Since its introduction, cryptocurrency has conquered the world and most countries have reacted legislatively. Some of the most progressive countries have chosen a more loyal approach, helping cryptocurrency projects to flourish. At the same time, other states have implemented strict regulations, up to its prohibition.
The rapid development of this sector has led to the emergence of many startups and companies willing to utilize the potential of digital currencies. However, the success of a cryptocurrency business largely depends on the country’s choice for its registration and operation. Two factors are important for assessing a jurisdiction’s attitude towards digital assets: the degree of regulation of cryptocurrencies and tax policy.
Let us consider some of the most attractive countries for cryptocurrency companies.
Malta
Legislation and regulation
Although the country tightened regulations in 2018 and introduced licensing for cryptocurrency companies, Malta, known as Blockchain Island, is one of the leading jurisdictions for cryptocurrency businesses. Licenses from the Malta Financial Services Authority (MFSA) are divided into four classes depending on the type of business. Class 1 license allows you to provide consulting services in cryptocurrency activities It costs about $ 3200, plus a progressive annual fee. The most expensive class 4 license gives the right to operate with digital currencies.
Tax policy
Malta offers an attractive tax regime for crypto businesses. Income tax is only 5% and investors do not have to pay long-term capital gains tax on cryptocurrency assets.
Why Malta is beneficial for crypto businesses?
Thanks to progressive legislation and support from the government, Malta has managed to attract a significant number of cryptocurrency companies, including major crypto exchanges such as Binance. Despite the tightening of regulations, the country continues to be an attractive destination for cryptocurrency businesses due to its low taxes and clear regulatory framework.
Canada
Legislation and regulation
Canada has always taken an open approach to cryptocurrencies with no restrictions on their use. However, cryptocurrency companies must register with the Financial Transactions Analysis and Reporting Center of Canada (FINTRAC) as Money Service Businesses (MSBs) to operate legally.
Tax Policy
Canada classifies cryptocurrencies as commodities, which means they are subject to capital gains tax. This classification allows individuals and companies to assess their tax liability based on gains or losses from investments in cryptocurrencies. Canada also offers clear standards and reporting requirements for taxpayers engaged in cryptocurrency transactions.
Why Canada is favorable for crypto businesses?
Canada has established itself as a technology development center and a leader in blockchain technology and cryptocurrencies. The country has one of the highest numbers of BTC ATMs in the world, indicating widespread adoption of virtual currencies. Some Canadian banks allow crypto transactions, making it easier for investors and businesses to operate. A well-defined regulatory structure that balances protecting investor interests and encouraging innovation makes Canada an attractive place to start a crypto business.
Estonia
Legislation and regulation
Estonia was one of the first countries in Europe to regulate cryptocurrencies by developing its regulatory framework. It takes two to six months to obtain a license from FIU Estonia to operate a cryptocurrency business. The state fee for obtaining a license is €3,300 (about $3,500). The authorized capital to register a company should be only 12000 euros (about 13000 USD).
It is important to note that physical presence is not required to set up a company in Estonia thanks to the e-residency program. However, according to the latest amendment to the Anti-Money Laundering and Countering the Financing of Terrorism Act, companies must have a physical office in Estonia and at least one member of the board of directors must be a resident, be in the country and actively participate in the company’s activities.
Tax policy
Estonia offers one of the most competitive tax policies among the countries of the Organization for Economic Cooperation and Development. Income tax is not applied here, and funds received from ICOs are not taxed. Bitcoins and altcoins are also not subject to VAT. However, income from cryptocurrencies is taxed like any other commercial activity.
Why Estonia is favorable for crypto business?
Estonia has established itself as one of the world leaders in digital innovation. Attractive tax policies and an advanced technological mindset make the country an ideal place to get a crypto license. The e-residency program simplifies the process of setting up a company by allowing you to do so remotely. The financial sector also supports cryptocurrency, and Estonian bank LHV was one of the first banks in the world to work with blockchain technology. Estonia is also considering launching a national cryptocurrency, Estcoin, underscoring its commitment to further innovation in this area.
