Top 5 Crypto Friendly Countries in 2023
Looking to live somewhere as a person who primarily spends digital currencies to go by? This blog will bake in some ideas for your next flight ticket.
Unless you've been living under a rock for the past decade, you can't fail to have noticed the meteoric rise of cryptocurrency. As it has become evermore important and sophisticated, more and more countries are starting to actively embrace it and create an environment where it can thrive.
In this blog post, we’ll take a look at the top 5 crypto friendly countries in 2023. We’ll discuss what makes a country “crypto friendly”, the regulations surrounding cryptos, and factors to consider when choosing a crypto friendly country.
What Are Crypto Friendly Countries?
Crypto friendly countries are countries that have a favorable attitude towards cryptocurrency. This usually means that the government of the country has taken active steps towards legalization and regulation of cryptocurrencies to create welcoming environments for crypto companies and individuals who wish to take advantage of this new blockchain-based technology.
These countries also demonstrate a positive attitude towards ICOs (Initial Coin Offerings), forging legal and regulatory frameworks that allow companies to raise funds through the sale of digital tokens.
Top 5 Crypto Friendly Countries for 2023
Switzerland
Switzerland is a country renowned for its banking and finance so it's perhaps no surprise to see it feature as one of the top crypto friendly countries. In fact, Switzerland is so crypto friendly that it's even home to what's known as ‘Crypto Valley’ – a crypto hub in the low-tax canton (a kind of administrative area) of Zug.
The Swiss government has been careful to carve out a legal and regulatory framework that is deliberately favorable for both crypto businesses and individuals over the years and has some of the most favorable tax rates for crypto investors anywhere in the world.
Switzerland classifies cryptocurrency as a private wealth asset – meaning that private investors are exempted from paying capital gains taxes on crypto. Your crypto income and the total value of your crypto assets are still subjected to taxation even if you are a private investor, though. For businesses, unfortunately, the Switzerland crypto tax laws are pretty much the same as the laws on legal tender or fiat currency.
Japan
Japan has been a leader in the cryptocurrency space since the early days of Bitcoin. In 2017, Japan took the step of passing legislative acts to protect people participating in the cryptocurrency market from possible bankruptcies of crypto exchanges. And with very good reason. One of the first and most famous exchanges, Mt Gox, collapsed in 2014 leading to a raft of negative consequences, something the Japanese government were keen to prevent happening again in future.
Cryptocurrency was also recognized as a legal tender around this time, paving the way for crypto payments. This step led to increased demand for cryptocurrency from investors and started the use of bitcoins as one of the payment methods in retail stores. In amongst all this, AML/CFT and KYC processes became legal requirements for organizations carrying out transactions with cryptocurrencies. Crypto businesses and users in Japan are subject to certain taxes, but the overall tax rate is quite low.
In Japan, the crypto industry also has a certain amount of say in how it's governed. The Japanese Virtual Currency Exchange Association (JVCEA) is made up of more than twenty organizations that can pass and enforce regulations and standards for cryptocurrency exchanges in Japan.
Singapore
This tiny Asian nation is known as being one of the most crypto friendly countries in the world. So much so, in fact, that Coincub ranked it as the most crypto friendly country in the entire world in 2021.
The government has taken deliberate steps to legalize and regulate the use of cryptocurrencies. In Jan 2020, Singapore introduced the Payment Services Act. It's been described as "a forward looking and flexible framework for the regulation of payment systems and payment service providers..." that also helps to establish clear registration requirements, as well as AML and CFT guidelines for cryptocurrency businesses. Existing cryptocurrency exchanges must receive a license from the MAS.
After an influx of initial coin offering launches, MAS published guidelines in 2017, which were latter followed by “A Guide to Digital Token Offerings,” clearly explaining their regulation in Singapore.
In Singapore, cryptocurrency is officially designated as a financial asset (one particular type of digital token that normally functions as a means of exchange, a unit of account, or a means of accumulation). Transactions with cryptocurrencies are subject to VAT. But Singapore also has some of the most favorable tax rates for crypto investors. Since capital gains tax isn't a thing in Singapore, capital gains doesn't apply to the sale of cryptocurrencies either.
Malta
This miniature Mediterranean island has a big reputation when it comes to being one of the most crypto friendly countries in the world. The government of Malta has taken steps to create regulations designed to discourage fraud, while simultaneously encouraging growth, all with the aim of attracting crypto businesses. Given the billions being invested there by crypto firms today, and the number of big companies such as Binance and OKEx setting up shop, this tactic seems to be paying off.
