The world’s first cryptocurrency is Bitcoin, which appeared back in 2009. Today, cryptocurrencies have revolutionized the global financial market. Disputes about their advantages and disadvantages have been going on for more than a year. And every day more and more people are not only interested, but also become participants in cryptocurrency transactions.
At the moment, in some countries, operations with cryptocurrency are allowed at the legislative level, in others they are generally prohibited. Let’s take a look at the legal status of cryptocurrencies in Europe.
European Union
At the moment, the European Central Bank classifies cryptocurrencies (including Bitcoin) as convertible decentralized virtual currencies. There is no direct regulation yet; in July 2014, the European Central Bank advised local banking organizations not to conduct transactions with cryptocurrencies until a regulatory regime was developed for them. In October 2015, the EU Court of Justice ruled that when Bitcoin is used as a means of payment, operations to exchange it for fiat currencies should not be subject to value added tax (VAT).
In 2017, the EU Anti-Money Laundering Directive was amended to reduce the risk of using virtual currency to launder criminally obtained funds. Under these changes, “virtual currency platforms” and cryptocurrency service providers are required to follow the same requirements for identifying their customers and tracking suspicious transactions as other financial institutions, including banks.
Belarus
Until recently, the cryptocurrency in Belarus was not recognized as a means of payment, or services, or any object of civil rights. Individuals and legal entities on the territory of Belarus could not carry out settlements using cryptocurrency.
But at the end of 2017 Belarus officially recognized cryptocurrencies. President Alexander Lukashenko signed Decree No. 8 “On the Development of the Digital Economy”, which exempts the industry from VAT and income tax until January 1, 2023, and also introduces concepts such as blockchain, mining, token, smart contract, etc. in the country. etc. According to the authors of the document, its goal is to create conditions under which world-class IT companies would come to the state and open their offices, development centers here and develop products that are in demand all over the world. But it is worth noting that only those entities that are registered as residents of the Hi-Tech Park, an analogue of Silicon Valley in the United States, which was created in 2005 with the aim of developing the IT sphere in Belarus, have the right to carry out activities related to cryptocurrencies.
Belgium
There is no legal regulation of cryptocurrency in Belgium yet. According to the Minister of Finance, the government does not yet see the need to interfere with the circulation of the cryptocurrency.
At the same time, in March 2018, it became known that the Special Tax Inspectorate (STI) began searching for its citizens who invest in cryptocurrency on foreign platforms. The goal is to find those who made money on this and did not pay taxes.Three cases have already been opened on citizens’ non-payment of taxes on profits from activities related to cryptocurrencies. Recall that the income tax in Belgium is 33%. Belgians are required to declare cryptocurrency profits as “miscellaneous income” on their tax return.
Interestingly, when the US Federal Tax Service ordered the cryptocurrency trading platform Coinbase to merge user information for 2013-2015, Belgium immediately made a request to obtain this data on its citizens in order to track those who did not pay the tax.
Bulgaria
Bulgaria views cryptocurrencies as a financial asset. This state recognized the legitimacy of bitcoin back in 2014. The main condition for the use of cryptocurrency in Bulgaria is the payment of tax in the amount of 10% from exchange or sale.
Great Britain
Despite the fact that, in general, the UK actively supports the ideas of introducing cryptocurrencies and blockchain into the life of countries and citizens, the final position on the regulation of cryptocurrencies has not yet been worked out here.
Between 2014 and 2017, the Financial Regulatory Authority (FCA) confirmed through statements that Bitcoin is not considered a currency or a “means of payment” in the UK, therefore, cryptocurrency is not regulated by local financial laws.
For example, the Electronic Money Law (EMR 2011) states that cryptocurrencies are not “electronic money” as they are not issued centrally. Because of this, the relevant authorities have no right to regulate it. Also, cryptocurrencies in accordance with the Payment Services Act (PSR 2009) are not “value”. And according to PSR 2009, they cannot be coins, banknotes, electronic money or other scriptural money.
Therefore, cryptocurrency in the UK is still considered a unique combination of numbers, obtained as a result of complex mathematical calculations and algorithms. As such, Bitcoin and other cryptocurrencies are not subject to the provisions of the Anti-Money Laundering Law (MLR 2007).
