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Hashbon Space: Crypto Grand Tour. Part 6 — European Union + 2 bonus countries

Greetings Hashtronauts!

We welcome you aboard our crypto world travel with the “Hashbon Space Edition” column. Last week we visited many countries in the EU. However, we haven’t come across all European countries as our trip got dense with information and we needed a relaxing layover.

Please set your seats back to their upright and locked position and fasten your seatbelts. Make sure you have your Schengen visa handy. Today we are going to continue investigating the multicultural association — European Union. Please remain in your seat until the plane comes to a complete stop, there will be 2 bonus countries for you. Have a pleasant flight!

To make it easier to navigate across our Crypto Grand Tour, we devote each Hashbon Space Edition to a group of countries which are united by some geographical features or have a single legal regulation.

Germany

At the end of 2011, the German Federal Financial Supervisory Authority (BaFin) declared that bitcoin is not electronic money, as it is not tied to any of the traditional currencies, which resulted in them being defined as a commodity. However, on the 19th of July this year, bitcoins were described as ‘units of accounts’ and therefore can be classed as ‘financial instruments’. Cryptocurrency regulations have treated Bitcoin as units of accounts, representing a form of “private money” that is taxable as capital. In addition, the need to obtain a license or special permission for some types of cryptocurrency use was mentioned. Nevertheless, on February 24th, 2018, the Federal Ministry of Finance (BMF) signed a decree recognizing bitcoin as legal tender. This document states that purchases made with cryptocurrency are exempt from taxation. Germany now officially defines bitcoin as a currency.

The supervisory authority BaFin follows its own regulatory rules and those of the European Union. Basically, the regulator distinguishes three types of virtual currencies: cryptocurrency tokens, security tokens and service tokens (utility tokens). Although crypto assets are subject to the rules that apply to financial services, each crypto asset may also be subject to other laws.

Greece

In Greece, there is currently no legal regulation of cryptocurrencies. But due to the catastrophic decline in the trust level of traditional banks, bitcoin and altcoins have become almost the only real alternative to fiat money. To date, the Greeks were the first to have real access to the network of crypto ATMs located in Athens, Thessaloniki and other various locations. The Bank of Greece set up an Innovation Hub or “sandbox” to enable fintech activities and became a member of the European Forum for Innovation Facilitators (EFIF) in April 2019.

Hungary

Currently, there are no laws that specifically regulate the use of cryptocurrency in Hungary, nor is any cryptocurrency recognized as legal tender. In April 2020, the Magyar Nemzeti Bank (MNB) published a report on fintech and digitalization that included an analysis of the fintech sector, profitability and services across the fintech market. Hungary has, however, joined the European Blockchain Partnership and agreed to AMLD5. Taxes on crypto mining and trading were lowered in 2022 to 15% revenue income. Exchanges from crypto to crypto are not taxable events. Taxes only apply when crypto is converted to fiat currency. It’s worth mentioning that the 15% rate is favorable compared to the rest of Europe.

Ireland

Cryptocurrency transactions in Ireland are not prohibited and are regulated by the International Financial Service Strategy 2025 (IFS20250). Initial Coin Offerings (ICO) are regulated by the Central Bank of Ireland. Crypto is not considered money or equivalent to fiat currency in Ireland. It isn’t backed by either the Irish government or the Central Bank. Ireland’s Office of the Revenue Commissioners released a manual on the tax treatment of various transactions under cryptocurrencies. It clarified that ordinary tax rules apply, and that cryptocurrency mining would generally not be subject to VAT. Generally, profits and losses from crypto transactions are taxable as normal income. There is some uncertainty as to capital gains tax and whether they are held as “investments” under “Badges of Trade” and related case law.

