This post is also available in: Español
As the cryptocurrencies industry continues to expand, the interest of regulators to establish clear rules for their operation has increased. Around the world, each country has developed their own opinion and regulations. As a result, some places are much more welcoming than others for the operation of cryptocurrencies companies. In such countries, governments show interest in supporting the sector, establishing regulations that seek to dictate norms, while at the same time favoring the growth of the ecosystem. Let’s take a look at some of those places.
Malta has emerged in recent years as one of the leading centers of operation for companies related to cryptocurrencies and blockchain technology.
The European island stands out as the first country to approve integral legislation for the ecosystem, offering legal certainty for the companies linked to the sector. Last July it took a step forward in the approval of three bills that will regulate the whole ecosystem in the self-described “Blockchain Island” of the Mediterranean. These are the Digital Innovation Act, the Innovative Technology Arrangements and Services Act, and the Virtual Financial Assets Act.
These regulatory projects are part of a large national blockchain plan implemented in Malta since last year, whereby the government seeks the strategic adoption of Distributed Ledger Technology (DLT) for the development of Maltese territory. At the same time, through the launch of Initial Coin Offering (ICO), the trade of cryptocurrencies is facilitated.
In tax matters, Malta has no tax legislation regulating cryptoassets as a means of exchange. Mariella Baldacchino, of the Maltese firm E&S Consultancy Ltd, stated last June that only if the sale of cryptocurrencies is done on a regular basis and/or the length of the property is very short, the transaction can be considered as income and therefore subject to income tax at 5%.
Because of this, many fintech companies and crypto exchange have chosen Malta as their site of operations, qualifying its regulatory system as one of the friendliest. These startups include Binance and OKEx. At the same time, the Maltese community around cryptoassets continues to grow, creating groups such as Malta Bitcoin Club and ICO Launch Malta, a service of support and advice to those who wish to make such offers.
Due to its lenient regulations and low tax rates, the small state of Gibraltar, located at one end of the Iberian peninsula, has become a pole of attraction for entrepreneurs of all kinds, especially those linked to the cryptocurrencies sector.
The government unveiled its first model of the regulatory framework for blockchain technology in April 2017, after two years of work with the Ministry of Finance and the private sector. At the time, the regulation took into account only the DLT and established that all companies that use blockchain networks to store or transmit third-party securities must apply for a license from the Gibraltar Financial Services Commission (GFSC).
Subsequently, in February of this year, work began on drafting the first drafts of a more specific bill to regulate the issue, sale, and distribution of tokens through the ICOs. This is why the small state takes the lead among the territories that introduce and formalize the launch of ICOs, approved by the government within the global financial system.
These regulatory proposals not only standardize the rules for companies that participate in the blockchain ecosystem but also regulate any financial activity that was not subject to legal control and that is linked to the blockchain. In this way, the growth of the entire financial technology industry in Gibraltar’s economy is closely related to the services and finance sector.
The landscape for cryptocurrencies continued to improve with the creation of the first government-backed exchange: Gibraltar Blockchain Exchange. This project was born with the objective of providing an institutional platform for the sale of tokens, the realization of ICO and exchange of cryptoassets. This attracts many industry companies that contemplate establishing themselves in a place that offers entrepreneurs a legal, legitimate and government-approved platform to launch their projects.
Zug is a small town located just 25 kilometers south of Zurich, Switzerland, and it seems to have all the necessary characteristics to become the Silicon Valley of finance in Europe. Currently, it serves as the home of many companies in the fintech industry.
The community around cryptocurrencies is large and growing, and as part of this ecosystem, Crypto Valley Association (CVA) was formed, a government-backed association that seeks to make Switzerland a world leader in the area. The CVA hosts a series of events each month and serves as a learning forum.
Oliver Bussmann, director of CVA, stated that about 530 startups related to cryptoassets technology have launched, not only in Zug but also in Zurich. The reasons include the pleasant environment for foreigners and the favorable policies for the development of financial technology that exist in Switzerland.
In terms of regulation, the Swiss Financial Market Supervisory Authority (FINMA) set up a system favorable to the operation of cryptoassets companies, especially for ICOs, earlier this year. As far as taxes are concerned, the tax rate is one of the lowest in the region.
However, there has been a lack of willingness on the part of Swiss banks to provide services to cryptocurrency-related organizations. Faced with this, the Swiss Bankers Association (SBA), with support from the CVA, presented a guide for banks that want to do business with such companies. The idea is to prevent companies in the sector from migrating to countries with even friendlier environments.
The Hong Kong Special administrative region is considered to be one of the largest cryptocurrencies centers in Asia. Many cryptocurrencies companies have migrated to this area, after suffering the restrictions imposed on the sector in China, South Korea, and even the United States.
Until now, the regulators of this autonomous province of the People’s Republic of China have been open to DLT and cryptoassets innovation, betting on becoming a development center. They plan to implement platforms for the commercial financing system and the implementation of a new blockchain network, along with 21 other financial institutions, as reported by the Hong Kong Monetary Authority (HKMA) last July.
The Hong Kong ecosystem could also be enriched with the entry of new talents linked to the sector, as last August it was announced a project that offers benefits to people around the world, with valuable skills and knowledge, who want to develop their careers in Hong Kong.
Last February the government carried out an educational campaign warning about some dangers of ICOs. Based on this fact, some cryptoassets issued in ICO come under the jurisdiction of SFC and must comply with its regulatory standards.
Even so, the community linked to cryptocurrencies is active in Hong Kong. Companies such as BitFinex operate there, and several key industry conferences are held annually.
Singapore is one of the most important centers for international business. Regarding cryptoassets, the government has shown interest in providing a legal framework that meets the needs of all parties, protecting investors and consumers without hampering innovation.
In this regard, the Prime Minister of Singapore, Tharman Shanmugaratnam, said last February that his government does not plan to ban cryptocurrencies, once regulations are established. All this within the framework of government interest in attracting cryptoassets firms through the establishment of fintech incubators.
In that sense, one of the greatest attractions of the country for companies linked to new technologies is the absence of tax rates. Bobby Ong, CEO of CoinGecko, a startup based in Singapore, says that new companies receive a total tax exemption on the first $100,000 of ordinary imputable income and an additional 50% exemption on the next $200,000 of ordinary imputable income.
In general terms, the attitude of the authorities has been open to the ecosystem, choosing not to regulate it, as confirmed in October last year by the Director of the Monetary Authority of Singapore (MAS), Ravi Menon. However, many entrepreneurs are cautious, as they still perceive a lack of regulatory clarity around the launch of ICO.
Despite this, Singapore is a source of funding, which has a vast ecosystem of cryptoassets. It is home to a large number of engineering talents and several of the world’s leading research universities.
In addition to these areas, other places are also eye-catching for entrepreneurs in the field of cryptocurrencies and blockchain technology. Dubai in the United Arab Emirates, some cities in the United States, Tokyo in Japan, and even the Principality of Liechtenstein in Europe, are places where members of the ecosystem grow exponentially, and who are attracting startups and entrepreneurs for their friendly environments.