The UK Internal Revenue Service (HMRC) defines cryptocurrencies as assets or “private money”, and also reserves the right to levy certain taxes on transactions related to cryptocurrencies.
Legislative regulation is still being developed. The FCA has released a discussion paper on blockchain technology and created a platform called the Innovation Hub to launch and test pilot projects related to cryptocurrency.
At the same time, in December 2017, local authorities announced that they intend to tighten regulation of the cryptocurrency market in order to combat money laundering and illegal operations. “We are going to oblige cryptocurrency trading platforms to comply with AML legislation and take measures to combat the financing of terrorism,” a Treasury spokesman said.Thus, the new rules will oblige traders to report suspicious transactions and disclose their identity. According to the regulator, the fact that transactions are now being conducted anonymously makes the cryptocurrency market attractive to criminals. More recently, the Bank of England issued a letter warning companies about the reputational risks associated with the use of cryptocurrency.
Germany
Over the past years, the approach to defining cryptocurrencies has changed several times. At the end of 2011, the German Federal Financial Supervision Authority (BaFin) announced that Bitcoin is not electronic money, since it is not tied to any of the traditional currencies, and identified it as a commodity. In the spring of 2014, a letter was issued by the Federal Ministry of Finance (BMF) clarifying that the commercial sale of Bitcoin is “a different service.” For retailers who accept Bitcoin as payment for goods, both the sale of the goods themselves and the sale of bitcoins that are accepted when making a purchase should be taxed. From late 2013 until recently, Bitcoin has been viewed by BaFin as a unit of account, a form of “private money” that is taxed as capital. In addition, it was mentioned about the need to obtain a license or special permission for some uses of cryptocurrency.
But on February 24, 2018, 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.
Greece
There is currently no legal regulation of cryptocurrency in Greece. But due to the catastrophic decline in Greek confidence in traditional banks, bitcoin and altcoins have become almost the only alternative to fiat money. Partly due to the absolute disregard of cryptocurrency regulation by local authorities, the popularity of Bitcoin and other cryptocurrencies in Greece has grown exponentially since 2013. The local population uses them both for long-term investments and for short-term storage of accumulated savings.
Today, the Greeks were among the first to gain real access to the network of crypto ATMs located in the largest cities (Athens, Thessaloniki and others).
Denmark
Denmark is one of the countries that has recognized cryptocurrency. This state is home to several startups and exchanges, such as CCEDK, an innovator in the decentralized exchange crypto space that released Bitcoin “3.0” technology. In the future, Denmark plans to completely abandon conventional paper money in favor of digital currencies.
The Danish Financial Conduct Authority (DFSA) announced that Bitcoin is not a currency, therefore, its use in the country will not be regulated.
Italy
In early 2018, the Italian Ministry of Economy and Finance published a draft law 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. However, it is not supported by government agencies and is not issued by the central bank, so cryptocurrencies are not necessarily considered a means of payment. The bill was issued mainly to meet EU requirements for combating money laundering and terrorist financing.
Spain
In the spring of 2018, it became known that the Spanish government plans to pass laws that would legalize cryptocurrencies and ICOs in order to attract promising blockchain startups to the country. Local authorities want not only to develop friendly laws for businessmen, but also to offer tax breaks, and small investments will not need to be declared at all. According to MP Garcia Igea, they plan to create the safest ICO regulatory environment in Europe.
In April 2018, the government asked 60 Spanish companies and financial institutions for information on trade transactions of cryptocurrency buyers. Thus, Spain hopes to identify and suppress attempts to launder money and tax evasion using cryptocurrencies.
Bitcoin has been recognized in Spain as a legal electronic payment system since 2014. In the spring of 2015, it began to be considered as a means of payment, and transactions with Bitcoin were exempted from VAT. In 2016, mining companies and individuals who are engaged in mining are required to register as individual entrepreneurs and pay tax on profits from the mining of cryptocurrencies.
Latvia
Latvia is one of the countries where bitcoin is not yet popular. In April 2018, Latvia announced that it plans to recognize cryptocurrencies as a legal medium of exchange and impose a 20% tax on transactions with cryptocurrencies. At the same time, the Financial and Capital Market Commission recalled that although cryptocurrency in Latvia is not yet legal tender, it can “function as a medium of exchange”.
