Cryptocurrencies in Europe explained

The general notion of cryptocurrencies in Europe denotes the processes of legislative regulation, distribution, circulation, and storage of cryptocurrencies in Europe. In April 2023, the EU Parliament passed the Markets in Crypto Act (MiCA) unified legal framework for crypto-assets within the European Union.

The legality of cryptocurrencies in Europe

There are some regulatory policy recommendations for EU states to follow in the course of cryptocurrency adoption and regulatory framework development that are given below in chronological order.

Cryptocurrency market  

According to Chainalysis, Europe's growth was largely driven by so-called "whales[23] ", large institutional investors shifting enormous sums of cryptocurrency.[24] According to Chainalysis, Europe has the world's largest crypto economy, collecting $1 trillion in the previous year, or 25% of all crypto activity worldwide.[25]

Different countries have their own approach to cryptocurrencies legalization, distribution, and storage.

Germany

Germany continues implementing crypto into the national regulation. First, they started with licensing crypto custody service providers and defining crypto assets as financial instruments.[26] Now private funds are allowed to keep 20% of their investments in crypto.[27]

In August 2020, the Ministry of Finance and the Ministry of Justice of Germany promulgated a bill to regulate electronic securities in the country (eWpG-E).[28]

United Kingdom

Although the United Kingdom affirmed in 2020 that crypto assets are property, it has no cryptocurrency regulations and does not consider cryptocurrencies to be legal tender.[29] [30] Mining of cryptocurrencies is permitted.[31]

In March 2022, the Financial Conduct Authority (FCA) declared that all cryptocurrency ATMs in the country were illegal and would need to be shut down. None of the ATM's operators had successfully registered with the agency. The FCA cited a failure to comply with know your customer laws (KYC), which track and prevent money laundering, as well as the high risk to customers, due to a lack of regulation and protection. At the time, Coin ATM Radar listed 81 such ATMs in the country.[32] [33]

Ukraine

In September 2021, the Parliament of Ukraine passed a law to legalize cryptocurrency. The law divided virtual currencies into secured and unsecured assets and establishes an obligation for crypto service providers to comply with anti-money laundering laws.[34]

The Netherlands

In July 2020, The Dutch Central Bank (DNB) said the euro system's central bank digital currency (CBDC) should be more programmable than Bitcoin.[35] [36]

Estonia

Estonia published its AML Bill as early as 2018.[37] According to the Organization for Economic Cooperation and Development (OECD), Estonia's tax policy is one of the most competitive in the world. There is no income tax in this jurisdiction, therefore funds received through ICOs are not subject to it, and Bitcoin and altcoins are not subject to VAT.[38] [39] As of 2021, 55% of all crypto currency service providers in the world are registered in Estonia according to the Estonian Financial Intelligence Unit (FIU) (Estonian: Rahapesu Andmebüroo (RAB)).[37] On 25 March 2024, the United States Treasury imposed sanctions against the Estonia-based Timur Evgenyevich Bukanov (Russian: Тимур Евгеньевич Буканов) associated Bitfingroup OÜ.[40]

France

Government policy appears to be supportive of crypto, if it would be possible to regulate.[41] In March 2020, the Central Bank of France began to study the topic of CBDC, in May it sold securities for the digital euro, and in September 2020, France announced the launch of CBDC based on the Tezos blockchain.

Spain

In Spain, there is no specific virtual currencies' legislation, except for the law approved in July 2021 on preventing and fighting tax evasion.[42]

Austria

Investors were cautioned by the Financial Market Authority (FMA) that cryptocurrencies are risky and that FMA does not monitor or control virtual currencies, including bitcoin or any cryptocurrency trading platforms.[43] [44]

Hungary

In 2014, in a press release the central bank of Hungary, Magyar Nemzeti Bank (MNB),  stated that Cryptocurrencies are "much riskier" than conventional forms of electronic payment, such credit cards.[45]

Denmark

The Financial Supervisory Authority of Denmark declared in a statement that it will not regulate the use of bitcoin and that it is not a form of currency.[46]

The Financial Supervisory Authority (FSA) released a statement on 17th December 2013 that supporting the European Banking Authority 's warning. In 2017, FSA notified that it has no regulatory control over bitcoin transactions, hence it does not prevent anyone on the establishment of such business.[47]

In 2013, FSA's chief legal adviser stated that Denmark might consider changing existing financial regulation to include virtual currencies.[48]

Sweden

The Swedish Tax Agency issued a preliminary decision on Value Added Tax (VAT) on bitcoins, declaring that trading bitcoins is not subject to Swedish VAT, but is instead subject to the Financial Supervisory Authority regulations and treated as a currency.

