Which countries have the most blockchain-friendly regulations?

Jelena Kirst
THE RELEVANCE HOUSE
4 min readMar 25, 2019
Photo by Valentin Antonucci on Pexels

Which countries have the most blockchain-friendly regulations?

For a blockchain startup to flourish, it needs to launch at the right time in the right place. While timing is difficult to predict, where to locate is up to you.

A few articles have attempted to rank the blockchain friendliness of countries by defining indicators and constructing categories such as “national context”, “blockchain startup activities” and “blockchain city leadership”. Some countries that often come up in this context are China, the US, Singapore, Dubai, London, Switzerland, Liechtenstein, Malta and Estonia.

Here, we will focus on the regulatory and legal frameworks in some of these territories. In order for blockchain startups to thrive, they need a regulatory environment that provides a sound legal foundation for the sector without hindering innovation. The challenge here is to prevent fraud and provide legal certainty without overly restricting the creativity of emerging firms. Below, we will examine a few countries which exemplify different approaches to this challenge.

The flexible approach: Switzerland

Switzerland was one of the first countries to create a regulatory and legal environment for blockchain. Rather than drafting bespoke laws especially for the sector, the Swiss government has incorporated the technology within existing legislation. Unlike many other territories, Swiss financial regulation tends to be based on broad principles that give the regulator, FINMA, the freedom to exercise discretion in individual cases. This has given FINMA enough flexibility to give the blockchain sector a solid legal footing, without needing to enact prescriptive legislation.

Switzerland is seen as one of the most blockchain-friendly countries in the world, partially due to its tax-free regulation for startup investors in the sector. The approach seems to have borne fruit: there are 750 blockchain companies with an estimated average valuation of $27 million in Switzerland. In total, the sector employs 3,300 people.

The tailor-made approach: Liechtenstein

Liechtenstein is a close neighbor of Switzerland which shares the same currency and football league — but when it comes to blockchain, it has adopted a radically different approach. It is one of the few territories planning to put specific laws on its books to give blockchain an explicit legal foundation. The Blockchain Act sets out to provide “confidence in digital transactions” by defining token types and “trusted technologies”. Thus, tokens will become a legally recognised entity in Lichtenstein. While this undoubtedly provides legal certainty for startups, it remains to be seen how future-proof this approach will be as blockchain technology evolves.

The technology-first approach: Malta

Malta, known as the crypto island, is another hotspot for crypto and blockchain startups. It has established a regulatory framework for cryptocurrencies that enables crypto exchanges to operate legally. Three specific blockchain laws have been passed with the aim of providing legal certainty and allowing for growth and development of the industry. Malta has adopted a “technology-first” approach to evaluating blockchain projects, meaning that the emphasis of the regulation is on the technology detailed in a firm’s white paper, rather than focussing on the financial gains. The country also has blockchain-friendly laws, particularly in the realms of company registration and taxation.

Malta hosts numerous cryptocurrency and blockchain events, which attract major crowds. A recent blockchain summit drew over 5,000 people, which is over 1% of the island’s population. Malta is actively promoting itself as a crypto island as they have clear legislation and very low taxes. The approach has already attracted some established names in the sector, such as BitBay, ZebPay, and Binance.

The centralised approach: China

If a centralised approach to blockchain sounds like a contradiction in terms, it’s because it is. In January 2019, the Cyberspace Administration of China introduced new regulations which stipulate that blockchain firms must provide access to all stored data and prevent anonymous transactions. All firms in the sector will be required to register the names, and IP addresses of users and all content distributed on DLT platforms needs to comply with Chinese censorship laws. Therefore, while massive Chinese firms like Alibaba are experimenting a lot in the blockchain realm, the regulatory climate for startups is much more uncertain.

We have seen that different territories take radically different approaches to the regulation of blockchain technology. Different regulations mean different opportunities for blockchain startups, so choosing the right location is essential. Since the onset of the crypto downturn, regulatory stability has become a key concern for blockchain startups, particularly those planning to launch an ICO or STO. Thus, it pays to be informed about the regulatory environment in a particular territory before establishing a base.

THE RELEVANCE HOUSE is a full-service blockchain marketing consulting agency for startups conducting an ICO or STO. The focus is to guide blockchain startups in building, designing and delivering a relevant brand and story. Because only relevance has impact. We look forward to hearing about your project. Contact us, we don’t bite!

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Jelena Kirst
THE RELEVANCE HOUSE

Community Wizzard: Community • Social Media • Events @RelevanceHouse