Cryptocurrency has revolutionized the financial and investment landscape, offering unparalleled opportunities for both investors and brokerage businesses.
As this market continues to grow, governments around the globe are striving to establish effective regulations. Some have welcomed crypto, its payments, and crypto broker solutions, fostering a supportive ecosystem, while others remain wary, implementing cautious or stringent measures.
This article will explore the most crypto-friendly countries so that you can choose to establish or enhance your crypto brokerage or exchange.
The Least Crypto-Friendly Countries
Total ban
9 countries that implemented absolute bans, which completely prohibit the production, holding, trading and use of cryptocurrency:
- Algeria
- Bangladesh
- China
- Egypt
- Iraq
- Morocco
- Nepal
- Qatar
- Tunisia
Partial restrictions
There are 42 countries that have set implicit bans, prohibiting banks and financial institutions from participating in cryptocurrency business and preventing cryptocurrency exchanges from operating within their borders. Kazakhstan, Tanzania, Cameroon, Lebanon, the Central African Republic, the Democratic Republic of the Congo, Bolivia, and Nigeria are among them.
The ban on cryptocurrencies in these countries is mainly due to concerns that cryptocurrencies will create competition and pressure on their legal currencies. Financial stability, anti-money laundering, and counter-terrorism are the other reasons.
Top 10 Crypto-Friendly Countries
Switzerland
Key reasons why Switzerland is a crypto-friendly country:
- Switzerland has emerged as a global leader in the crypto space since 2016, actively promoting the use of cryptocurrencies for financial purposes.
- The country recognizes cryptocurrencies as assets rather than securities, which provides a favorable regulatory environment.
- Switzerland’s advanced financial transaction infrastructure has made it a preferred destination for cryptocurrency companies.
- Zug, dubbed Crypto Valley, hosts major players like the Ethereum and Cardano Foundations.
- Cryptocurrencies are subject to the Wealth Tax in Switzerland, where private investors are exempt from paying capital gains taxes on personal wealth assets. However, when buying and selling through professional traders, the transactions are classified as business income and taxed accordingly. Professional crypto traders might face a slight wealth tax of 0.5% to 0.8%, applicable to all assets.
Regulation:
- The Swiss Anti-Money Laundering Act (AMLA) and its ordinance (AMLO) provide the legal foundation.
- FINMA, Swiss Financial Market Supervisory Authority, supervises AML, Anti-Money Laundering, and CFT, Countering the Financing of Terrorism, compliance.
- Depending on their characteristics, some crypto tokens may be classified as securities under the Swiss Financial Services Act (FinSA), leading to more stringent regulations.
Singapore
Key reasons why Singapore is a crypto-friendly country:
- The city-state is positioning itself as a leading jurisdiction for cryptocurrencies and innovation.
- In Singapore, crypto profits are tax-free for people, except when derived from trading.
- Singapore’s central bank supports crypto, stating that the blockchain ecosystem should be closely monitored to prevent illegal activity.
- Initiatives like the Sandbox program allow companies to test and develop innovative solutions for decentralized currency.
Regulation:
- The Payment Services Act regulates crypto service providers.
- The Monetary Authority of Singapore (MAS) oversees the Payment Services Act (PSA) and regulates the provision of DPT, Digital Payment Token, services.
- A platform that facilitates trading in Singapore may require a license.
Malta
Key reasons why Malta is a crypto-friendly country:
- Malta, known as Blockchain Island, has attracted major players such as Binance, which established operations there due to its favorable regulatory environment. BitBay, a popular cryptocurrency exchange, also relocated to Malta, as did OKEx, which set up its European headquarters there.
- Malta does not impose capital gains taxes on crypto transactions.
- Crypto trades in this country are treated similarly to day trading stocks or shares, with a standard Business Income Tax rate of 35%. However, depending on an individual’s earnings and residency status, this rate can be reduced to as low as 5% or even 0%.
Regulation:
- The Malta Digital Innovation Act (MDIA)
- The Virtual Financial Assets Act (VFAA)
- The Innovative Technologies Arrangements and Services Act (ITAS)
- KYC/AML (Know Your Customer/Anti-Money Laundering) regulations
Portugal
Key reasons why Portugal is a crypto-friendly country:
- Initially, the Portuguese Tax Authority deemed digital currency trading and transactions tax-exempt for individuals, provided the profits were not the primary income source and the tokens were held for more than a year. However, new regulations in 2023 introduced a 28% tax on crypto transactions.
