Cryptocurrencies have been expanding all over the world. Every country on earth has been influenced by virtual currencies at some extent.
In this article we will analyze the cryptocurrency situation in different Western European countries. Which are the friendliest towards bitcoin and distributed ledger technology? Which are the hardest? Where can we see the strictest regulations? Which is the best to invest in? Let’s have a look.
The United Kingdom:
The United Kingdom is one of the most important financial hubs in Europe and has a very rich cryptocurrency life. At the moment, there are no clear regulations in the country, something that may allow enterprises to settle here and provide great products and services.
But not everything is as perfect as we may think. When there are no regulations, it is not clear how enterprises should act, which are they rights and obligations, and what they are able to do or not. At the same time, individuals and investors are not protected by law in case there is a problem with a cryptocurrency or blockchain enterprise.
The Financial Conduct Authority (FCA), the regulatory financial institution in the United Kingdom, stated that there is no need for exchanges and crypto-related businesses to register with the agency.
What cryptocurrency and blockchain businesses are doing in the UK is auto-regulating themselves. What does it mean? That means that enterprises located in the country do not have the obligation to follow specific regulations, but they constrain themselves by adopting regulations from other countries.
Before the G-20 financial summit in Buenos Aires on between March the 19th and the 21st, Mark Carney, governor of the Bank of England said that cryptocurrencies are too small to threat the existing financial system.
Mr Mark Carney explained:
“The FSB’s (Financial Stability Board) initial assessment is that crypto-assets do not pose risks to global financial stability at this time. This is in part because they are small relative to the financial system.”
The G-20 financial summit ended up with no new regulations for the cryptocurrency market.
France is a very important country in the European Union and home of one of the most important capitals on earth, Paris. The city hosts Europe’s largest purpose-built business district known as La Défense.
The country has been debating whether to strictly regulate the cryptocurrency and blockchain market or not. In the past, the French finance minister, Bruno Le Maire, called for worldwide bitcoin and crypto regulations.
In the end, no international regulations were proposed and Mr Le Maire changed opinion about how to regulate the market.
“These new financial technologies bring promises but, at the same time, they bring risks: terrorism financing, money laundering activities and speculation,” explained Mr Le Maire. “That’s why we must define a framework in which these new technologies could develop in a safe way for countries and nations.”
Pour la 1ère fois, le sujet des crypto-actifs et de la #blockchain – leurs opportunités comme leurs risques – est abordé au G20 !
Grâce à cette initiative franco-allemande, nous avons pu avancer ensemble sur un cadre approprié pour un développement sûr de ces technologiques. pic.twitter.com/Fq2WECBons
— Bruno Le Maire (@BrunoLeMaire) March 20, 2018
Furthermore, the finance minister is also planning to regulate ICOs in order to attract cryptocurrency startups. About that, Le Maire said:
“France has every interest in becoming the first major financial centre to propose an ad hoc legislative framework for companies making an initial coin offering.”
With blockchain technology and flexible regulations, enterprises located in France would be able to benefit from it. There are infinite opportunities for them to expand their businesses and increase their efficiency.
Spain is another country that is ready to implement positive regulations for the cryptocurrency and blockchain environment. In Spain there are some important blockchain and crypto-related enterprises operating and offering services to the community.
Apparently, Spain and its government are preparing blockchain-friendly legislation that could include tax breaks and exemptions to companies that want to settle their operations in the country.
According to Teodoro Garcia Egea, the lawmaker that is preparing the bill, Spain is considering specific regulations that would make the country more attractive for entrepreneurs to use blockchain technology or other financial tools.
Egea said during an interview:
“The level of the digitalization for companies will be key. We hope to get the legislation ready this year. We want to set up Europe’s safest framework to invest in ICOs.”
It seems that Spain is taken very seriously the fact that it has very interesting competitors around. It if wants to stay relevant as a hub for cryptocurrencies and blockchain enterprises, Spain will have to work on this regulation as soon as possible.
But the intentions are clear. Spain has taken a friendly position towards cryptocurrencies, and without important news coming from Europe, the situation is expected to keep in this way in the middle term.
This country is working very hard in order to promote the use of blockchain technology. It is a very open country towards cryptocurrencies and it has a Bitcoin Embassy. The embassy is located in Amsterdam and it offers the possibility to individuals to learn about cryptocurrencies, talk about the latest trends in blockchain adoption and more.
