As more and more countries begin exploring adopting cryptocurrencies and allowing investors to invest in digital assets, they will begin to diverge in policy flexibility and openness.
For example, the United States in 2022 announced that it wants to be a crypto-friendly country, but some of its policies suggest otherwise. In addition, in places like Europe, regulators and industry are battling back and forth on the future of cryptos, blockchain, and Web3.
How Do We Measure If A Country is Crypto-Friendly?
There are a few measurements that can be used to gauge whether a country is friendly towards crypto. The most widely used metric one can look at is how heavily a country regulates and taxes cryptocurrencies.
Besides this, however, there are many other signals that a country can make to label it a “crypto-friendly” place.
First, a country that has a large number of crypto investors and traders can be said to be a “crypto-friendly” place. Second, a nation that allows for bitcoin mining and enacts measures to attract investment in this area also signifies relative support. Third, if a country’s banks have lenient policies for transferring funds to crypto exchanges and other decentralized platforms is another positive development. This in particular is a good sign for wider crypto adoption because getting funds out of one’s bank account and onto these cryptocurrency investment channels is a huge bottleneck, especially since there are fees involved. Therefore, in terms of whether a country is friendly towards crypto or not, it’s really all about perspective and which aspect you’re looking at.
So let’s talk about some of the most “crypto-friendly” countries out there.
Portugal is said to be taking “a soft stance towards cryptocurrencies.” Apparently, those who “profit from the purchase and sale of cryptos are not taxed on the capital gains.” Furthermore, the exchange of one cryptocurrency to another currency is tax-free. However, these advantages seem to only apply to individuals, corporations are not included. In other words, Portugal is a crypto haven for individuals, not corporations.
Germany views “cryptocurrency as private money, as it isn’t treated as legal tender nationwide.” Furthermore, German laws are said to be designed to favor long-term investments. This means that those who hold onto their investments are not subject to a capital gain tax, while those who sell (within a year) are subject to capital gains.
The small country of Malta has been long talked about as a crypto and blockchain center. The Maltese government supports cryptocurrencies and so far has established rather lax regulations. However, this has worried people that there is not enough regulatory oversight.
Switzerland was early to the crypto game. Many crypto and blockchain companies operate in the country, for example, Ethereum, Shapeshift, Xapo, Bity, and many more. Zug, a large city in the country, is known as “crypto valley.” Having this name in itself is significant. In terms of regulation and taxation, it depends on locality, as some are strict, while others are less so. Moreover, on the positive side, it seems like individuals can purchase items and pay bills in crypto.
Slovenia houses the world’s first Bitcoin-friendly shopping center, called “Bitcoin City.” The shopping center has around 500 shops that all accept Bitcoin. Also, apparently, income from cryptocurrencies is not taxed for individuals.
Singapore has been an “Asian Tiger” economic powerhouse and stable financial center for a long time. It’s also an innovative hub for companies operating in the technology and Fintech industries. Cryptocurrency exchanges and trading are legal, and the city-state has taken a friendlier position on the issue compared to its regional neighbors.
A recent study by research firm Crypto Head labeled the United States as the most “crypto-ready” country in the world. Although this doesn’t directly translate into “crypto-friendly,” it’s still important to take into account. Besides this, the federal and state governments are paying lots of focus and attention to cryptocurrencies. Despite this, little to no rulemaking has taken place. Individual states like Wyoming, Colorado, Oklahoma, Nebraska, South Carolina, Arizona, and New York are reviewing crypto and making moves towards easing up restrictions. At the federal level, the SEC, FinCEN, and Treasury Secretary Yellen are starting to look into cryptos and stablecoins, but it remains unclear what they will do. Of course, as AML, CFT, and the taxing situations unfold, the industry will likely tighten up a bit. But in terms of all-out banning and regulating the purchase and trade of cryptocurrencies, the United States doesn’t seem to be moving in this direction, instead, it will likely seek to maintain its role as the biggest crypto market.
Honorable mentions: Cyprus, Bermuda, Nigeria, United Kingdom, Israel
Although this isn’t an exhaustive list of crypto-friendly countries and a full analysis of each country’s policies and attitudes towards crypto, it’s a start. Because definitions vary, it’s difficult to make a perfect assessment of which countries are crypto-friendly and why.
The countries mentioned above are not the only countries that may have a positive attitude towards cryptocurrencies, there are certainly more. Nevertheless, the underlying theme that connects all the above countries together is that they are not excessively taxed and regulated, and individuals can purchase these assets quite freely. However, is this enough? Will these countries remain friendly towards crypto moving forward? Or will they begin to work against it and put up stricter barriers? At the moment it’s hard to say.
We at Phemex will definitely stay on top of it and put out future pieces on regulatory affairs. Stay tuned!