Singapore
Legislation and regulation
Singapore provides some of the most favorable conditions for launching a cryptocurrency business. To operate legally in the cryptocurrency industry, you must obtain a license from the Monetary Authority of Singapore (MAS). MAS is known for its tolerance towards blockchain startups and allows cryptocurrency-related activities under the FinTech Regulatory Sandbox without a license. The process of obtaining a license takes up to six months on average due to the appointment of an Anti-Money Laundering (AML) officer.
Tax Policy
Cryptocurrency is considered a commodity in Singapore, and cryptocurrency transactions are treated as barter trade. Unlike Estonia, where cryptocurrency transactions are not taxed, cryptocurrency companies in Singapore pay goods and services tax (GST), which is 7%. However, there is no capital gains tax in Singapore, which means that profits from cryptocurrency trading are not taxed. However, income tax is levied on cryptocurrency gains.
Why Singapore is favorable for crypto business?
Singapore is one of the most developed economies in Asia and an attractive destination for crypto investors. The country is a global fintech hub and is open to cryptocurrencies, making it a great place to launch a certified crypto business. Singapore’s central bank supports innovation in the blockchain ecosystem while providing strict controls to prevent illegal activities. This creates a favorable and supportive environment for setting up a legal cryptocurrency or blockchain company.
El Salvador
Legislation and regulation
Over the past few years, the government of El Salvador has been actively promoting cryptocurrencies and seeking to transform its digital economy and related legislation. In November 2022, El Salvador’s president signed the Digital Assets Law, which defined cryptocurrency companies as firms that provide the exchange, storage, and servicing of cryptocurrencies to third parties. Compliance with the Law by service providers is monitored by the Financial System Authority (SSF). Rules have also been developed to obtain a crypto license for El Salvador. This requires registration of the company with the Registry of Digital Asset Service Providers (DASP), the development of a business plan and AML/KYC policy, and an authorized capital of $2,000.
Tax Policy
El Salvador offers unique conditions for cryptocurrency companies and investors. Licensed firms are exempt from fees, taxes, and duties on digital assets, capital gains, and ordinary taxes. Foreign investors are also not taxed on capital gains or income from cryptocurrency. In addition, all other taxes and government fees can be paid with cryptocurrency.
Why El Salvador is favorable for crypto business?
El Salvador is attracting attention for its proactive approach to cryptocurrencies, becoming the first country in the world to recognize Bitcoin as a legal tender. This has led to more than 4 million cryptocurrency users, which is about 60% of the country’s population. The government actively supports the crypto industry by providing citizens with $30 worth of bitcoins to encourage the use of cryptocurrency. Not only that but all businesses in the country are required to accept payments in BTC.
This supportive approach makes El Salvador an ideal place for crypto businesses to grow and thrive. The license issuance process takes up to 5 months, and there is no government application fee or annual supervision fee. It is also an attractive jurisdiction for those who want to avoid taxes on cryptocurrency.
Other countries
In addition to the countries listed above, other cryptocurrency-friendly jurisdictions can be mentioned. These countries provide clear legal frameworks, favorable tax conditions, government support, and developed blockchain infrastructure to promote cryptocurrencies and blockchain technologies:
Switzerland
This country attracts crypto businesses due to its stable economy, favorable legislation, and low taxes. The canton of Zug, known as “Cryptodolina,” is a center for blockchain startups and innovation.
United Kingdom
The United Kingdom offers clear legislation and government support for cryptocurrency companies. London is one of the world’s leading financial centers, providing access to capital and markets.
Czech Republic
The Czech Republic has a favorable tax policy and actively supports technological innovation. Prague is known for its open attitude towards cryptocurrencies and blockchain technology.
Lithuania
The country provides favorable conditions for crypto businesses, including fast company registration and support from the government. Lithuania is also actively developing the fintech sector.
Poland
Poland attracts crypto businesses due to low taxes and a growing fintech sector. The government supports the development of blockchain technology and cryptocurrencies.
Georgia
Georgia offers favorable taxation and government support for cryptocurrency companies. The country is known for its low energy costs, which makes it attractive for cryptocurrency mining.
In conclusion, the success of your crypto business in the dynamic world of digital currencies directly depends on choosing the right jurisdiction. Regulatory clarity, economic incentives, and the level of government support are the key factors that entrepreneurs need to consider when deciding where to incorporate their company. A strategic choice of jurisdiction will help you succeed in an increasingly competitive marketplace.