Having a bitcoin embassy means much more than having a name or the “honour” of hosting it. Instead, the bitcoin embassy shows that there is a very interested community in Amsterdam that is aware of the cryptocurrency world. But more important, they have a very active life that promotes the use of cryptocurrencies, Bitcoin and blockchain.
The civil society is not the only one that is involved in promoting this technology. The government is working with an enterprise so as to promote different blockchain uses. Some governmental institutions and agencies are already testing these projects known as Blockchain Pilots.
Koen Lukars Hartog, program manager of blockchain pilots explained:
“We did not do this alone, because I think the key ingredient of the success of our pilot projects is that we were able to create a large network of technical experts.”
Another important aspect to mention about Netherlands is that is has created its own cryptocurrency known as Amsterdam Coin (AMS). The intention of the company is to make this token commonly accepted in the stores of Amsterdam.
Finally, Netherlands has a bitcoin city known as Arnhem. The city located near the boundary with Germany is trying to promote cryptocurrency payments all over the city. The main goal is to demonstrate that there is an alternative for the current fiscal system.
Belgium is the place where the European Union is settled. The EU, in general, has always tried to regulate the cryptocurrency market. At the moment, the Belgium is the home of Fujitsu’s Blockchain Innovation centre.
The Blockchain Innovation Centre opened by the Japanese company Fujitsu will be the regional centre for experts to investigate about blockchain technology. Fujitsu is trying to promote the use of blockchain technologies by testing different use cases in the society. The company explained that it has decided to chose Brussels as the city to host the centre, because there is a growing interest for cryptocurrencies and blockchain in the country and the region.
At the moment, there is no clear regulations regarding bitcoin and cryptocurrencies in Belgium. The tax authorities are going behind cryptocurrency investors, though. Citizens investing in the market must pay 33% tax on their gains.
At the same time, the government has suggested that they could tighten the regulations over cryptocurrencies. The fears that tax authorities and regulators have in mind are related with scammers and cybercriminals. This topic is very discussed among the bitcoin community and countries are doing everything what is possible to avoid these kind of activities.
Germany has a very interesting blockchain and cryptocurrency life. There are several enterprises operating in the country related to the crypto industry and the government did not take strict regulations to control the market.
Indeed, Germany announced that it will not tax Bitcoin users that spend their cryptocurrencies as a means of payment. The Ministry of Finance informed that cryptocurrencies have been accepted as a valid means of transaction.
The document presented by the Ministry of Finance reads as follows:
“Virtual currencies (cryptocurrencies, e.g., Bitcoin) become the equivalent to legal means of payment, insofar as these so-called virtual currencies of those involved in the transaction as an alternative contractual and immediate means of payment have been accepted.”
This is a very important step for bitcoin and cryptocurrencies in Germany and Europe. Miners will also not be taxed under the regulation applied in Germany.
In this way, cryptocurrency users will be able to use cryptocurrencies without being worried about the taxes that they may have to pay when purchasing goods or services with Bitcoin.
One of the most important banks in Europe and Germany, Deutsche Bank, warned customers about the dangers and risks that cryptocurrency investments may carry. “We do not recommend it (investing in cryptos),” commented the bank.
Global head of the chief investment office at Deutsche Bank, Markus Müller, said that he does not support the current trend of investing in virtual currencies.
Mr Müller commented:
“It is only for investors who invest speculatively. There is a realistic risk of a total loss. Important issues such as liability and documentation are unclear. We are still at the very beginning.”
But this is something that the bank separates from Blockchain technology. Cryptocurrencies are not the same as the distributed ledger technology that promises incredible benefits to several industries. In a slide presentation that the bank presented at the end of 2017, it explains that blockchain technology offers incredible opportunities for businesses and enterprises.
“We expect that the blockchain will change the business model of companies in a sustained way,” reads the presentation. “The blockchain technology enables a faster and cheaper exchange of assets and financial products between individuals without an intermediary, which reduces de asymmetry of information between individuals.”
The bank expects that 10% of the global gross domestic product (GDP) would be tracked using blockchain technology. The document was presented by Christian Nolting, and Mr Müller.
Italy is known for having the best pizza, pasta, and the most un-understandable bureaucracy. But what about blockchain and cryptocurrencies?
Italy is still discussing cryptocurrency and blockchain regulations. In January / February, 2018, there have been public consultations regarding a regulatory framework for virtual currencies. The Ministry of Economy and Finance was discussing with interested parties how to regulate the industry.
The most important points of the discussions, are related with Know Your Customer (KYC) and Anti Money Laundering (AML) activities. The intention is to prevent illegal crypto transactions, and other criminal activities. The regulations increase the responsibilities of crypto businesses which will have to report they work to the local financial authorities.