- Portugal remains a key destination for the digital asset community, hosting international events like Nearcon23 or the Web Summit.
Regulation:
- AML, Anti-Money Laundering, Law and its Ordinance
- Banco de Portugal (BdP) oversight
- KYC/AML requirements
- Securities Market Code (CMVM)
- Crypto providers must register as Virtual Asset Service Providers (VASPs) with BdP.
Slovenia
Key reasons why Slovenia is a crypto-friendly country:
- In Slovenia, cryptocurrency is widely accepted, with a vibrant community and initiatives like Bitcoin City, a shopping mall that accepts Bitcoin.
- Individuals selling digital assets aren’t taxed on capital gains.
Regulation:
- Slovenian Prevention of Money Laundering and Terrorist Financing Act (ZPPDFT-2)
- Financial Market Supervisory Authority (FURS), overseeing AML/CFT compliance for VCSPs, Virtual Currency Service Providers
- Slovenian Investment Funds and Management Companies Act
- Securities Market Act
- VCSPs must register with FURS and comply with KYC/AML requirements.
Canada
Key reasons why Canada is a crypto-friendly country:
- The government supports crypto businesses.
- Canada boasts a growing number of crypto exchanges, businesses, and talent, fostering a vibrant community.
Regulation:
- Regulations for crypto businesses fall under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA).
- Required registration with Canada’s Financial Transactions and Reports Analysis Centre (FINTRAC)
- Necessary compliance with anti-money laundering (AML) and counter-terrorism financing (CTF) rules
Estonia
Key reasons why Estonia is a crypto-friendly country:
- One of the first countries to embrace tokens and actively promote its use.
- Estonia is recognized for its cashless society, boasts a highly developed digital infrastructure that supports widespread crypto adoption.
- Estonia attracts blockchain startups and nurtures a vibrant decentralized currency community. Obtaining a business license is quick and easy, with a small fee of 3,300 euros.
- The country offers low corporate tax rate of 20% on profits and no capital gains tax on digital asset sales.
Regulation:
- The Money Laundering and Terrorist Financing Prevention Act (MLTFA). It applies to Cryptocurrency Service Providers (VASPs) in Estonia
- Financial Intelligence Unit (FIU)
- VASPs must register with the FIU
- AML/CFT requirements
- Minimum capital requirements based on a VASP risk profile
Japan
Key reasons why Japan is a crypto-friendly country:
- Japan recognised Bitcoin as a legal form of payment since 2017, making its markets a mature adopter of digital currencies.
- Existing financial institutions are entering the blockchain-based currency space, adding legitimacy.
- Japan boasts one of the most active and mature cryptocurrency trading markets globally.
Regulation:
- Payment Services Act (PSA)
- Exchange Service Providers (CASPs) must register with the FSA
- Act on Prevention of Transfer of Criminal Proceeds (AML Act)
- Financial Instruments and Exchange Act (FIEA)
- AML/CFT requirements
Germany
Key reasons why Germany is a crypto-friendly country:
- In Germany, digital assets are classified as private money, exempt from VAT and long-term capital gains tax if held for more than a year. Thus, it’s easier for citizens and businesses to understand and report their blockchain earnings.
Regulation:
- Digital currency service providers must comply with Federal Financial Supervisory Authority (BaFin) rules
- Banking Act, Kreditwesengesetz or KWG
- German Securities Trading Act (WpHG) and Markets in Financial Instruments Directive (MiFID II)
- Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) regulations
- German Money Laundering Act (GwG)
- German Electronic Securities Prospectus Act (eWpG)
El Salvador
Key reasons why El Salvador is a crypto-friendly country:
- El Salvador adopted Bitcoin as legal tender in 2021.
- The nation is also recognized for its virtual currency-friendly policies, which include requiring businesses to accept Bitcoin and investing in a nationwide digital wallet system.
- El Salvador offers tax benefits for virtual currency activities. The value and earnings from digital assets are completely tax-exempt.
Regulation:
- Registration of Virtual Asset Service Providers (VASPs) by FATF
- Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) regulations
- Bitcoin Law
- NRP-29
