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Governments across the globe disagree on how to regulate cryptocurrency as it transitions from speculative investment to a diversified holding in a portfolio.

The sector is flourishing in practically every part of the globe today and for excellent reasons. It is one of the easiest means of doing transactions and gives the greatest flexibility also. Even better is that it gives a new form of individual empowerment that is both fascinating and dynamic. Digital assets are also booming for many more reasons. It protects against inflation, is cost-effective, and is also a safe way to pay. What is even more remarkable about this is that it is a private approach that is self-governed and managed.

When I think about how friendly a country is to cryptocurrency, I think about how much it regulates and taxes cryptocurrency to see how friendly that country is to them. With that in mind, let’s examine how some of the so-called “Crypto friendly” countries are tackling crypto legislation. 

Malta

The little Mediterranean island country has always been seen as a welcoming face by cryptocurrency investors. Due to their open-mindedness, numerous cryptocurrency exchanges and blockchain projects are headquartered in the nation.

There are a few more reasons that Malta makes strategic sense for crypto-focused enterprises as well. Malta is a European Union member-state. That implies that crypto projects with operations located in Malta can operate freely throughout the remainder of the European Union.

The country’s lenient stance toward regulating crypto hasn’t gone without criticism. The Financial Action Task Force (FATF), an international policy-making group with 39 member nations, has been vociferous in its concern over Malta. The FATF convened a closed meeting in which alarm was vocalized over an alleged 60 billion EUR ($71.2 billion) in cryptocurrency, which had flowed through Malta’s borders. There were no reports of it being employed for criminal purposes or even hints thereof. Concerns have been raised about the absence of a regulatory authority to provide guidance.

Increased regulation may or may not come to this little Mediterranean island. In the meanwhile, affluent crypto investors from non-EU nations will continue to consider it for its 1.5 million EUR ($1.78 million) citizenship offer and liberal stance toward crypto.

Switzerland

Switzerland has a reputation for many things. High privacy and minimal risk are synonymous with Swiss banking norms, which are well-known in the financial world. Consequently, it should come as no surprise that the country has lax laws for crypto investors as well.

However, the division of areas into cantons significantly impacts what is and isn’t possible. Legal standards for regulating cryptocurrencies vary from canton to canton in Switzerland, which has 26 states and federal territories.

Cryptocurrency may be taxed in one Swiss canton but not in another. Each canton may have its own set of criteria for determining when taxes are levied. Because of the tax exemption for moveable private wealth in Zurich, Bitcoin and other cryptocurrencies may be excluded from the country’s income tax. On the other hand, mining profits are subject to standard income tax. The rules are more stringent in Bern, and mining and trading are considered normal employment compensation. Zurich’s capital gains are tax-exempt in Lucerne, which is more in accordance with the canton’s policy.

European Union

While cryptocurrency is legal in the majority of the European Union (EU), exchange administration varies by member state. Meanwhile, taxes vary significantly within the EU, ranging from 0% to 50%. Recent years have seen the implementation of the EU’s Fifth and Sixth Anti-Money Laundering Directives (5AMLD and 6AMLD), which strengthen KYC/CFT standards and standard reporting requirements. The European Commission proposed the Markets in Crypto-Assets Regulation (MiCA) in September 2020—a framework that strengthens consumer protection clarifies crypto industry conduct and provides new licensing requirements.

Portugal

Today, if you’re looking for some of the world’s most crypto-friendly countries, Portugal is almost certain to be towards the top. In Portugal, cryptocurrency is tax-free, and many crypto traders have already established a second residence in the nation. In Portugal, there is a great deal of interest in cryptocurrency. In April 2020, Portugal launched a “Digital Transitional Action Plan” to boost digitalization. According to the Government, this strategy will foster an environment conducive to corporate innovation and digital transformation. Additionally, the action plan calls for the establishment of “Technological Free Zones” to facilitate blockchain and other field experiments.

Canada

In general, Canadian regulators have adopted a proactive attitude toward cryptocurrency. In February 2021, it became the first jurisdiction to approve a Bitcoin exchange-traded fund (ETF). Additionally, the Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC) have stated that cryptocurrency trading platforms and dealers must register with provincial authorities in Canada. Additionally, Canada recognizes cryptocurrency investment firms as money service businesses (MSBs) and requires them to register with the Canadian Financial Transactions and Reports Analysis Center (FINTRAC). Canada taxes cryptocurrencies similarly to other commodities.

Estonia

Estonia is adamant on carving out a magnificent niche for itself in the world of cryptocurrency. It is one of Europe’s hotbeds for cryptocurrency startups, and the popularity of cryptocurrencies matches Estonia’s reputation as a digital success story. This market is expanding, and investors are willing to invest in any solution, including blockchain technology. In Estonia, bitcoin and other cryptocurrencies transactions are taxed similarly to other company activities – there is no corporate income tax on profits that are not dispersed.

Estonia’s banking sector is likewise becoming more crypto-focused. For example, LHV Bank in Estonia was one of the first financial institutions to use blockchain technology. Additionally, the organization introduced a Cyber Wallet application, a blockchain-based wallet that lets users transmit digital representations of actual euros.

Singapore

Singapore is well-known as a fintech centre in Southeast Asia. The Monetary Authority of Singapore, Singapore’s central bank, argues that innovation should not be stifled while the cryptocurrency ecosystem should be strictly controlled to prevent money laundering and other illicit activity.

Singapore has no capital gains tax. Cryptocurrency money held by individuals and corporations are not taxed. However, if a business is incorporated in Singapore and engages in crypto trading or accepts crypto payments, the corporation is liable to income tax.

Germany

Germany has an unusual stance on cryptocurrency taxation. Individual investment is favoured in the country, which views bitcoin as private money rather than a currency, asset, or stock. Bitcoin and other cryptocurrencies are tax-exempt in Germany if kept for more than a year. They are not subject to VAT on sale or purchase.

If you convert the money to cash or another cryptocurrency within a year, the profit is tax-free if it is less than €600.

Luxembourg

Luxembourg views cryptocurrency as a valid medium of exchange. There are no prohibitions on dealing or utilizing cryptocurrencies within the nation. Although Luxembourg does not have clear cryptocurrency regulations, the government’s attitude to legislation is normally progressive.

Cryptocurrency exchanges in Luxembourg are regulated by the CSSF and must comply with the same laws as other financial institutions.

Today, the country is poised to stay current on cryptocurrency developments and establish the most effective tactics for dealing with them.

Netherlands

The Netherlands has a liberal approach regarding cryptocurrencies. The officials believe it has the potential to assist the country’s economy to develop. Because the Netherlands does not have any strong restrictions prohibiting the usage of cryptocurrencies, individuals utilize them without concern. They adhere to the Financial Action Task Force’s requirements (FATF.)

In the Netherlands, cryptocurrency is regulated by The Dutch National Bank (DNB).

India

So what about India?

Different nations regulate cryptocurrencies differently, but it is reasonable to say that India has been one of the most resistant to cryptocurrencies thus far. According to media sources about what the Government is going to propose in crypto legislation, this status is unlikely to alter much.

The country has maintained a cautious stance toward cryptocurrencies, with the RBI attempting to prohibit them. Even after the restriction was lifted, the central bank’s declared position has remained the same. The Indian Government, on the other hand, is pursuing a twin strategy of rigorously regulating cryptocurrencies while simultaneously supporting the use of blockchain technology.

Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.