Financial Supervisory Authority and the central bank in a statement publicly declared that bitcoin is legal but not an official form of payment or legal tender.

Czech Republic

Czech Republic Govt. stated that businesses and people who purchase, sell, store, manage, or mediate the acquisition or selling of virtual currencies or offer similar services are required to adhere to anti-money laundering regulations.

For the purposes of accounting and taxes, Bitcoin is categorized as an intangible asset rather than as electronic money.[49]

Switzerland

Swiss Govt declared that Bitcoin businesses in Switzerland are regulated by anti-money laundering laws and may need a banking license in certain situations.

On December 5, 2013, a proposal was submitted by 45 Swiss Parliament members concerning digital sustainability, which urged the Swiss government to evaluate the opportunities for utilization of bitcoin by the country's financial sector.[50]

In response to the parliament's recommendations, the Swiss Federal Council issued a report on virtual currencies in June 2014.[51]

Norway

In December 2013, the Norwegian Tax Administration said that they did not classify bitcoin as currency but rather as an asset. Wealth tax is applied on profits. In business, use of bitcoin will be subject to tax sale tax.[52]

Luxembourg

In Luxembourg, the first BitLicense was issued in October 2015.[53]

See also

Notes and References

  1. Web site: EBA Warning and Opinion on Virtual Currencies. live. https://web.archive.org/web/20170607001816/https://centralbank.ie/consumer-hub/consumer-notices/eba-opinion-on-virtual-currencies . 2017-06-07 .
  2. Web site: EBA Opinion on 'virtual currencies'. live. https://web.archive.org/web/20200205121615/https://eba.europa.eu/sites/default/documents/files/documents/10180/657547/81409b94-4222-45d7-ba3b-7deb5863ab57/EBA-Op-2014-08%20Opinion%20on%20Virtual%20Currencies.pdf?retry=1 . 2020-02-05 .
  3. Web site: Virtual currency schemes – a further analysis. live. https://web.archive.org/web/20150302164129/http://www.ecb.europa.eu/pub/pdf/other/virtualcurrencyschemesen.pdf . 2015-03-02 .
  4. Web site: Report on Distributed Ledger Technology Applied to Securities Markets. 2021-11-01. www.esma.europa.eu.
  5. Web site: ESMA highlights ICO risks for investors and firms. 2021-11-01. www.esma.europa.eu.
  6. Web site: REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on Markets in Crypto-assets, and amending Directive (EU) 2019/1937. live. 2021-11-01. eur-lex.europa.eu. https://web.archive.org/web/20201006113431/https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:52020PC0593&from=EN . 2020-10-06 .
  7. Web site: Virtual currencies and central banks monetary policy: challenges ahead. live. https://web.archive.org/web/20180710003655/http://www.europarl.europa.eu/cmsdata/149900/CASE_FINAL%20publication.pdf . 2018-07-10 .
  8. Web site: Virtual Currencies. live. https://web.archive.org/web/20190624025430/http://www.europarl.europa.eu/cmsdata/149902/KIEL_FINAL%20publication.pdf . 2019-06-24 .
  9. Web site: Crypto-asset markets: Potential channels for future financial stability implications. live. https://web.archive.org/web/20181024175455/http://www.fsb.org:80/wp-content/uploads/P101018.pdf . 2018-10-24 .
  10. Cœuré. Benoît. 2019-07-18. Update from the Chair of the G7 working group on stablecoins. en.
  11. Web site: FINMA. Eidgenössische Finanzmarktaufsicht. FINMA publishes 'stable coin' guidelines. 2021-11-01. Eidgenössische Finanzmarktaufsicht FINMA. en.
