01 September 2022 • 8 min read
Cryptocurrencies, blockchain technology, and decentralized finance (DeFi) continue to revolutionize the financial world, offering innovative applications, some that are now extending beyond finance into other industries.
There is, however, the issue of legal compliance within a world that currently lacks a uniform regulatory landscape. While some countries are crypto-friendly, others view crypto with a certain amount of skepticism, while others still are downright hostile.
A country's financial laws can make or break the adoption of crypto, allowing FinTech startups the space to create a new, better internet based on decentralization, blockchains, and token-based economics (Web3). Or it can inhibit innovation through restrictive laws or outright bans, such as the case with China, whose efforts to ban Bitcoin have been largely ineffective.
Which countries are the most crypto-friendly? Let’s take a quick tour around the world to find out!
Crypto-friendly countries and territories enact laws that are aimed at supporting crypto-related activities, such as transactions, investments, crypto startups, and NFT launches. Below are some of the top crypto-friendly countries in no particular order.
A British Overseas Territory in the North Atlantic, Bermuda is looking to position itself at the forefront of crypto, at least according to recent reports. In June 2022, the country’s Monetary Authority (BMA) announced that Jewel Bank, Bermuda’s first new bank in twenty years, has received a bank license to serve global crypto firms, issue stablecoins, and provide real-time settlement services.
Even the ongoing crypto winter hasn’t put a dent in the country’s interest in crypto. Jason Hayward, Bermuda’s Minister of Economy & Labour, has been quoted as saying that the recent devaluation of cryptocurrencies does not affect the country’s crypto aspirations. In fact, the downturn will likely impact the island’s long-term growth in crypto in a positive way.
And as The Wall Street Journal reports, Bermuda’s regulators are hoping to combine their expertise in international business with their trained workforce to become a digital-assets hub. It’s also one of the few jurisdictions globally that has created a comprehensive regulatory framework for cryptocurrencies. And if you decide to set up shop in Bermuda, you can even pay for taxes, fees and other government services with USDC.
The tiny landlocked European principality has some of the most advanced blockchain and crypto regulatory frameworks in the world.
In October 2019, it adopted the so-called “Token and TT Service Provider Act” (formally called the Act on Tokens and Entities Providing Services Based on Trusted Technologies), which took effect in January 2020. The legislation provides for the support of “trustworthy technology,” or “technologies through which the integrity of Tokens, the clear assignment of Tokens to TT Identifiers and the disposal over Tokens is ensured.” In plain English, the act aims to protect investors, combat money laundering, and establish regulatory transparency.
While the principality acknowledges the many benefits of blockchain technology, it is also keen to legislate against the misuse of it. As it writes,
“The increasing propagation of blockchain applications has already resulted in problematic areas, such as open questions related to customer and asset protection as well as the misuse of this technology for money laundering or other criminal purposes. Such issues should be addressed by means of clear regulations.”
When coupled with its awareness of the tremendous potential of the “token economy,” Liechtenstein’s clear regulatory environment has already positioned it as an example for the global crypto industry, making it one of the most crypto-friendly countries in the world.
Malta has steadily transformed itself into a crypto hub during the past few years. The Mediterranean country is often referred to as “blockchain island," reflecting its embrace of crypto startups and willingness to regulate innovative technologies in a transparent manner.
The Maltese government has enacted three acts in particular, which it sees as a way to create business opportunities for FinTech businesses and DeFi disruptors by establishing a clear regulatory framework centering on distributed ledger technology platforms and blockchain technology.
Enacted on 4 July 2018, this framework has three main parts:
Aside from its robust pro-crypto regulations, Malta has become a tax haven for overseas investors and companies. Unlike many countries, income or capital gains for long-term crypto investments are not taxed. Even though trading income tax sits at about 35%, financial leverages open to nonresidential traders can lower this to an average of 0-5%.
Another country looking to become a global crypto hub is Cyprus. In fact, the Mediterranean nation has been supportive of crypto activities for quite some time and recent moves by its government signal a willingness to adopt a clear and comprehensive regulatory framework with an eye toward the future.
Referred to as the Distributed Ledger Technology Bill, its purpose is to facilitate the application of distributed ledger and blockchain technology in a technologically neutral manner, thereby striking a balance between promoting and using new technologies and enhancing innovation while simultaneously preventing money laundering and safeguarding consumer rights.
Even before this latest bill, there have been a few other attempts to regulate and facilitate blockchain technology applications in Cyprus. A notable example includes a 2018 Act by the Cyprus Securities and Exchange Commission entitled "Introduction to New Rules Governing Derivatives on Virtual Currencies."
More recently, Crypto.com continued to make headway in Europe by receiving regulatory approval in July 2022 from Cyprus’s Securities and Exchange Commission. The crypto trading platform now has a full license to operate within Cyprus alongside exchange FTX, which was in March 2022.
Some view crypto as an asset, but Portugal sees it otherwise. According to the Portuguese government, crypto is rather a form of payment, making cryptocurrencies tax-free (earnings are exempt from VAT). Additionally,there are few legal and regulatory hurdles facing cryptocurrency businesses.