Italy

Cryptocurrencies and blockchain are regulated at the legislative level in Italy under Legislative Act no. 90. At the beginning of 2018, the Italian Ministry of Economy and Finance published a bill on the regulation of cryptocurrencies, which provides for a mandatory registration procedure for cryptocurrency companies. According to the new document, cryptocurrency is recognized as a medium of exchange for services and goods. The bill was issued mainly to fulfill the requirements of the European Union with regards to combating money laundering and terrorist financing. Italy joined the European Blockchain Partnership (EBP) along with 22 other countries in April 2018.

In February 2022, Italy published new AML rules for crypto firms which outline registration and reporting requirements for VASPs that align with the EU AMLD5 and the Financial Action Task Force (FATF) guidelines for crypto firms.

Latvia

There is no regulatory framework for cryptocurrencies in Latvia. Nor are there any particular prohibitions or obligations related to obtaining special licenses. Furthermore, bitcoin and other crypto are not classified as currency of any state. In April 2018, Latvia announced that it plans to recognize cryptocurrencies as a legal medium of exchange and impose a 20% tax on crypto transactions.

Lithuania

In 2017, the Bank of Lithuania stated that Lithuanian financial services must clearly dissociate from activities related to virtual currency, basing its position on the financial risks associated with digital currencies. Lithuania requires crypto firms to register with the country’s Center of Registers. Registrants must adopt comprehensive KYC and AML procedures and are expected to inform the Financial Crime Investigation Service (FCIS) of large transfers. In June 2018, the Lithuanian Ministry of Finance issued guidelines for conducting ICOs, according to which, tokens that generate income or grant entities the right to manage investor funds will be treated as securities.

Luxembourg

In April 2014, the Financial Sector Supervisory Commission issued a statement equating cryptocurrencies with conventional currencies. Accordingly, the authorities provide an opportunity for both individuals and legal entities to use cryptocurrencies for mutual settlements or other transactions. As for the operation of cryptocurrency exchanges, they must obtain special permits from government agencies to provide financial services.

Malta

At the moment, there is no legal regulation framework for cryptocurrencies. In February 2018, the government submitted a relevant bill, according to which, a special agency will be created in Malta to control companies working with cryptocurrency. This agency will certify blockchain platforms and verify cryptocurrency transactions.

Netherlands

At the legislative level, there is no regulation of cryptocurrencies in the Netherlands. The Dutch Central National Bank De Nederlandsche N.V. (DNB) defines crypto as “a digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily attached to a legally established currency and does not possess a legal status of currency or money but is accepted by natural or legal persons as a means of exchange and which can be transferred, stored and traded electronically.” It has its own “bitcoin city” — Arnhem, where you can pay for almost everything with cryptocurrency, including housing, gas, bicycles, and even dental services.

Poland

In February 2017, Poland officially recognized the sale, purchase of cryptocurrency, and its mining as types of commercial activities. In January 2018, the Council of Ministers adopted the draft law “On the regulation of bitcoin and other cryptocurrencies’’. According to this document, cryptocurrency exchanges will be required to conduct due diligence with regards to their clients — that is, to study in detail their business, especially their source of income. They are also entrusted with the functions of financial monitoring agents — they are required to report any suspicious transactions.

Portugal

Despite having issued warnings about the risks related to cryptos, Portugal is widely seen as the most crypto-friendly country in Europe. The legal status of cryptocurrency in Portugal was officially clarified in a statement by the Portuguese tax authorities and was subsequently reaffirmed by the Journal de Negocios. Portugal does, however, follow EU regulation as it has agreed to AMLD5. In April 2020, the Portuguese government published a Digital Transition Action Plan which included 12 pillars, the most important of which were the digital empowerment of people, the digital transformation of companies, and the digitization of the state.

Slovakia

In 2015, the National Bank of Slovakia stated that bitcoin does not have the necessary features of a currency, which means that it will not be regulated by the state. Operations with cryptocurrencies in the country are not prohibited or limited in any way. Accordingly, there is limited legislative regulation in the country.

Slovenia

Slovenia considers cryptocurrency holdings to be virtual currencies. In order to comply with international requirements for tax transparency, the Slovenian government has expanded the anti-money laundering legislation to deal with cryptocurrency (brokers and cryptocurrency exchanges are recognized as financial institutions, the KYC procedure is mandatory).