Bitcoin and cryptocurrency users in Italy are highly unregulated, there are no clear rules on the matter. But companies and businesses are starting to see some attempts from the government and local authorities to control the market.
In February 2018, the cryptocurrency exchange BitGrail, has been hacked. The Italian enterprise lost $195 million dollars in Nano coins (former RaiBlocks) (XRB). The local authorities are working side by side with the owners of the exchange to solve this situation as soon as possible.
On April the 10th, the cryptocurrency exchange informed their users:
“We regret to say that dev team’s behavior harms not only BitGrail, but also our users who are directly damaged by tarnishing of our image, which threatens to partially compromises the implementation of the re-entry plan (that will be formulated shortly). As already anticipated in the past, it will be a settlement agreement without recognition of any liability: According to the law BitGrail is relieved of any refund of the damages.”
Which will be the future regulations in Italy, is yet to be seen.
Portugal does not have any special treatment for bitcoin, neither regulations about the topic. But as reported by the Portuguese newspaper Jornal de Negócios, cryptocurrency earnings must pay taxes.
It is clear that some countries are trying to regulate the market. Controlling criminal activities, and reduce tax fraud, are among the main interests of governments. But Portugal does not consider Bitcoin as a currency. So should Bitcoin holders pay taxes? According to the Financial Authority of the country, Autoridade Tributária e Aduaneira (AT), Bitcoins were taxable.
At the moment, the country is still discussing how to tax cryptocurrencies, bitcoin activities, and distributed ledger technology.
Back in January, a Portuguese Santander Group Branch, decided to reverse its decision to block bitcoin transfers. Some banks around the world have decided to block bitcoin and cryptocurrency purchases. At the same time, other banks decided to temporary close the accounts of some users that were buying Bitcoin and other virtual currencies.
In Portugal, Santander Bank received an important pressure to reverse its decision of blocking bitcoin purchases. Some of the bank’s clients sent a letter to the financial institution in order to lift the sanctions imposed.
Currently, the bank has decided to allow bitcoin-related transactions. The main reason was due to the fact that the bank was not allowing Portugal move towards the new financial and technological developments.
It is important to mark that Santander Group is working with Ripple and blockchain technology. The main purpose is to offer better services and products.
Switzerland is known as the cryptocurrency nation. It has developed a very interesting crypto-community and it has adopted flexible regulations. Indeed, the city of Zug, is known as the crypto-valley. There, shops, public transport, and enterprises work daily with virtual currencies and blockchain technology.
Some ICOs and enterprises have decided to settle their operations in the country. One example is Bitmain, the largest crypto mining hardware provider.
Switzerland is a great location for mining cryptocurrencies. That’s why Bitmain has decided to chose this country. Electricity prices are cheaper and in winter the temperatures are relatively cold, helping with the cooling of the hardware machines.
Additionally, several government officials have mentioned that the country aims to become a ‘crypto-nation.’
Gazprombank, one of the most important Russian banks, has decided to invest in Blockchain technology in Switzerland. The location has been selected due to the flexible regulatory framework that the alpine nation has.
But not everything is perfect in this country. According to Tim Draper, an important figure in the cryptocurrency space, commented that other countries like Singapore or Liechtenstein have better and friendlier regulatory frameworks.
Tim Draper on the #CryptoSummit: „Switzerland is focussing on regulation – goverments have to compete for us. Switzerland is losing its position. I would chose #Liechtenstein […and others] for my ICO“ @TimDraper #SmartRegulation pic.twitter.com/bN7dK5Sp6p
— Peter Schnürer (@schnuerer_peter) March 28, 2018
Mr. Draper commented:
“You had the tiger by the tail, everyone was going to do their ICOs through you, and all you had to do was make it easier for everybody. Instead, the regulatory bodies got in there, they made it tougher, they put more and more barriers up, so people went to Singapore, Gibraltar, Cayman, and to other places.”
About this, a government official explained:
“We think there is huge potential, but the market is not as disciplined as we want. We want it to prosper but without compromising standards or the integrity of our financial markets.”
In the future, we could see new regulations in the country. Will Switzerland become a crypto-nation?
Being one of the smallest countries in Europe, the nation is trying to attract crypto-related investments. According to the Prime Minister Adrian Hasler, Liechtenstein is going to support blockchain technology.
During a speech, Mr Hasler confirmed:
“The planed regulations will make us one of the nations worldwide to regulate this topic this broadly, laying the groundwork for extensive economic applications.”
