The widespread adoption of blockchain and cryptocurrencies has created several hubs for Web3 development. Clarity around crypto taxes and regulations is enabling the most crypto-friendly countries to build thriving Web3 communities that integrate with governments and financial institutions. Also, several countries appear to be on the verge of implementing a central bank digital currency (CBDC). However, not all countries share the same attitudes toward digital assets. In fact, some countries and governments go to great lengths to make it difficult for people to access crypto assets.
In this article, we’re going to explore the most crypto-friendly countries worldwide. We’ll discuss what makes a country crypto-friendly and address some of the most favored nations for crypto investors and businesses.
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Top 5 Most Crypto-Friendly Countries
Several factors are taken into consideration when determining the most crypto-friendly countries. For example, a country must have high levels of institutional acceptance, exchange and wallet availability, DeFi acceptance, government regulation, and transparency. Also, the most crypto-friendly countries must have a thriving financial sector that offers a range of crypto services and products.
In the crypto landscape, clearer regulation and the development of central bank digital currencies (CBDCs) are looming. Although some in the industry argue that regulation is a negative proposition, many argue that it is essential for the mass adoption of Web3. Below, we’ll take a look at the top five most crypto-friendly countries as ranked by the Coincub International Crypto Ranking guide.
According to the Coincub International Crypto Ranking guide for Q1 2022, Germany is the most crypto-friendly country in the world. This is largely due to the recent decision made by the German government to allow cryptocurrency investments to make up part of the German domestic savings sector. Also, Germany has the second-highest number of Bitcoin nodes in the world after the United States. Plus, Germany has a particularly progressive taxation model for digital assets.
Financial institutions in Germany have taken a unique approach to allow crypto to become an essential part of long-term investment strategy for everyday savers. Furthermore, Sparkasse, the largest collective savings institution in Germany, is about to give its 50 million customers access to crypto transactions.
Germany was among the first countries to adopt a blockchain strategy. This strategy aims to harness the power of blockchain to advance digital transformations sector-wide. Also, blockchain will play a crucial role in the development of the German digital identity framework. Furthermore, major German companies such as About You SE & Co. KG, Volkswagen, and BigchainDB, have begun creating NFTs and crypto payment applications.
In addition, Germany is creating advanced technological infrastructures that aim to reduce the environmental impact of the blockchain industry and cement Web3 as a key factor in economic, social, and technological developments nationwide. Germany’s “Fund Location Act” makes it possible for pension funds, insurance companies, and corporate investment funds to allocate up to 20% of their holdings into cryptocurrencies.
Germany is home to several high-profile blockchain startups and fintech companies. Also, the country is the headquarters for Northern Data AG, the largest European crypto mining community and a pioneer of sustainable crypto mining. Moreover, Germany is pioneering the digital Euro central bank digital currency (CBDC). Plus, crypto held for over a year is exempt from capital gains tax.
Previously at the top spot, Singapore makes way for Germany as it slides down the rankings into second place. Singapore has long been a hub for technology and crypto innovation. Naturally, the region is still home to a thriving crypto economy and is an attractive location for crypto investors and Web3 startups.
However, Singapore has fallen from the top spot due to restrictions on advertising from virtual asset service providers (VASPs) beyond their websites. Also, the region is experiencing a clampdown on Bitcoin ATMs. Accordingly, Singapore has lost the top spot on the most crypto-friendly countries list.
Furthermore, Singapore residents benefit from zero capital gains tax. Also, Singapore levies no tax on goods or services purchased using cryptocurrencies. On the other hand, the country does receive income tax from staking and other crypto activities.
Singapore has a somewhat relaxed approach to crypto regulation. Currently, crypto companies can operate in the country without a license for up to six months. As such, Singapore is a hotbed for Web3 development and innovation.
World Economic Forum ranked the economy of Singapore as the most open, the third least corrupt, and the most pro-business worldwide. The country is also home to APEC (Asia-Pacific Economic Cooperation), the intergovernmental forum for trade incorporating 21 economies.
Despite the reduced appetite for risk among investors, the United States appears to be undergoing a regulatory overhaul with regard to digital assets. The Federal Reserve is in discussions about a central bank digital currency (CBDC). Plus, retail banks are competing to introduce crypto services.
North America is home to some of the most prominent Bitcoin mining facilities in the world. The U.S. boasts the highest number of nodes, Bitcoin ATMs, and cryptocurrency trading volume out of any other country. Furthermore, the Coincub ranking places the U.S. in third place due to the country’s population size and GDP. Accordingly, a country with equal scores may rank higher if it has a smaller population or lower GDP.
The IRS (Internal Revenue Service) defines cryptocurrencies as property. As such, taxation rules in the U.S. are somewhat firm. Filing tax returns on crypto assets in the U.S. is essential for effective wealth management. If you’re in the U.S. and want to learn how to comply with crypto tax laws, be sure to check out the U.S. Taxation of Digital Assets course at Moralis Academy. This course teaches students how to calculate and report crypto taxes confidently.