The issue of regulating the cryptocurrency market in Latvia was instructed to deal with a special working group created by order of the Prime Minister of the country Maris Kučinskis. The members of this group are obliged to weigh all the potential benefits and risks of the cryptocurrency market in the state.
Lithuania
So far, there is no legal regulation of cryptocurrency in Lithuania.But in April 2018, the Central Bank nevertheless admitted that despite the risks, “blind denial, unwillingness to understand and work with cryptocurrencies leads nowhere.” In this regard, a dialogue was initiated between cryptocurrency distributors and commercial banks on the approach to virtual currencies.
Earlier, in 2014, the Central Bank banned banking institutions from working with cryptocurrency and explained that the main purpose of introducing restrictions is for citizens to understand that they are not protected by the state when they use cryptocurrencies, and their possible losses will not be reimbursed.
In June 2018, the Ministry of Finance of Lithuania issued ICO guidelines, according to which tokens that generate income or give the right to manage investors will be treated as securities. In 2019, Lithuania is planning to create a blockchain project LBChain, which will help Lithuanian companies master relevant technological solutions.
Liechtenstein
At the moment, Liechtenstein is completing the development of legal regulation of cryptocurrencies. The first public discussion of the new law took place on June 21, 2018. Adrian Hasler, the country’s prime minister, said the government intends to avoid “over-regulation” and, based on the experience of other countries, is going to go “much further.” He stressed that he does not see any point in too strict regulation of cryptocurrencies, since technologies will still continue to develop outside the framework of the law.
Malta
At the moment, there is no legal regulation. But in February 2018, the government has already submitted a relevant bill, according to which a special agency will be created in Malta to control companies working with cryptocurrency. This department will deal with the certification of blockchain platforms and verify cryptocurrency transactions. The authorities believe that such measures could “bring peace of mind” to the country’s cryptocurrency market.
But the creation of a department that will also provide services to financial institutions and implement blockchain technology in government structures is only the first stage in the regulation of the cryptocurrency market. At the second stage, it is planned to pass a bill on ICO regulation in Malta. The third stage directly concerns the regulation of the cryptocurrency market – it will affect exchanges, brokers, investment consultants, as well as those who provide crypto wallet services.Netherlands
The Netherlands is not just a Bitcoin-friendly state, it even has its own “bitcoin city” – Arnhem, where you can pay for almost everything with cryptocurrency, including housing, gas, bicycles and even dentist services.
At the legislative level, cryptocurrencies in the Netherlands are not yet regulated. But Finance Minister Vopke Hekstra plans to change that. He recently suggested that the country’s parliament more actively use international experience in the regulation of cryptocurrencies, in particular in the field of consumer protection. In addition, the minister insists on the introduction of mandatory state registration of cryptocurrency services and cryptocurrency exchange platforms, which will also be required to identify all their customers. Hekstra believes these requirements should be met by the end of 2019.
Norway
In 2013, cryptocurrencies were officially recognized as a digital asset in Norway. The tax on profits from the sale of cryptocurrencies is calculated in accordance with the rules adopted for transactions with real estate, stocks and other traditional assets. In 2017, the government decided to abolish VAT on all purchases and sales of bitcoin and other cryptocurrencies. There is no detailed legal regulation yet.
In May 2018, it became known that the Central Bank of Norway is thinking about creating a national virtual currency that would be a supplement to cash, an alternative to deposits in banks and a backup solution for electronic payment systems. This decision was made against the background of a decrease in the use of cash.
Poland
In February 2017, Poland officially recognized the sale and purchase of cryptocurrencies and mining as one of the types of commercial activities, respectively, such activities must be registered with an authorized body. In January 2018, the Council of Ministers adopted a bill “On the regulation of Bitcoin and other cryptocurrencies” in order to restrict transactions with cryptocurrencies under the pretext that they are used for tax evasion and money laundering. This document lists a long list of entities that will be subject to such regulation, and among them there are exchanges and other intermediaries working with cryptocurrencies. Thus, cryptocurrency exchanges will be required to conduct due diligence of their clients – that is, to study in detail their business, especially the sources of income. They are also entrusted with the functions of financial monitoring agents – they are obliged to report any suspicious transactions.
