Regulatory barriers are a major concern for businesses working with decentralized assets. Not all governments, however, are putting obstacles in front of crypto companies. In fact the number taking a crypto-friendly stance is in fact increasing.
Also read: Ukraine in a Rush to Legalize Cryptocurrencies Under Zelensky
Executives View Regulations as the Biggest Threat
Government regulations are a determining factor for the business climate crypto companies operate in. A recently published survey conducted among executives from the industry shows that the slow advance in that respect is a major concern. Over half of the respondents, 53% of CEOs polled by venture capital firm Digital Currency Group, singled out the regulatory environment as the main “enemy.” Other threats include a possible economic downturn and cybersecurity risks.
A quarter of the questioned managers admitted that compliance was the greatest challenge they faced last year, while a third stated that the lack of regulatory progress this year surprised them the most. Rules constricting the growth of cryptocurrencies are a much bigger concern to the industry than hacking attacks, for example. The situation can deteriorate even further with policymakers calling for increased oversight in the sector.
Existing regulations in many countries are quite inadequate as they don’t reflect the specifics of crypto-related economic activities, and where new ones are introduced they are often rather hostile. But there are a few notable exceptions, mostly in Europe, like Switzerland, Estonia, Belarus, Malta, and Gibraltar. Authorities in these jurisdictions have taken the lead to establish favorable regulatory frameworks that attract more crypto companies.
Three Countries Make Positive Steps
The number of governments with positive attitudes towards cryptocurrencies and entities working with digital assets is growing, and the crypto community has seen some promising developments over the last few months. These include the adoption of new legislation creating more business-friendly conditions for crypto companies as well presenting a favorable interpretation of tax rules that can save investors money.
Liechtenstein, which is considered by many to be an integral part of the expanding Swiss Crypto Valley, recently adopted a law that aims to clarify the regulatory environment for crypto businesses and attract more of them to the German-speaking principality. The “Token Act,” approved unanimously by its parliament, turns Liechtenstein into a secure location for service providers operating with digital coins and tokenized securities. The tiny Alpine nation hopes to become a major European fintech hub. Several dozen companies from the industry, including entities dealing with cryptocurrencies, are already based or represented in the country.
Regulatory uncertainty can put off businesses and individual investors. But two clarifications issued by Portugal’s tax authority position the country as a crypto tax haven in Europe. In its latest statement on the matter, the regulator said that transactions related to mining, the miner’s reward and its exchange to fiat, should be exempted from VAT. The agency has previously announced that although cryptocurrencies can generate taxable income, gains on their sale or appreciation received by private individuals are not subject to taxation.
Ukraine, which recently elected a younger and more tech-savvy generation of politicians to power, is also embracing cryptocurrencies. There is now a general consensus between government institutions, business circles, and civil society on the need to legalize decentralized digital assets and regulate related economic activities. Several new bills designed to accomplish that goal have been proposed or are currently being finalized. They should provide answers to questions concerning the legal status of cryptocurrencies and taxation in the industry.
If you need a really good example of a crypto-friendly nation, look to Slovenia. Authorities there have a very relaxed policy towards digital currencies. It’s legal in Slovenia to own and trade coins, and capital gains of individual crypto investors are not taxed. Government support has allowed for a thriving crypto industry to develop. One of its members, Eligma, is the startup behind the crypto payment processing platform Elipay which allows in-shop purchases with bitcoin cash (BCH) and other major cryptocurrencies. Mainly thanks to its services, the country now has the most BCH-accepting physical locations in the world, as news.Bitcoin.com reported, numbering over 400.
Do you think more governments will soon follow in the footsteps of these crypto-friendly nations? Share your expectations in the comments section below.
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Author: Lubomir Tassev