto history (note: Mt. Gox in 2011 and Coincheck in 2018), so it’s only logical that the country’s Financial Services Agency (FSA) has strict regulations for crypto exchange operators. Despite the heavy requirements for registration, more than 200 companies applied for a license during the recent bear market.

After the more recent Coincheck hack, Japan’s two largest crypto industry groups decided to merge and establish a new self-regulatory organisation that would focus on areas such as safety management systems and compensation of customer assets. It has since grown to nearly 250 members from the Japan Blockchain Association (JBA) and the Japan Cryptocurrency Business Association (JCBA).

You’ll also find that the island country is home to the world’s first crypto-themed J-pop band: the Virtual Currency Girls. Their debut song “The Moon and Virtual Currencies and Me” warns against fraudulent operators and urges people to lock down their cyber security. Each of the eight members represents a cryptocurrency such as BTC, BCH, ETH and XRP.

What about crypto taxes?

Under the Income Tax Act, profit earned by crypto sales is considered miscellaneous income rather than capital gains. The Financial Supervisory Authority is currently proposing tax reforms that should allow crypto spending, trading, or hodling without burdensome tax laws.

2 - Switzerland’s Crypto Valley

The canton of Zug in central Switzerland is home to the “Crypto Valley” project, which is an independent but government-supported association aiming to lead the growth of a blockchain and crypto technology ecosystem.

The headquarters of some 50-100 companies and startups, including names such as ShapeShift, Bancor, and ConsenSys, can be found in the Crypto Valley. The city of Zug became the first in the world to accept payments of local taxes in BTC back in 2016.

Swiss Financial Market Supervisory Authority (FINMA) has recently pioneered a framework for the regulation for ICOs with the intention to assist local startups in launching ICOs compliant with Swiss law. The framework clarifies how blockchain tech companies need to adhere to KYC and AML laws, which will accelerate the growth of DLT platforms within the region.

Most recently, the Federal Assembly has approved a motion in March of 2019 directing the Federal Council to regulate cryptocurrencies. This will further tackle issues like money laundering, extortion, and criminal fraud, adapting the existing legislation to include and accommodate cryptocurrency and its associated risks. The government continues to aim to support a flourishing cryptocurrency sector.

What about crypto taxes?

In Switzerland, cryptocurrency is defined as “virtual currencies,” and crypto holdings must be declared and are subject to wealth taxes. Income tax applies to crypto earned as a salary and crypto from mining profits. ICOs will be regarded as securities.

1 - Malta’s Blockchain Island Haven

Though the island-nation has an estimated population of just under half a million, it is prime real-estate for bitcoin and blockchain-based companies. An economic minister announced in April of 2018 that Malta aims to be known worldwide as “The Blockchain Island.” Malta’s unmatched friendliness towards the industry was reinforced when the largest crypto exchange by volume, Binance, announced in March 2018 it will relocate its headquarters to Malta.

Malta’s Prime Minister and government heartily welcome bitcoin and blockchain technology, creating the Malta Digital Innovation Authority back in February of 2018. The MDIA has provided a comprehensive regulatory framework for crypto business operating within the region and seeks to certify blockchain platforms and improve the verification processes for crypto platform users.

Moving forward, MDIA will be the government body in Malta responsible for creating further crypto policy, collaborating with other nations and organisations, and also enforcing ethical standards for the industry.

One of the world’s largest and most significant annual crypto events, the AI & Blockchain Summit, takes place in Malta. The event aims to gather the most influential crypto speakers, enthusiasts, potential investors, and the biggest international blockchain-based companies in the same space to discuss the most recent developments in the industry.

What about crypto taxes?

Malta has no tax legislation regulating crypto as a medium of exchange, and transactions to exchange fiat for units of crypto and vice versa are VAT exempt. The country certainly proves itself with such lax (or lack) of laws that it truly is a crypto haven.

From Slovenia’s BTC City to Switzerland’s “Crypto Valley”, our top five friendliest crypto countries have done their part in paving the way for the whole industry to grow by welcoming startups, creating friendly tax policies, and forming organisations that promote responsible blockchain development and adoption.

Setting a prime example for other countries to follow suit, they have shown what blockchain tech and crypto can do when they are allowed to flourish – and they’ll go down in history for leading the development of a technology that will bring us even further into the future.

Which country will next pave the way for crypto to prosper? Tweet us @Cloudbet with your thoughts today.

Jan 13, 2020
Crypto 101

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