Two big trends are going to shape the future of cryptocurrencies in 2022 (no, not the metaverse and DeFi) — regulation
Concerning the former, Joe Biden just signed a surprisingly positive executive order on crypto
, while the latter looks set to replace the current financial payment infrastructure. However, both are generally considered to be bearish for cryptocurrencies like Bitcoin
, because they strengthen the state's grip on cryptocurrencies. Countries like Nigeria
, where a CBDC exists alongside private cryptocurrencies, are real-time experiments on how well the two can co-exist.
But if CBDCs eventually prevail over private crypto, it is important to know which countries have crypto-friendly regulation. After all, there may be many reasons like tax or lifestyle optimization to choose a crypto-friendly to conduct business.
That is why Academy by CoinmarketCap put together this comprehensive list of crypto-friendly countries, crypto tax havens, countries with crypto passports and the best offshore crypto exchanges.
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Cryptocurrencies find themselves in a curious limbo when it comes to taxes.
On the one hand, crypto has been around for so long already that most countries have passed at least some sort of crypto regulation. On the other hand, regulatory approaches vary wildly, depending on how strict individual countries want to regulate crypto.
The general crypto tax consensus is that most countries levy a tax on income in crypto and capital gains from crypto.
For instance, these activities are subject to taxation in most countries:
- Selling crypto for fiat currency;
- Trading crypto for another cryptocurrency;
- Spending crypto on goods or services;
- Income from crypto staking or mining.
However, crypto donations are a good way to offset your tax liabilities.
With that in mind, let's look at the most crypto-friendly countries as of 2022.
El Salvador 🇸🇻
El Salvador is the undisputed king when it comes to crypto-friendly regulation. The Central American country passed a law in 2021 that implemented Bitcoin as a legal tender
, meaning you can use Bitcoin just as easily as the U.S. dollar to pay for goods in services in El Salvador. Consequently, the country has no income or capital gains tax
on Bitcoin. It also plans to maintain its status as a cryptocurrency hub by building the world's first Bitcoin City
despite heavy criticism
from established financial institutions.
Another well-known crypto-friendly country is Singapore. The South-East Asian country levies no capital gains tax and no tax on goods and services paid for in crypto. However, it does have income tax on income from crypto-related activities like staking. Furthermore, financial regulators in Singapore are fairly open to digital assets, allowing crypto companies to operate without a license within a grace period of six months.
Portugal is one of the most well-known crypto-friendly countries. Although Portugal taxes income in crypto, there are no capital gains taxes and taxes on trading. Furthermore, Portugal has a Golden Visa program, allowing non-EU citizens to qualify for a residency permit and eventually a passport in the country through investments. But to apply for the Golden Visa and not become a tax resident, you can’t remain in Portugal for more than 183 days a year.
This tax-free way of life for crypto investors is one of the reasons why Portugal has been growing rapidly in popularity in the industry, with Lisbon becoming one of the main hubs in Europe.
Malta is another popular destination for crypto, as it recognizes Bitcoin and other cryptocurrencies as a "unit of account, medium of exchange or a store of value." The law on blockchain, cryptocurrency and distributed ledger technology the country passed in 2018 made it a haven for ICOs
at the time.
Even though crypto trading in Malta incurs a tax of up to 35%, you can reduce that to 0% - 5%, depending on your tax bracket and income status.
Puerto Rico 🇵🇷
Puerto Rico is a popular destination for North Americans since the overseas territory is treated as a separate country when it comes to taxation. Consequently, there is no federal income tax in Puerto Rico and no capital gains tax if you bought cryptocurrencies as a tax resident. However, crypto that you purchased before moving to Puerto Rico and becoming a resident will be subject to taxation by the IRS.
Switzerland is a popular crypto hub, especially in Zug
, with Lugano emerging as another crypto-friendly city
that plans to pay its taxes in digital currency. Switzerland has an income tax on mining and a wealth tax on an individual's net worth but no capital gains taxes
. Furthermore, income from professional trading is taxable as well.
The small Alpine country has the highest market capitalization of blockchain projects per capita, even though ICOs are subject to taxation. Furthermore, Slovenian tax residents have to pay a 25% income tax on mining but no capital gains tax.
Germany is a somewhat unexpected entrant on this list — but its regulation that defines cryptocurrencies as private money instead of a financial asset makes tax optimization fairly easy. Cryptocurrencies that have been purchased and held for more than one year are exempt from capital gains tax. Digital assets that have been held for less than a year and incurred more than a €600 gain are subject to taxation. Furthermore, Germany taxes income from mining and staking, even though staked crypto becomes tax-free after ten years.
Although the previous countries are crypto-friendly, the following ones really knock it out of the park. Some countries do not apply any taxes on digital assets, so if you are really hell-bent on not sharing your bags with the state, you should have a look at the following candidates.
These are the countries with no crypto taxes —
As mentioned above, El Salvador is the number one mecca for crypto bulls at the moment. The country taxes neither income from crypto-related activities nor profits from trading and investments.
A popular tax haven outside digital assets, the Cayman Islands are also a hot tip for those that do not want to pay income tax or capital gains tax on cryptocurrencies.
Another Caribbean Island state with a very lenient approach to financial regulations. No income or capital gains taxes
in Bermuda either, and the country even made crypto transactions tax-free.
Furthermore, if you incur taxes on another source of income you can pay them in USDC
A surprise entrant on this list, but thanks to the authoritarian president Alexander Lukashenko, crypto is legal in Belarus. As a result, businesses and individuals are exempt from crypto taxes until 2023. This includes income from mining and investments, too.
Is There a Country of Tax Residence That Gives You a Crypto Passport?
Besides crypto tax havens, there are also countries that go a step further and offer a crypto passport. This crypto passport is a passport that can essentially be bought for a (comparatively) small donation.
The Pacific Island state may be an unusual choice for residency, but it was the first country to accept Bitcoin payments to issue citizenship. For only $130,000, you can receive Vanuatuan citizenship valid for five years.
This Caribbean nation is another popular tax haven with a crypto passport in exchange for Bitcoin. The donation of $100,000 is comparatively low and goes to the country's development fund.
The Best Offshore Crypto Exchanges
If you are not yet wealthy enough to invest in a crypto passport or live in a crypto tax haven, you may be looking to increase your bags at offshore crypto exchanges.
Binance recently received
regulatory approval in Bahrain. With over 100 cryptocurrencies on offer, Binance
is the biggest exchange for digital assets in the world. It offers the widest selection of services, from trading to OTC trading
, a crypto debit card, and much much more. This has helped Binance become the biggest and most liquid centralized exchange
in the world since its launch in 2017.
is a rapidly growing offshore crypto exchange based in Barbados. Headed by former professional trader Sam Bankman-Fried, the exchange has exploded in growth and signed on several superstars as brand ambassadors, such as Tom Brady and Stephen Curry. FTX is known for its fast listings of new tokens, as well as its customer service and user interface.
is a Hong Kong-based offshore crypto exchange with a reputation for being a mecca for altcoin
traders. It lists over 300 different currencies and often provides liquidity for currencies that other centralized exchanges do not have. Kucoin also has a selection of services like free trading bots, OTC trading and crypto crowdfunding initiatives.
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