When it comes to crypto taxes, there's no capital gains tax on long-term profits you generate from selling your crypto, provided that is, if it's recognized as a ‘store of value.’ That's great news if you want to hold your crypto for a while, and sell for profit when the price rises.
Business income tax could potentially be up at 35 percent, but it varies based on factors such as residency and income generated. Depending on where you fit into the taxation structure, it's possible you could be looking at as little as three percent, or perhaps even no taxation at all. This is why many consider it to be a crypto tax haven and one of the most attractive crypto tax free countries in the world.
Germany
We mentioned earlier that Singapore topped the list of most crypto-friendly countries in 2021. Which country supplanted it in the 2022? That would be Germany.
The country has a taken a forward-thinking position on cryptocurrency. In a ground-breaking move, it decided to include crypto investments as part of its domestic savings industry. Cryptocurrencies are therefore completely accepted as a form of long-term investment in Germany.
To give you an idea of the dedication there, it is the country with the most Bitcoin nodes outside the U.S.. Given the smaller population and GDP of the country, this highlights the level of commitment to crypto.
Germany was also one of the few countries in Europe that started properly regulating cryptocurrencies before the recent European Union’s Markets in Crypto Assets, or MiCA, regulatory framework.
Germany classifies cryptocurrencies as private money rather than a financial asset, which makes it easier to optimize tax. According to German laws, capital gains tax doesn't apply to cryptocurrencies if they are held for more than a year, and there is no value-added tax VAT on sale or purchase. Anyone generating more than a €600 gain on assets that have been held for less than a year must pay income tax which may impact the efficiency of crypto trading.
Crypto-Friendly Regulations
Some of the most common crypto friendly regulations include: KYC (Know Your Customer) and AML (Anti Money Laundering) regulations, capital gains taxes, and consumer protection regulations. These regulations are designed to make sure that the crypto markets are secure and that investors are protected.
It's also important that to be truly crypto-friendly the regulations of any country are clear and easily grasped so people understand the boundaries they are operating within, rather than complicated and fragmented, which only serves to stifle innovation and growth and put off those involved in the crypto space.
Factors to Consider When Choosing a Crypto Friendly Country
When choosing a crypto friendly country, there are a few factors that you should consider.
Regulatory Framework
The most important factor is the legal and regulatory framework of the country. Make sure that the country has created a favorable legal and regulatory framework for the use of cryptocurrencies.
Tax Rate
You should also consider the tax rate of the country. Different countries have different tax rates for crypto investors. Make sure to do your research and find a country with a favorable tax rate for crypto investors.
Attitude
Finally, you should consider the overall attitude of the country towards cryptocurrency. Different countries may have different attitudes towards cryptocurrency. Make sure you find one that has a positive attitude towards cryptocurrencies, therefore creating a welcoming environment for crypto businesses as well as individuals and their private money.
Crypto Regulations in Different Countries
Crypto regulations vary from country to country, based both on the attitude of those countries, as well as the particular approach those countries have taken.
The European Union, for example, has recently passed the MiCA regulation governing issuance and provision of services related to cryptoassets and stablecoins. It is the first and only legislation of its kind in the world and leads the way for the use of cryptocurrencies across the continent, and acts as a trailblazer for other parts of the world.
In the United States, the Securities and Exchange Commission (SEC) is still involved in long-running debates about whether particular types of cryptocurrency are classified as securities or not, leaving a lack of clarity over exactly how the industry can operate there long term.
Throughout the rest of the world, many countries have taken steps to legalize and regulate the use of cryptocurrencies, like Japan and Singapore as we've already talked about. On the other hand, countries such as China have adopted a far stricter approach, going as far as to make cryptocurrency itself illegal.
Closing Thoughts
When we talk about crypto friendly countries, what we mean are not just countries that have a favorable view towards crypto, but those that have also demonstrated this favorable attitude by creating frameworks that allow businesses and individuals to use and invest in cryptocurrencies.
These countries offer the best conditions for both businesses and individuals to get involved with and profit from the crypto industry. So, if you are looking for somewhere to thrive in the crypto space, you could do a lot worse than some of the places mentioned in this article. Whatever your plans though, always remember to do your own research before making any decisions.
Benedict Clark
Toby Bromet