At the moment, Liechtenstein has no cryptocurrency restrictions. The Financial Market Authority of Liechtenstein (FMA), has released informative brochures about how Initial Coin Offerings (ICOs) work.
Vaduz, Liechtenstein capital is an important financial centre in the region. With Blockchain and cryptocurrencies, it can be potentiated even further.
Luxembourg is an important player in the cryptocurrency world. Being located in the heart of Europe, the country has been selected by many enterprises as their headquarters.
Bitstamp has been accepted as the first fully licensed bitcoin exchange in Europe. Luxembourg’s Minister of Finance Pierre Gramegna said at that time:
“Luxembourg has a long-standing history as an international leader in innovation. That Bitstamp has chosen Luxembourg as its European hub only strengthens that reputation. I believe this announcement marks a milestone for bitcoin and digital finance in Europe. Bistamp is a most welcomed addition to Luxembourg’s fin-tech ecosystem.”
This may have been one of the first steps that Luxembourg did in order to become a very open country towards virtual currencies.
According to a local newspaper, Luxembourg Times, Almost 30% of the population understands how virtual currencies work. Furthermore, nearly 10% of the country’s population has confirmed that they own cryptocurrencies.
The country does not have a strong regulatory framework, but instead, a very clear one. It protects investors, without destroying initiatives and investments. This is one of the best ways of adapting to the new technologies.
Austria did not present a clear position towards cryptocurrencies. Its governments have decided to leave the market unregulated, until very recently.
The government will try to regulate Initial Coin Offerings, and cryptocurrencies in order to comply with minimum KYC and AML standards. Apparently, lawmakers will use the existing regulatory framework for gold and other derivatives as a model for the new crypto regulations.
Finance Minister Hartwig Loeger said:
“Cryptocurrencies are significantly gaining importance in the fight against money laundering and terrorism financing. We need more trust and security.”
Austria is also the home of one interesting enterprise that has decided to invest in blockchain technology. We are talking about Wien Energie, one of the most important Austrian utility companies.
The CIO of Wien Energie, Astrid Schober, explained that the electric enterprise is going to implement a blockchain-based system in one of the most known neighbours in Vienna (Vienna’s Viertel Zwei). The main purpose is to have better control of the transactions that the company realizes keep a better record of the interaction with clients.
The European Union (EU), has been asking for crypto regulations several times. But it has also been pushing for investments in Blockchain technology.
In the past, the Court of Justice of the EU ruled that tax shouldn’t be charged to cryptocurrencies and bitcoin because they should be considered a means of payment. Furthermore, they stated that Bitcoin is a currency and not a commodity that can be taxed. It is important to mark that VAT and other taxes (including income tax) still apply for transactions in bitcoin (or other virtual currencies) for goods and services.
At the same time, cryptocurrency exchanges and service providers need to comply with KYC and AML policies. The EU is worried about terrorism financing and other criminal activities.
Since 2013, the European Commission is trying to promote different projects related to Blockchain technology. For example, the FP7 was a funding programme for 2007 and 2013, and since then, the new project Horizon2020 is promoting different uses of innovative technologies.
According to the 2018 Fintech Action Plan released by the European Commission, there is an intention to keep developing artificial intelligence and blockchain technology.
Mariya Gabriel, Commissioner for the Digital Economy and Society said:
“Digital technologies have an impact on our whole economy – citizens and business alike. Technologies like blockchain can be game changers for financial services and beyond. We need to build an enabling framework to let innovation flourish, while managing risks and protecting consumers.”
The European Central Bank (ECB) has taken several measures against national cryptocurrencies. For example, Estonia wanted to issue its own virtual currency known as Estcoin. But Mario Draghi, president of the ECB stopped the initiative. He claimed that the only legal currency in the Eurozone was the Euro.
At the same time, Mario Draghi explained that some financial institutions in the Eurozone are considering holding positions in Bitcoin.
“However, recent developments, such as the listing of Bitcoin futures contracts by US exchanges, could lead European banks too to hold positions in bitcoin, and therefore we will certainly look at that,” commented Mr Draghi. “We should understand that Bitcoin and other digital currencies are in the unregulated space and should be regarded as very risky assets. Virtual currencies are subject to high volatility and their prices are entirely speculative. Banks should measure the risk of any holdings of digital currencies in their portfolio accordingly.”
What do you think about that? Is Western Europe mostly opened or closed regarding cryptocurrencies, bitcoin, and blockchain technology? Which things should the governments modify?
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