In 2017, the Slovenian Financial Administration (FURS) issued guidance on the regulation of cryptocurrencies, in which it first mentioned the taxation of capital gains from virtual currencies. Individual income in the form of cryptocurrencies, as well as from mining, is taxed in the same way. However, the income of individuals as a result of trading cryptocurrencies and fluctuations in their rate is exempt from taxation.

As for legal entities, it is worth noting that local legislation does not allow a company’s business model to be based solely on operations with cryptocurrencies. Cryptocurrency mining in Slovenia is not subject to VAT.

Spain

In Spain, bitcoin was recognized as part of a legitimate electronic payment system in 2014. In 2015, bitcoin was considered as a means of payment, and transactions with bitcoin were exempted from VAT. Mining companies and individuals who are engaged in mining are required to register as individual entrepreneurs and pay tax on profits from cryptocurrency production.

Sweden

The Financial Supervisory Authority (FSA) and the central bank have publicly declared that bitcoin is legal but not an official form of payment or legal tender. Certain companies working with traditional currencies (primarily exchange platforms) are required to obtain licenses, as well as comply with standard requirements for combating money laundering and terrorist financing, including identifying their clients. The regulation of cryptocurrencies in Sweden assumes that cryptocurrency transactions are not subject to VAT, though mining is subject to tax as income from employment or business income. Mining activities are not regulated under Swedish law. There are no licensing or registration requirements specifically applicable to virtual currency mining activities.

And here we are! We popped into all EU countries and learned about their crypto regulation. It was a long trip, but don’t hurry to say goodbye as there are 2 bonus countries below!

Canada

In 2016 Canada began to actively study the features of blockchain’s innovative technology. At the same time, the Central Bank of Canada began developing its own cryptocurrency called CADcoin.

Canada has approved bitcoin exchange-traded funds (ETFs). Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC) have issued guidance requiring crypto trading platforms and dealers in Canada to register with the local provincial regulators. In 2021, Canada adopted a clear registration regime for trading platforms that offer custodial services to Canadian clients. Several firms have registered under the new rules. The Canada Revenue Authority (CRA) generally treats cryptocurrency like a commodity, meaning that gains and losses relating to crypto are to be taxed as such.

United States

There is limited legal regulation of the cryptocurrency industry In the US. The Internal Revenue Service (IRS) determined in 2014 that, for federal tax purposes, Bitcoin and cryptocurrencies were treated as property, implementing the applicable taxation rules (property gains tax). In turn, the Securities and Exchange Commission (SEC) considers cryptocurrency “as a digital embodiment of value that is distributed in digital form and can be used as a means of accounting, exchange, or accumulation.”

When carrying out certain types of activities, such as the sale/exchange of cryptocurrencies, entities must comply with AML/CFT and KYC rules. Conducting an ICO in the US, under certain conditions, may be subject to the regulation of securities laws.

To iron out the regulatory differences, confusion about definitions, and jurisdiction, the President’s Working Group and the Financial Stability Oversight Council will play important roles in the development of a future regulatory framework. The Internal Revenue Service (IRS) defines cryptocurrencies as “a digital representation of value that functions as a medium of exchange, a unit of account, and/or a store of value” and has issued tax guidance accordingly. The IRS requires investors to disclose yearly cryptocurrency activity on their tax returns. The United States is home to the largest number of crypto investors, exchanges, trading platforms, crypto mining firms and investment funds.

Good job! We’ve landed at Hashbon International Airport. Please, don’t forget the interesting facts you came across during our trip. Thank you for your attention.

Your Captain Wise Raccoon.

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Hashbon FiRe

Hashbon FiRe

Finance Reinvented Crypto Ecosystem. Including DeFi CDEX platform Hashbon Rocket, payment gateway Hashbon React and crypto wallet Hashbon Quant