A Guide to the Most Crypto Friendly Countries
There are a variety of metrics for determining the friendliness of a country towards cryptocurrencies, one of the most common being the way in which it regulates and taxes digital assets. Another means by which we can compare crypto averse and crypto friendly countries is by looking at the national stance on crypto mining, as well as the level of effort put into encouraging or discouraging investment in this arena. The number of crypto traders and investors in the country should also be taken into consideration, when assessing crypto friendliness. In addition, the degree of leniency in the national banking policies towards the transfer of funds to crypto exchanges, platforms and other types of decentralized financial applications is a major issue, since blocking fund transfers to cryptocurrency investment channels places a serious obstacle in the path of crypto adoption.
In this guide we will look at some of the most crypto friendly countries and what makes them so attractive as digital asset investment hubs.
According to the recently introduced Fund Location Act, “spezialfonds,” funds which are open only to institutional investors and are Germany’s primary investment vehicle, are now permitted to invest up to 20% of their portfolios in crypto. If all the spezialfonds invested the full amount allowed, Germany could see as much as $415 billion to flow into digital currencies.
This development is drawing digital currencies into the traditional, regulated system and could eventually have a huge impact on retail investors. For example, insurance policies and retirement funds may be managed by these funds. Also, this development may trigger further regulation, legitimization, and adoption in the retail investment sphere.
German law favors long term over short term crypto investment. For example, while those who sell their digital assets within a year are subject to capital gains tax, those who HODL their crypto for longer than 12 months are not obliged to pay it.
Portugal offers attractive opportunities, for retail crypto investors. For a start, it doesn’t tax individuals on any capital gains from the purchase or sale of digital currencies. Moreover, the country allows for individuals to exchange digital assets into other currencies, completely tax-free. Yet, these tax breaks are not extended to institutional investors.
Though geographically, only a small dot on the global map, Malta has carved out a prominent name for itself as “the blockchain island,” a center for blockchain and crypto investment. This has been achieved through a soft stance towards crypto. However, there has been a recent backlash as the country’s institutions have come under the international spotlight for lax regulation and a resulting lack of oversight.
Another major crypto hub, in contrast to many of its Asian neighbors, is the city-state of Singapore. It has become a southeast Asian Fintech center, where crypto trading is legal and digital currency exchanges can operate legitimately.
The central bank has implemented regulatory oversight of crypto finance to prevent money-laundering and fraud, yet takes a crypto-forward approach that promotes growth, with all cryptocurrencies being exempt from capital gains tax.
In Slovenia, retail investors are not taxed for income from cryptocurrencies. The country is also home to “Bitcoin City”, the first ever Bitcoin-supported shopping center, with approximately 500 stores that accept crypto payments.
Switzerland got in on the ground floor with digital currencies and today goods, services and even taxes can be paid in crypto. It is home to the “crypto valley”, with 960 blockchain and crypto companies at last count, including various heavy hitters like Ethereum, Cardano, Nexo, Solana and Diem.
It should be noted however, that Switzerland has 26 localities, known as cantons, each of which has its own regulations relating to cryptocurrencies. For example, in Bern crypto trading and mining are treated as regular income, whereas in Zurich and Lucerne, since capital gains are tax exempt, this can be interpreted to mean that digital assets are tax-free.
There can be no discussion of crypto-friendly countries without a brief look at the United States, as it is the world’s biggest crypto market.
It has also been termed the world’s most “crypto-ready” country, based on a variety of factors from Google searches to legislative action. Globally, there are approximately 15,000 businesses accepting crypto payments, 2,000 of which are in the US, and there are over 17,000 crypto ATMs, more by far than anywhere else in the world.
Some states are moving forward faster than others on the crypto front, with New York, Arizona, Wyoming, Nebraska, Oklahoma, South Carolina and Colorado all looking to ease restrictions.
However, crypto readiness does not necessarily translate to crypto friendliness. While there is no over-riding clear regulatory framework, federal and state legislators are expending a great deal of effort focusing on cryptocurrencies. Currently, the SEC is exploring whether more cryptocurrencies should be considered securities, as well as which crypto market participants should be subject to SEC oversight.
This is far from a full list of crypto-friendly countries, which also includes Cyprus, the UK, Israel, Bermuda and Nigeria to name a few. Facts on the ground are changing at an incredibly rapid pace as legislators, world-over catch up to an evolving decentralized financial reality.
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To learn more about crypto arbitrage, global crypto regulation or a range of other topics relating to blockchain, DeFi and digital currencies, check out the ArbiSmart blog.