Cryptocurrencies have been making headlines these days. People are becoming more and more interested in holding and investing in cryptocurrencies. Cryptocurrencies transactions provide its owners several benefits, including low transaction fees, higher efficiency, security, and speed. Being decentralized in nature, cryptocurrencies are a great asset against inflation. Last year, the prices of cryptocurrencies skyrocketed, and people who invested reaped significant benefits. Since cryptocurrencies are decentralized, they cannot be regulated by governments. This is why governments in several countries have either restricted or outrightly banned cryptocurrencies. A country’s attitude towards cryptocurrencies can be understood by looking at how it regulates and taxes cryptocurrencies. In this article, we will be talking about the seven most crypto-friendly countries in the world where crypto regulations are pretty flexible and benevolent.
- Switzerland
Switzerland has established itself as a lucrative destination for blockchain projects and crypto investors. With many crypto projects and blockchain hubs, Switzerland has attracted investments worth millions of dollars, thus, instituting itself as the “crypto nation” of the world. One of Switzerland’s small towns, Zug, is called “crypto valley” due to many crypto projects present there. Recent research data depicts that the crypto valley alone inhabits 960 companies with $254.9 million worth of market valuation. This has also increased employment opportunities in the region. Zug became the first place in the world to accept Bitcoin payments in 2016.
Swiss banks began offering business bank accounts to crypto companies to eliminate fraudsters and encourage legal businesses. It was the first bank in the world to do so. Now cryptocurrency taxation depends on the rules and regulations of each canton. Switzerland is divided into 26 small divisions or cantons that define and tax cryptocurrencies differently. For example, in Zurich, capital gains from private wealth are tax-exempt, under which crypto investors may not have to pay taxes on their crypto gain. But for this exemption, you have to qualify as an individual trader, investing from your account. On the other hand, if you buy or sell crypto through a professional trader, your income will be considered commercial and taxed.
- Portugal
Portugal is considered one of the crypto-friendly countries. If you are making any capital gains from purchasing or selling cryptocurrencies, you do not have to pay any taxes. Additionally, the exchange of cryptocurrencies is also tax-free. Portugal is an excellent country for individual investors as it does not impose income tax on payments received in cryptocurrencies. However, the same cannot be said for companies that have to pay the normal income taxes for payments received in cryptocurrencies. Therefore, if you are an individual investor, Portugal might be a lucrative option for you due to its unique stance on crypto taxes. The country has several programs for crypto investors looking to set up a base here.
- Germany
According to German law, cryptocurrency is regarded as private money rather than stocks, currencies, goods, or commodities. It has a unique approach of taxing cryptocurrencies as the laws favor long-term crypto investors. German residents who hold cryptocurrencies for any period exceeding a year are exempt from paying any taxes on their capital gains. On the other hand, people who hold cryptocurrencies for less than a year, tax will be levied on capital gains above 600 euros ($684). However, businesses and startups have to pay corporate income tax on any capital gains through cryptocurrency trading/exchange. Therefore, it can be said that Germany is an attractive nation for individual investors looking to hold cryptocurrencies in the long term.
- Singapore
Singapore’s stance towards cryptocurrencies is a unique combination of regulation and innovation. The country believes in meticulous monitoring of the crypto ecosystem to prevent any fraudulent or illegal activities that do not hinder growth. Singapore’s crypto environment is regulated by the Payment Services Act of 2019. The law balances crypto growth along with the prevention of any illegal activities. Therefore, it offers an ideal regulatory and legal environment for progressive and sustainable growth.
There is no capital gains tax for individual investors and corporations holding cryptocurrencies. Still, if a company is buying, selling, or accepting crypto payments, it has to pay income tax.
- Malta
Malta considers Bitcoin a “unit of account, medium of exchange or a store of value.” The country has many favorable laws for crypto investors and companies. Individual investors are exempt from paying any capital gains tax for long-term crypto investments. But crypto trades equivalent to one-day trading in stocks are levied 35% income tax. If you benefit from structuring options under Malta’s financial system, this tax percentage can be reduced to 0-5%.
Under the Virtual Financial Assets Act passed in 2018, cryptocurrencies can be classified as Virtual Financial Asset (VFA) and lay down comprehensive rules that balance the crypto industry’s growth with customer protection.
- Belarus
In 2018, the government of Belarus started looking at cryptocurrencies quite favorably. This year, the country made all the crypto activities legal and exempted them from taxes until 2023. This was done to promote a crypto-based digital economy. The law aimed to boost the digital economy and provide impetus to crypto investors. Cryptocurrency investments in Belarus are considered personal money and, therefore, not subject to any capital gains taxes. As a result of this progressive law, Belarus became one of the most favorable countries for crypto trading.
- Bermuda
Bermuda is quite an attractive destination for crypto investors. It passed the Digital Business Act in 2018, which set up standard regulations for individuals and entities engaging in crypto-related activities. Crypto transactions are exempt from any income taxes in Bermuda. The country also became the first in the world to accept payments for government services, taxes, and fees in cryptocurrencies (USD coin). In 2020, the Bermuda Stock Exchange approved the Hashdex Nashaq Crypto ETF after being rejected multiple times by the US Securities and Exchange Commission.
If you are interested in learning more about cryptocurrencies’ laws and regulations in different countries, read our blog.