Portugal
In September 2017, the Central Bank of Portugal announced that the financial regulator does not consider cryptocurrency as a currency, as it does not meet the relevant characteristics. In May 2018, the Portuguese Parliament discussed the rules for regulating cryptocurrencies, in particular, ICO regulation. According to the government, the new rules will expand domestic cryptocurrency services, which will benefit consumers by encouraging competition. At the same time, the transparency and security of payments will be ensured.
It is also a matter of dispute resolution practice – payment service providers will be required to cooperate with dispute resolution organizations. For example, there are plans to introduce complaint mechanisms for e-money issuers and payment service providers.
Russia
The Ninth Arbitration Court of Appeal in Moscow in May 2018 recognized the cryptocurrency as “other property” and allowed it to be included in the bankruptcy estate to pay off debts to creditors, which became a turning point, since for the first time in the judicial practice of the Russian Federation, Bitcoin was recognized as a valuable asset.
At the same time, the draft law on the regulation of cryptocurrency was adopted in the first reading, more precisely, 3 documents that come in a package. The bill introduces the term “digital right”, which means a set of electronic data confirming the right to own a cryptocurrency. Tokens and cryptocurrencies are recognized as property. They do not represent legal tender, but they can be exchanged for rubles through certified intermediaries.
Also, the bill allows for ICO. To do this, you will need to provide detailed information about the project and a public offer. Unqualified investors will only be able to invest in such projects a limited amount.
Slovenia
Today Slovenia views cryptocurrencies as virtual currencies.In order to comply with international requirements for tax transparency, the Slovenian government has expanded the anti-money laundering legislation to cryptocurrency transactions: all brokers and cryptocurrency exchanges are recognized by financial institutions and are required to carry out the KYC procedure and comply with transparency requirements.
In 2017, the Financial Regulator of Slovenia (FURS) issued a guide that first mentioned the taxation of capital gains from virtual currencies. The income of individuals in the form of cryptocurrencies is taxed: the taxable base is calculated based on the exchange rate of the cryptocurrency in relation to the euro at the time of receipt of this cryptocurrency. The same principle applies to mining. At the same time, the income of individuals from trading cryptocurrencies and income from fluctuations in the bitcoin rate are exempt from taxation.
As for legal entities, it is worth noting that local legislation does not allow basing a company’s business model only on operations with cryptocurrencies: all companies in Slovenia must have a bank account to conduct non-cash transactions with traditional money.
Ukraine
So far, cryptocurrencies in Ukraine do not have a legal status, but the preparation of a concept for regulating this market, according to the deputy head of the NBU Oleg Churiy, is practically over. The regulator of the cryptocurrency market will be the National Commission on Securities and Stock Market, crypto exchanges will be required to obtain licenses to operate, and market participants will be required to comply with financial monitoring when conducting transactions with cryptocurrencies.Earlier, in September 2017, the NBU refused to recognize Bitcoin as a currency and stated that it was not a means of payment. In this regard, the term “cryptocurrency” is proposed to be replaced by “crypto-unit”.
At the moment, the Verkhovna Rada has three bills on cryptocurrencies, prepared back in October 2017. One of them equates cryptocurrency to an object of ownership with appropriate taxation, the other provides tax exemption for profits from transactions on the purchase, sale and production of cryptocurrency. But back in November 2017, the financial regulator analyzed all three projects and came to the conclusion that they are overly strict and need to be improved.
Finland
In early July 2018, the Central Bank of Finland published a document called “The Great Cryptocurrency Deception”, in which it explained its attitude towards virtual currencies. According to the Bank’s representative, cryptocurrencies are not real currencies, but just “systems for counting non-existent assets.”
In Finland, Bitcoin is viewed as a financial (payment) instrument, not an asset, so it is exempt from VAT. For tax purposes, cryptocurrency transactions are considered a private contract equivalent to a contract for difference (CFD). Purchasing goods for cryptocurrency or converting cryptocurrency into fiat money “realizes” the value, and any price increase is taxed; but losses are not taxed. Bitcoin obtained from mining is treated as earned income.