And while so much of the crypto space is digital and abstract, there’s a physical community in Portugal that supports the blockchain community. The Lisbon coworking space The Block provides a place for professionals and enthusiasts to meet and share ideas. Based in Porto, the Blockchain Center Portugal aims to bring cryptocurrency enthusiasts together through training and support initiatives. And the Portuguese Blockchain and Cryptocurrency Association has been providing membership services and promoting the crypto economy for the past four years.
If Portugal sounds like something of a crypto paradise, then you should be forewarned. The country is serious about cracking down on some of the misuses of cryptocurrencies. Recently, Portuguese banks closed crypto exchange accounts over suspicions of money laundering, despite the fact that the exchanges had full regulatory approval to operate in the country.
Switzerland—Europe’s “Crypto Valley.” Despite its small size, the alpine country boasts an impressive 14 unicorns, making Switzerland one of the most mature blockchain hubs. And Finance Minister Ueli Maurer continues to roll out the red carpet for crypto and blockchain companies, swimming against the current during the current crypto meltdown.
Switzerland has over 400 crypto startups based in Zug, the country's crypto hub, and almost 600 others scattered across the country. Many of the household names in crypto call Zug their home—Tezos, Cardano, Solana, and Polkadot have their roots here.
More importantly, regulations for crypto-related companies are proactively making the country more alluring to startups and investors. In 2021 the government launched its Blockchain law to fully regulate cryptocurrencies, virtual assets, and securities—among the first of its kind in the world.
Founded in 2018, Zug-based SEBA Bank is one of the world’s most crypto-friendly banks, providing a bridge between traditional and digital assets. Customers can secure, trade, and manage their crypto, digital assets, and conventional securities all in one place.
For these reasons and others, many are now asking if Switzerland will emerge as a global leader in cryptocurrency.
In 2019, Germany launched a new strategy to explore the many advantages, opportunities, and overall potential of blockchain technology. The project's scope ranges from utilizing decentralized technology in business and public administration, climate initiatives, and even digital identities for citizens.
As former Federal Minister of Finance Olaf Scholz has stated, “We want to be at the forefront of innovation, and we want to reinforce Germany’s position as a leading technology hub. As part of the internet of the future, blockchain technology can play a key role in our efforts.”
Consequently, Germany now ranks as the most crypto-friendly country in 2022, thanks in part to a robust FinTech startup sector, increasing blockchain adoption across industries (BMW Group, for example, has been using blockchain technology for a number of years), and the growth of the metaverse and Web3. Additionally, Germany is a profitable hub for crypto miners; it’s placed in the top 10 miner-friendly countries and is home to one of Europe's biggest mining companies, Northern Data, even though mining in the country is subject to taxes.
And there’s increasing acceptance of crypto among German citizens. contributes to German citizens' widespread acceptance of crypto. According to a recent study, 44% of Germans are interested in investing in crypto in order to be part of the future of finance, which is inextricably linked with the future of cryptocurrency.
In the eyes of some, the crypto stars are beginning to align for the gulf nation. The country recently started to approve virtual asset licenses in an effort to attract crypto industry leaders and investors. In April, significant stakeholders in the crypto community such as FTX, ByBit, and Crypto.com all received the government's official nod to operate.
UAE’s RAKBANK has also announced that it will allow its customers to trade cryptocurrencies using Emirati dirhams, its national currency. With the younger generation driving cryptocurrency’s growth in the region, local banks will be instrumental to the market’s footprint and expansion, as investors will no longer have to use foreign bank accounts and therefore be subjected to paying foreign exchange costs.
And while the UAE currently lacks a uniform regulatory approach to crypto, Dubai has made significant strides in becoming a popular destination for crypto investors and those interested in Web3. In March 2022, the capital approved a virtual assets law and established the Dubai Virtual Assets Regulatory Authority (VARA), which will oversee crypto legislation in the country.
President Nayib Bukele has been on a Bitcoin buying spree. His “buying the dip” approach has netted the Central American country 2,381 BTC. He even wants to create the world’s first Bitcoin city, although citizens are less than taken by the idea. It’s also the first country in the world to use Bitcoin as legal tender. While it’s clear that President Bukele has Bitcoin fever, it remains to be seen whether El Salvador will emerge as one of the most crypto-friendly countries.
First it was. Until it wasn’t. And now it might be again. Is Singapore still one of the most crypto-friendly countries in the world? Has Dubai stolen some of Singapore’s crypto mojo? The jury’s still out. Initially welcoming of crypto firms, Singapore has taken a more critical approach lately, and such mixed messages might have long-lasting implications.
Various UK officials have publicly stated that they want the nation to become a global crypto hub and early proposed legislation, such as recognizing stablecoins as legitimate forms of payment, appears promising. However, the UK has barred investors from trading crypto derivatives and has also taken a hard stance on crypto advertising. As with Singapore, there appear to be mixed signals.
As crypto and blockchain adoption continue to increase, there won’t be a shortage of countries offering investors, creators, engineers, and crypto visionaries an attractive place to do business.
While countries such as China and Algeria have cut themselves off from the cryptosphere, others such as Malta, Switzerland, Bermuda, Liechtenstein, Portugal, the UAE, and Cyprus are all vying for the top spot as the global crypto hub.