Five Essential Countries in the Cryptocurrency Universe
According to the ancient Greek philosopher Heraclitus of Ephesus, who is considered one of the most important thinkers in history, everything is guaranteed to change. Most of us know that, and yet IMF’s Christine Lagarde warns that change can appear daunting, destabilizing, even threatening. The latest revolution in the digital markets – blockchain technology and cryptocurrency – is definitely the change many find stressful. After all, technological changes “disrupt our habits, jobs, and social interactions,” says Lagarde. Yet, when it comes to fintech, some individuals, institutions and countries are more resilient than others, and are already working to adopt new technologies and integrate them with mainstream business operations.
Whether you are a cryptocurrency enthusiast, trader or entrepreneur, it is important to keep an eye on the development of different blockchain technologies and crypto markets around the globe, and try to wrap your mind around several questions. What makes some nations welcome crypto? Why is it easier to start a blockchain or crypto start-up in one country, but not in another? Although there are many considerations that would go into defining a nation as crypto-friendly, some attributes are quite obvious: favorable tax regimes and beneficial legal frameworks, supporting blockhain based businesses and cryptocurrencies, and of course government buy-in.
Although before making any business decisions, you would need to examine regulatory frameworks and policies in potential target countries, here is a list of crypto friendly nations and the main attributes that make them important for you to consider:
A small archipelago in the Mediterranean Sea, and a part of the eurozone, Malta has developed a reputation for drawing expatriates looking for beautiful weather and a stable and attractive business environment. Historically, the country served as a naval base for different nations, and relied on trade. Over the last several decades, its favorable tax regime, along with its secure economic and political environment, convenient geopolitical location, and relaxed residence requirements have attracted a variety of industries, including financial services and gaming. Then came blockchain and cryptocurrencies. Malta’s leadership welcomed the emerging technologies and announced that it wanted Malta to become a “global trailblazer in the regulation of blockchain-based businesses” known as the blockchain island.
Malta is a part of Europe’s banking sector and is considered an advanced economy by the IMF. Getting Malta’s residence, which offers a special tax status by setting the personal 15% tax rate on income earned abroad, is relatively easy. In addition, foreign residents are not responsible for any income tax on foreign sourced capital gains, such as profits made in the stock market that may include cryptocurrencies. As a result, over the last few years, Malta has become a hub for many blockchain and crypto businesses, including high profile exchanges such as Bittrex and Binance. Binance, which came to Malta in 2018 following regulatory developments in several Asian countries, such as China, Hong Kong, and Japan, is also planning to start a blockchain-based bank in Malta, despite some red tape.
Following decades of stagnation since the 1990s, Japan has been searching for new ways to spur economic growth. Often ahead of other nations when it comes to innovative technologies, it has now become an active player in the cryptocurrency industry. The legendary Satoshi Sakamoto, the founder of bitcoin, whose identity is not known, uses a Japanese pseudonym. Japan is at the forefront of Bitcoin adoption and is ahead of other countries in bitcoin trading, with more than 16 companies operating as cryptocurrency exchanges.
Japan’s solid legal system supports the industry and works to build credibility among investors. The country recognizes Bitcoin and other cryptocurrencies as a payment method, which eliminates the consumption tax on the sales of crypto. The regulation also makes it easier for businesses to accept crypto payments. A growing number of Japanese stores, including large retailers such as Yamada Denki, are accepting the digital currency to attract business from progressive and technologically proficient customer base. Other businesses, such as hotels, are catching up, while some Japanese companies have started to give employees the option to receive bitcoin as part of their monthly salary.
Japan’s National Tax Agency ruled in 2017 that gains on cryptocurrencies like bitcoin should be categorized as miscellaneous income, which is taxed at 15-55% rates. Although these regulations create certainty for investors, they have been criticized by the industry, which remains hopeful that the overall tax treatment of digital currencies in Japan will become more favorable.
Switzerland’s Crypto Valley – think Silicon Valley for cryptocurrencies – is home to a thriving ecosystem with hundreds of crypto and blockchain companies, as well as many incubators, conferences, blockchain competitions, VC investors, legal services firms, and co-working spaces. The region has emerged as a popular location for blockchain and crypto businesses, due to its favorable taxation regime, crypto-friendly regulation, supportive political system – direct democracy and decentralization – and an easy access to important research and business hubs.
The Swiss town of Zug is in the center of the Crypto Valley, spreading beyond its borders across Switzerland and Liechtenstein. This used to be a humble region, with the lowest income in the nation, which in the XX century opted for direct democracy and passed a favorable tax law. The law allows companies in the region to pay no income tax. Companies also pay lower taxes, if they earn over 80% of their income abroad. The policies, coupled with favorable regulatory framework, have attracted large multinationals, as well as international financial firms that were looking for a home base. The city of Zug has been accepting bitcoin as payment for local taxes since 2016, while in February 2018, Switzerland’s FNMA released a set of guidelines for crypto ICOs, ensuring that crypto start-ups do not have to deal with stringent regulations. Offered this legal certainty, blockchain and cryptocurrency start-ups have been flocking to Switzerland. In addition to low taxation and business-friendly regulations, many famous blockchain and crypto platforms and projects, including the Ethereum Foundation, and many others, have added to the rising appeal of the region.
Historically an important financial hub for Southeast Asia and an international financial center, the small island nation of Singapore has been consistently placed among the top places to do business in the world. In fact, Singapore was ranked 2 among 190 economies in the ease of doing business, according to the World Bank annual ratings in 2017 and 2018. Its investor- and business-friendly laws, stable socio-political environment, and attractive tax framework, combined with well-educated and skilled talent, are some of the reasons behind Singapore’s business-friendly reputation. Over the last several years Singapore has gradually turned into the crypto hub for the region, supporting and advancing technology, entrepreneurship and innovation, and has witnessed a massive growth in the number of blockchain, fintech, and cryptocurrency related startups and projects.
Singapore’s government has been strategically encouraging the adoption of cryptocurrencies and blockchain technology related businesses, which will allow it to pursue various opportunities and projects in the sector. It is now home to several high volume cryptocurrency exchanges, including Upbit and Binance, and is one of the top three ICO centers around the world. The Monetary Authority of Singapore (MAS), which is the central authority responsible for regulating the country’s financial sector, is well-known for its pragmatism. With fewer ICO and other cryptocurrency regulations, Singapore is better positioned than some of its neighbors for businesses and investors to pursue their goals in the areas of blockchain applications and service development.
Republic of Georgia
In Georgia, a small country in the Caucasus mountains near the Black Sea, neighboring Russia, the government willingly embraced cryptocurrencies and the associated businesses and technologies. With a goal to become one of the leaders in the crypto space, Georgia has been betting its economy on digital transformation. The country’s crypto-friendly economic terms and political environment, including free economic zones with preferential tax rates and exemptions from VAT for businesses, as well as energy sold at rates cheaper than in the United States or Europe, has drawn in tech-savvy entrepreneurs and encouraged massive mining of cryptocurrencies.
Today, about 5% of Georgian households are involved in cryptocurrency mining or investments. Among the world’s largest miners of cryptocurrencies, according to the World bank, the nation is home to Bitfury – one of the leading mining companies around the globe. Georgia’s government has been generous to cryptocurrency businesses, from extending loans to companies to devoting more than 10% of its total electricity to mining operations. Enthusiastic about blockchain, Georgian government has been trying to introduce related technologies into its operations. For instance, the country migrated most of its land registry to blockchain. Its tax system may follow suit, as Georgia advances its reputation as a country with light-touch regulation of cryptocurrencies to dominate blockchain development.
Text by Maria Birger