  12. Web site: Occasional Paper Series: In search for stability in crypto-assets: are stablecoins the solution?. live. https://web.archive.org/web/20190829183758/https://www.ecb.europa.eu/pub/pdf/scpops/ecb.op230~d57946be3b.en.pdf . 2019-08-29 .
  13. Web site: Digital Finance Package: Commission sets out new, ambitious approach to encourage responsible innovation to benefit consumers and businesses. live. https://web.archive.org/web/20200924111429/https://ec.europa.eu/commission/presscorner/detail/en/IP_20_1684 . 2020-09-24 .
  14. Web site: Occasional Paper Series Stablecoins: Implications for monetary policy, financial stability, market infrastructure and payments, and banking supervision in the euro area. live. https://web.archive.org/web/20200924021936/https://www.ecb.europa.eu//pub/pdf/scpops/ecb.op247~fe3df92991.en.pdf . 2020-09-24 .
  15. Web site: Procedure file. live. https://web.archive.org/web/20210112191734/https://oeil.secure.europarl.europa.eu/oeil/popups/printficheglobal.pdf?id=718278&l=en . 2021-01-12 .
  16. Web site: Proposal for a Regulation of the European Parliament and of the Council. live. https://web.archive.org/web/20210512124654/https://ec.europa.eu/info/sites/default/files/business_economy_euro/banking_and_finance/200924-presentation-proposal-crypto-assets-markets_en.pdf . 2021-05-12 .
  17. Web site: European central bank officially announces 2-year-investigation to develop digital euro. .
  18. News: Jones. Huw. 2021-07-20. EU to tighten rules on cryptoasset transfers. en. Reuters. 2021-11-01.
  19. Web site: Bateman. Tom. 2021-07-21. The EU is making Bitcoin traceable, closing crypto loophole. 2021-11-01. euronews. en.
  20. Web site: ESMA Report on Trends, Risks and Vulnerabilities. live. https://web.archive.org/web/20210901095745/https://www.esma.europa.eu/sites/default/files/library/esma50-165-1842_trv2-2021.pdf . 2021-09-01 .
  21. Web site: Browne . Ryan . EU lawmakers approve world's first comprehensive framework for crypto regulation . 2023-04-21 . CNBC . 20 April 2023 . en.
  22. Web site: 2023-04-21 . EU passes world's first comprehensive crypto framework . 2023-05-14 . fintechmagazine.com . en.
  23. Web site: Wisdom . Crypto . 2024-02-13 . What Is a Crypto Whale? . 2024-02-21 . Smart Crypto Wisdom.
  24. Web site: Bateman. Tom. 2021-09-29. 'Whales' make Europe the world's new cryptocurrency capital. 2021-12-06. euronews. en.
  25. Web site: DeFi makes Western Europe the world's largest 'crypto economy'. 2021-12-06. finance.yahoo.com. 28 September 2021 . en-US.
  26. News: Kissler . Michael . Guidance on crypto assets and crypto custody under the recent amendment to the KWG. . 21 March 2022 . Corporate Finance. July 2020.
  27. News: 2021-07-30. Germany to Allow Institutional Funds to Hold up to 20% in Crypto. en. Bloomberg.com. 2021-11-02.
  28. Web site: Germany: Electronic Securities Act Enters into Force. 2021-11-02. Library of Congress.
  29. Web site: Crypto Regulations in the UK. 2021-11-02. ComplyAdvantage. en-US.
  30. Web site: Central bank digital currencies. 2021-11-02. www.bankofengland.co.uk. en.
  31. Web site: Blockchain & Cryptocurrency Laws and Regulations United Kingdom GLI. 2021-12-08. GLI – Global Legal Insights – International legal business solutions. en.
  32. News: Moon . M. . UK's financial regulator orders shutdown of all Bitcoin ATMs . 11 March 2022 . Engadget . 11 March 2022.
  33. News: Titcomb . James . Bitcoin cashpoints forced to shut down after being declared illegal . 11 March 2022 . The Telegraph . 11 March 2022.
  34. Web site: 2021-09-08. Parliament passes law to legalize cryptocurrency in Ukraine – KyivPost – Ukraine's Global Voice. 2021-11-02. KyivPost.
