The status of cryptocurrencies within a national framework has been chaotic from the get-go. The lack of thorough understanding of the space caused politicians and financial watchdogs to ban or criminalized cryptocurrencies without well-founded arguments for their decision.
Blockchain technology is becoming more integrated into digital financial processes. As nation-states experiment with central bank digital currencies, the outlook towards crypto as a new monetary standard is becoming more lenient. Demand for digital assets and increased usability of blockchain as a technological substrate have pushed politicians to create better legal standards to foster crypto adoption.
Starting a cryptocurrency exchange in the current market is much easier because of the improved regulatory framework developed by nation-states. As cryptocurrencies become a global necessity, a handful of countries are regulating their activity as a way to increase contribution to their budget, yet they do not seek to become central players in the crypto market.
Regulatory inputs from EU states still have an indecisive view of cryptocurrencies and hold a conservatory view of accepting crypto, however EU crypto legislation offers better exchange implementation solution, even though it is party fragmented. Bitcoin is not legally justified throughout the European Union, with each country imposing its own regulatory standards. However, the European Banking Authority has cataloged Bitcoin as a virtual asset that holds no physical value aside from its physical representation of value. Although the banking authority recognizes digital assets as a unit of exchange, they express that they are not considered a country-issued digital currency.
Still, within the EU, some countries have relaxed their stance on cryptocurrency exchanges aiming to develop progressive sandboxes for the emerging industry. Below we cover the top 3 countries with the most lenient and accepted form of crypto regulation.
Germany
In Germany, digital assets are legal; after the country implemented special regulations regarding tokenization, ICOs are considered financial instruments that abide by existing fiscal laws. Moreover, in 2018, the Federal Financial Supervisory Authority issued a statement stating that the exchange of cryptocurrencies is exempt from VAT.
Luxemburg
In Luxembourg, crypto holds a legal status after the country became the first EU state to offer cryptocurrency exchange licenses which are to be obtained from the Ministry of Finance. Moreover, in 2019 Luxembourg redacted a law partly deeming cryptocurrencies similar to traditional currencies, further reiterating their positive stance towards crypto.
France
France has a more on-hands approach towards crypto regulation. Profits from cryptocurrencies are taxed as well as cryptocurrency savings are taken into account when calculating wealth-tax, whilst crypto transfers as gifts are also subject to taxation. Using cryptocurrencies commercially has been approved by companies including Decathlon and Sephora, which allows users to purchase gift cards using Bitcoin.
The fact that authorities prefer to act as overseers and don’t fully embrace cryptocurrencies adds to the notion of reluctance and inexperience about the global outlook towards digital assets. However, by partly regulating when needed, countries maintain their detachment while creating a free market for blockchain and crypto to self-normalize.
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