France
In February 2018, the local regulator (AMF) announced that financial products based on cryptocurrencies should be regulated as derivatives. This means that trading platforms will need permission to trade such contracts. Also, they can no longer advertise cryptocurrency contracts online.
On April 26, 2018, the French Council of State lowered the tax rate on the sale of cryptocurrencies from 45% to 19%. This is due to the ruling of the French Supreme Court that digital assets are now classified as movable property. Thus, the tax was reduced to the level of taxation of intellectual property. But there is one caveat – the tax rebate applies only to investments, so France is still unprofitable for miners.
In March 2018, the regulator began work on ICO legislation.
Czech
The Czech Republic was one of the first in the world to take steps to regulate cryptocurrencies.In January 2017, the adopted bill limited the anonymity of transactions – crypto exchanges and other exchange services were obliged to verify their clients in order to combat money laundering and terrorist financing. But cryptocurrency transactions are tax-free and not subject to licensing.
In general, local authorities are loyal to cryptocurrency. For example, in August 2017, the Czech National Bank urged banks not to be afraid of bitcoin and called Prague “home for cryptocurrency users”.
Switzerland
Cryptocurrencies are considered assets in Switzerland, and therefore they are neither derivatives (options, futures, etc.), nor securities, nor property rights. Switzerland does not have special rules for conducting token sales, although there are requirements for compliance with the provisions of the legislation on combating money laundering and the financing of terrorism (KYC/AML Policy).
In February 2018, FINMA released the ICO guide. In the document, the regulator clarified that it distinguishes between three types of tokens issued for ICO purposes. Their regulation depends on which token falls into the category.
Using cryptocurrencies to purchase goods or pay for services and accepting cryptocurrencies as payment do not require a license. Any cryptocurrency exchange before starting operations must either apply to FINMA for a license, or become a member of a self-regulatory organization (SRO). Certain commercial activities with cryptocurrency may require a special banking license.For example, it is necessary if an organization accepts money from customers on a commercial basis and stores it in their accounts, or accepts bitcoin from customers and manages these assets for their benefit.
In July 2017, Switzerland announced the creation of a “regulatory sandbox,” which aims to create an enabling environment for fintech startups.
Sweden
Sweden quickly legitimized the fast-growing cryptocurrency industry by publicly declaring bitcoin and other digital currencies to be legal tender. Certain companies working with classic currencies (primarily exchange sites and exchanges) are required to obtain licenses, as well as comply with standard requirements for combating money laundering and terrorist financing, including identifying their customers.
Cryptocurrency transactions in Sweden are not subject to VAT, and mining is subject to labor income tax or business income tax.
Estonia
Estonia attracts many companies with its legal regulation of activities related to cryptocurrencies. In November 2017, the new Anti-Money Laundering and Terrorist Financing Act (MLTFPA 2017) entered into force in Estonia, which made it possible to legally engage in cryptocurrency business. In accordance with this law, cryptocurrency is considered as an alternative means of payment, that is, an unconventional financial instrument that has a monetary value and is outside the standard banking system. The Estonian Financial Intelligence Unit (EFIU) oversees the conduct of cryptocurrency activities.
In March 2018, the Financial Supervision Authority (EFSA) published ICO guidelines, according to which tokens can still be recognized as securities in accordance with Estonian securities and stock market legislation. It also provides for punishment (up to criminal) for violation of current legislation, for example, if the prospectus was not registered, although the ICO was subject to registration.
As for the regulation of cryptocurrency activities, earlier, when conducting transactions worth more than 1,000 euros per month, it was necessary to “meet” with the buyer in person, receive a copy of the identity document, and store all information about the client and his transactions in order to provide it at the first EFIU requirement. Now, if certain requirements are met and the client’s potential risk level is analyzed, the need for face-to-face client identification for transactions over 1,000 euros is no longer necessary. Alternative payment providers are required to register with the Register of Economic Activities of Estonia and obtain licenses / permits from EFIU to conduct such activities. Typically, such licenses are issued within 7-15 days, provided that all documents have been correctly drawn up.