  35. Web site: 2020-05-21. Dutch National Bank to lead way in digital euro development. 2021-11-02. Finextra Research. en.
  36. Web site: Blockchain & Cryptocurrency Laws and Regulations Netherlands GLI. 2021-12-08. GLI – Global Legal Insights – International legal business solutions. en.
  37. News: Laine . Martin . Kund . Oliver . Aljas . Riin . Vunš . Marta . Tuul . Marta . Roonemaa . Holger . Černiauskas . Šarūnas . Sepioło . Mariusz . TALES FROM THE CRYPTO: HOW THE BALTIC STATES BECAME THE HUB OF MONEY LAUNDERING AND FRAUD: International criminals used Estonia's deficient cryptocurrency regulation to turn the small country into a hub of financial crime where over a billion euros have been laundered or defrauded from victims. Now the same actors are relocating to other countries who repeat all the same mistakes . vsquare.org . 4 October 2023 . 19 October 2023 . 19 October 2023 . https://web.archive.org/web/20231019214459/https://vsquare.org/tales-from-the-crypto-money-laundering-fraud-sanctions-estonia-lithuania-russia/. Alternate archive in Russian
  38. Web site: Money Laundering and Terrorist Financing Prevention Act – Riigi Teataja. 2021-11-02. www.riigiteataja.ee.
  39. Web site: Pomerleau. Kyle. 2015-11-06. Estonia's Growth-Oriented Tax Code. 2021-11-02. Tax Foundation. en-US.
  40. Web site: Treasury Designates Russian Companies Supporting Sanctions Evasion Through Virtual Asset Services and Technology Procurement . United States Department of the Treasury (treasury.gov) . 25 March 2024 . 27 March 2024.
  41. Web site: Blockchain & Cryptocurrency Laws and Regulations France GLI. 2021-12-08. GLI – Global Legal Insights – International legal business solutions. en.
  42. Web site: Blockchain & Cryptocurrency Laws and Regulations Spain GLI. 2021-12-08. GLI – Global Legal Insights – International legal business solutions. en.
  43. Web site: Regulation of cryptocurrency around the world : Albania, Algeria, Angola, Anguilla, Antigua and Barbuda, Argentina, Australia, Azerbaijan, Bahamas, Bahrain, Bangladesh, Belarus, Belgium . 2023-11-27 . Library of Congress, Washington, D.C. 20540 USA.
  44. Web site: Cryptocurrency regulations by country.
  45. Web site: Sajtóközlemény: Az MNB kockázatosnak tartja a fizetésre használható virtuális eszközöket, például a Bitcoint . 2023-11-27 . www.mnb.hu.
  46. Web site: Regulation of Bitcoin in selected jurisdictions . 2023-11-27 . Library of Congress, Washington, D.C. 20540 USA.
  47. Web site: 2013-12-17 . Advarsel mod virtuelle valutaer (bitcoin m.fl.) . 2023-11-27 . 2013-12-17 . https://web.archive.org/web/20131217113641/http://www.finanstilsynet.dk/da/Nyhedscenter/Pressemeddelelser/2013/Advarsel-mod-virtuelle-valutaer-bitcom-mfl-2013.aspx . bot: unknown .
  48. Web site: 2013-12-18 . Bitcoins Spark Regulatory Crackdown as Denmark Drafts Rules – Businessweek . 2023-11-27 . 2013-12-18 . https://web.archive.org/web/20131218191849/http://www.businessweek.com/news/2013-12-17/bitcoin-rules-drafted-in-denmark-as-regulator-warns-against-use . bot: unknown .
  49. Book: Kucharova . Ivana . Specifics of Cryptocurrencies from an Accounting, Tax and Financial View in a Globalized Environment . Pfeiferova . Daniela . Lőrinczova . Enikő.
  50. Web site: Swiss Parliament . 2023-11-27 . www.parlament.ch.
  51. Federal Council report on virtual currencies in response to the Schwaab (13.3687) and Weibel (13.4070) postulates . The Swiss Parliament.
  52. News: 2013-12-13 . Bitcoins Fail Currency Test in Scandinavia's Richest Nation . en . Bloomberg.com . 2023-11-28.
  53. Web site: SnapSwap Granted License for EU Operations . 2023-11-28 . Chronicle.lu.

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