Top U.S. States for Crypto
The U.S. has broad and varied attitudes towards cryptocurrencies between states. However, some states are at the forefront of innovation in the Web3 realm and are working hard to develop favorable conditions for crypto investors.
The state of California has seen a massive influx of new hires in crypto roles. This is partly due to the success of crypto exchanges such as Coinbase and Kraken. Also, California has more Bitcoin ATMs than any other state.
Also, the state of Wyoming has some of the most crypto-friendly regulators in the country. The state has passed more than 20 laws specifically aiming to make it easier for crypto firms to do business. Furthermore, residents do not have to pay state taxes on crypto transactions.
Following the appointment of Bitcoin-friendly mayor Francis Suarez, Miami has become a hub for crypto innovation. The city hosted the Bitcoin 2022 conference. Also, governor Ron DeSantis has proposed that the state accept crypto payments for some state taxes. The city is piloting the MiamiCoin (MIA) digital currency to generate dividends for residents. Plus, mayor Suarez accepts half of his wages in Bitcoin (BTC).
Texas is another crypto-friendly state. It has favorable laws for crypto investments and low energy costs for mining firms. Also, miners receive incentives such as tax credits. In addition, Texas has passed multiple bills that aim to optimize the regulatory landscape for crypto investors and financial institutions.
Australia takes a positive stance on the regulation of digital assets. Not only does the country go to great lengths to protect consumers, but it also makes it easy for businesses and financial institutions to adopt blockchain and Web3 technologies. In March 2022, discussions began in Australia to introduce a retail central bank digital currency (CBDC).
This progressive attitude towards blockchain and Web3 is helping to create strong relationships between technologists, financiers, and government bodies. The nation accepts that crypto assets are likely to play a pivotal role in the future of finance, which is reflected in the growing demand for crypto services in Australia.
Cryptocurrency payments and Bitcoin ATMs are common in several major Australian cities. Also, Australian investors can add Bitcoin to their retirement funds. Furthermore, Commonwealth Bank of Australia has partnered with New York-based exchange Gemini to provide a crypto custodial service via a mobile banking app. Moreover, Australia’s financial sector is at the forefront of decentralized finance (DeFi) adoption and scores higher than any other country on this metric.
Switzerland has risen eight places to reach the most crypto-friendly countries list. According to the Coincub report, the independent Swiss canton of Lugano now accepts and openly recognizes Bitcoin (BTC) as legal tender. The only other country to do this is El Salvador. Also, Switzerland provides high levels of security for institutional crypto investments and is the home to BBVA, the first mainstream bank in Europe to offer Ethereum (ETH) and Bitcoin (BTC) to customers.
Switzerland has one of the most progressive economies in the world. It is home to hundreds of crypto service companies. These companies benefit from tremendous regulatory clarity and a pragmatic approach to compliance. Also, the Swiss “DLT (distributed ledger technology) Act” provides clear guidance on licensing and compliance that make Switzerland a practical location for any crypto firm. The recent DLT law has been pivotal in providing regulatory clarity for Swiss crypto exchanges. In addition, Swiss pension funds enable investors to hold cryptocurrencies.
Furthermore, Switzerland’s central bank is trialing a central bank digital currency (CBDC) as a way of settling large transactions between financial institutions. Plus, a broad range of Swiss banks and financial service providers offer crypto services alongside traditional financial products.
Tax Havens and Crypto Passports
Although the countries mentioned above embrace blockchain and Web3, most people still have to pay their taxes on profits made from investing in crypto assets. However, some countries don’t require investors to share their crypto bags with the taxman. In El Salvador, not only is Bitcoin recognized as legal tender, but profits made from crypto trading are non-taxable.
Likewise, the Cayman Islands and Bermuda investors do not pay income tax or capital gains tax on crypto assets. Plus, Bermudan investors can pay taxes on other sources of income using USDC. Furthermore, businesses in Belarus are exempt from paying taxes on crypto holdings and mining operations until 2023.
Investors can also apply for a crypto passport to gain citizenship in a country with favorable attitudes towards crypto taxes. For example, you can obtain five-year citizenship in the Pacific Island of Vanuatu for $130,000. Plus, the Caribbean state of Antigua offers a crypto passport in return for a $100,000 donation to the nation’s development fund.
Top 5 Most Crypto-Friendly Countries – Summary
As governments and central banks around the world come to terms with the many benefits of Web3 technologies, it’s becoming increasingly challenging to shy away from the overwhelming demand for crypto services. Cryptocurrency and blockchain adoption are pushing world leaders and policymakers to consider different ways of integrating these technologies in a compliant and safe way. As such, blockchain companies are looking to the most crypto-friendly countries to set up operations.
Each year, regulators and lawmakers edge closer to integrating crypto assets into the traditional financial ecosystem. As education around blockchain continues to improve and become more accessible, the adoption of Web3 technologies is becoming commonplace sector-wide. The use of blockchain is prominent in art, music, real estate, energy, insurance, and of course, finance. As such, there has never been a better time to become a blockchain developer or learn a new skill in an emerging tech field.