Cryptocurrencies have been on a roller-coaster ride ever since they emerged on the financial scene. It’s enough to analyze Bitcoin’s performance over the years or take a brief look at the development of the Ethereum platform and the evolution of the Ethereum price to understand all the hurdles they’ve had to endure and the numerous ups and downs they’ve experienced throughout their short but eventful existence.
Given that digital currencies have always been and continue to be a rather controversial asset class, due to their volatility and the risk they involve, it’s no wonder they haven’t enjoyed a warm reception in all parts of the world. In fact, during their early years, cryptocurrencies were completely ignored by governments, and it’s only recently that their staggering growth and popularity have prompted authorities to acknowledge their presence as an important player in the global financial system.
However, just because digital currencies are now being recognized by most nations doesn’t mean they are tolerated or accepted. Attitudes toward digital assets vary widely from country to country, ranging from complete prohibition to acceptance. While some governments have decided against the use of crypto in their territory, others have or are currently working on developing legislative frameworks to accommodate crypto assets. Some countries such as El Salvador and the Central African Republic have gone as far as adopting Bitcoin as a legal tender.
Since there’s no unified approach to crypto, those who engage in crypto trading and investing should be aware of the countries that are crypto-friendly and those who fall on the opposite pole.
What is crypto-friendliness?
Before we start listing crypto-friendly countries, we should first clarify what crypto-friendliness means. Since we’re talking about an industry that’s still in its infancy, most crypto-related terms can be quite ambiguous, so the concept doesn’t have a clear definition. There are no metrics that could help one determine the crypto-friendliness level of different countries around the globe.
Many counties have warmed up to crypto over the past few years, but does that make them crypto-friendly? Not necessarily. The number of crypto users in a county is not an indicator either. However, there are other factors that could clear things up. Usually, the most crypto-friendly countries are the ones that have no taxes on crypto capital gains, crypto income or crypto exchanges or have very low taxes in this respect.
As you can see, crypto-friendliness is largely determined by the level of taxation a country imposes on crypto and the regulations regarding the use of digital currencies. Local authorities can place taxes on crypto transactions, companies that facilitate the buying and selling of cryptocurrencies or provide crypto-related services, or any income generated from trading and investing in crypto, with tax policies varying widely across countries.
What are the most crypto-friendly countries in the world in 2023?
The crypto regulatory landscape is rather confusing at the moment, making it quite difficult to keep up with all the changing rules in different regions around the world. But there are certainly countries that offer a much smoother experience for crypto users than others, so let’s take a look at the ones that have made the list.
Germany
One might not expect to find Germany on the list of crypto-friendly countries, considering that Germany is known for its high taxes and contributions. But interestingly enough, the German government has a much milder approach when it comes to crypto taxes. While the country does impose taxes on digital assets, they are low enough so as to not represent an impediment for the 2.1 million crypto users that reside within its borders. According to statistics, nearly 44% of Germany’s population is interested in investing in digital assets.
Germany has introduced crypto taxes for crypto payments and crypto gains earned through mining or staking. Taxes are also applicable for staked crypto sold within one year and short-term capital gains of over €600 from crypto held for less than a year.
Switzerland
Recognized as one of the world’s most important economic centers, Switzerland is also home to Crypto Valley, a government-supported cluster of blockchain companies and foundations based in the Swiss canton of Zug. So, the fact that the country is considered crypto-friendly doesn’t exactly come as a surprise. Nevertheless, Switzerland is not a tax-free zone for crypto, as many would expect. But the level of taxation is kept to a minimum, with private investors being exempt from capital gains taxes on crypto. For institutional investors and businesses crypto taxes are comparable to those for legal tenders and fiat money.
El Salvador
El Salvador is probably the first country that comes to mind when you think of crypto-friendly environments and for good reason. The country has passed numerous laws and regulations that encourage the use of digital assets on its territory. What’s more, El Salvador was the first nation to adopt Bitcoin as a legal tender back in 2021.
With plans to build a Bitcoin City in the future, the only crypto tax that the country imposes is a 10% VAT to support the development f the city. Also, foreign investors don’t have to pay any income tax and capital gains tax on Bitcoin, making El Salvador a true crypto heaven for both companies and individuals.
Malta
The small island country of Malta is also popular among crypto enthusiasts for its tax-friendly policies on digital currencies. In 2018, the Parliament of Malta passed three laws on blockchain technology and cryptocurrency, classifying crypto as a unit of account, a medium of exchange or a store of value. This means that users don’t have to pay tax on long-term crypto capital gains, and crypto traders are subjected to a business income tax of maximum 35%.
There are other honorable mentions of crypto-friendly countries including Slovenia, Luxembourg, the Netherlands, Portugal, Singapore, Canada and Estonia, proving that cryptocurrencies are gaining ground around the world, despite the initial reluctance and resistance.
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