Two major trends will shape the future of cryptocurrencies in 2022 (no, not the metaverse and DeFi): regulation and CBDCs.
Regarding the former, Joe Biden has just signed a surprisingly positive executive order on cryptocurrencies, while the latter looks set to replace the current financial payment infrastructure. However, both are generally considered bearish for cryptocurrencies such as Bitcoin, because they strengthen state control over cryptocurrencies.
Countries like Nigeria, where CBDC exists alongside private cryptocurrencies, are real-time experiments in how well the two can co-exist.
But if CBDCs ultimately prevail over private cryptocurrencies, it is important to know which countries have cryptocurrency-friendly regulation. After all, there may be many reasons such as tax optimisation or lifestyle to choose a friendly cryptocurrency for conducting business.
That’s why Alexandria by CoinmarketCap put together this comprehensive list of cryptocurrency-friendly countries, crypto tax havens, crypto passport countries and the best cryptocurrency exchanges abroad.
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WHICH ARE THE MOST CRYPTOCURRENCY-FRIENDLY COUNTRIES?
Cryptocurrencies find themselves in a curious limbo when it comes to taxation.
On the one hand, cryptocurrency has been around for so long that most countries have passed at least some form of crypto regulation. On the other hand, regulatory approaches vary enormously, depending on how strict individual countries want to regulate cryptocurrencies.
The general crypto-tax consensus is that most countries impose a tax on cryptocurrency income and capital gains from cryptocurrencies.
For example, these activities are taxable in most countries:
Selling cryptocurrencies for fiat currency;
Exchanging cryptocurrencies for another cryptocurrency;
Spending cryptocurrencies on goods or services;
Income from cryptocurrency or mining.
However, crypto donations are a good way to offset your tax liabilities.
With that in mind, let’s take a look at the most cryptocurrency-friendly countries as of 2022.
El Salvador 🇸🇻
El Salvador is the undisputed king when it comes to cryptocurrency-friendly regulations. The Central American country passed a law in 2021 that implemented Bitcoin as legal tender, meaning you can use Bitcoin as easily as the US dollar to pay for goods in services in El Salvador. As a result, the country has no income or capital gains taxes on Bitcoin. It also plans to maintain its status as a cryptocurrency hub by building the world’s first Bitcoin city despite strong criticism from established financial institutions.
Singapore 🇸🇬
Another well-known cryptocurrency-friendly country is Singapore. The Southeast Asian country does not levy any capital gains tax or any tax on goods and services paid in cryptocurrencies. However, it does have income tax on income from cryptocurrency-related activities, such as staking. In addition, financial regulators in Singapore are quite open to digital assets, allowing crypto firms to operate without a licence within a six-month grace period.
Portugal 🇵🇹
Portugal is one of the most well-known cryptocurrency-friendly countries. Although Portugal taxes cryptocurrency income, there are no capital gains taxes or trade taxes. In addition, Portugal has a Golden Visa programme, which allows non-EU citizens to qualify for a residence permit and eventually a passport in the country through investments. But to apply for the Golden Visa and not become a tax resident, you cannot stay in Portugal for more than 183 days a year.
This tax-free lifestyle for crypto investors is one of the reasons why Portugal has been rapidly growing in popularity in the industry, with Lisbon becoming one of the main hubs in Europe.
Malta 🇲🇹
Malta is another popular destination for cryptocurrencies, as it recognises Bitcoin and other cryptocurrencies as a “unit of account, medium of exchange or a store of value”. The law on blockchain, cryptocurrency and distributed accounting technology that the country passed in 2018 made it a haven for ICOs at the time. Although cryptocurrency trading in Malta incurs a tax of up to 35%, you can reduce it to 0% – 5%, depending on your tax bracket and income status.
Puerto Rico 🇵🇷
Puerto Rico is a popular destination for Americans, as the overseas territory is treated as a separate country when it comes to taxation. As a result, there is no federal income tax in Puerto Rico and no capital gains tax if you bought cryptocurrencies as a tax resident. However, cryptocurrencies you purchased before moving to Puerto Rico and becoming a resident will be subject to taxation by the IRS.
Switzerland 🇨🇭
Switzerland is a popular crypto hub, especially in Zug, with Lugano emerging as another cryptocurrency-friendly city that plans to pay its taxes in digital currency. Switzerland has an income tax on mining and a tax on an individual’s net worth, but no tax on capital gains. In addition, income from professional trading is also subject to tax.
Slovenia 🇸🇮
The small Alpine country has the highest market capitalisation of blockchain projects per capita, despite the fact that ICOs are taxable. In addition, Slovenian tax residents have to pay a 25% income tax on mining, but not a capital gains tax…
Germany 🇩🇪
Germany is a somewhat unexpected entrant on this list, but its regulation defining cryptocurrencies as private money rather than a financial asset makes tax optimisation fairly easy. Cryptocurrencies that have been bought 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 have incurred more than a €600 gain are subject to tax. In addition, Germany taxes income from mining and staking, although cryptocurrency staking becomes tax-free after ten years.
CRYPTO TAX-FREE COUNTRIES IN 2022
While the above countries are cryptocurrency-friendly, the following really knock it out of the park. Some countries don’t tax digital assets at all, so if you’re really hell-bent on not sharing your suitcases with the state, you should take a look at the following candidates.
These are the countries without crypto taxes:
El Salvador
As mentioned above, El Salvador is the number one mecca for crypto bulls right now. The country taxes neither income from crypto-related activities nor profits from trade and investments.
Cayman Islands
A popular tax haven outside of digital assets, the Cayman Islands are also a hot tip for those who don’t want to pay income tax or capital gains tax on cryptocurrencies….
Bermuda
Another Caribbean island state with a very lenient approach to financial regulations. There is also no income or capital gains tax in Bermuda, and the country even made crypto transactions tax-free. In addition, if you incur tax on another source of income, you can pay it in USDC..
Belarus
A surprise entrant on this list, but thanks to authoritarian president Alexander Lukashenko, cryptocurrency is legal in Belarus. As a result, companies and individuals are exempt from crypto taxes until 2023. This also includes income from mining and investments.
Is there a country of tax residence that gives you a crypto passport?
In addition to crypto tax havens, there are also countries that go one step further and offer a crypto passport. This crypto passport is a passport that can essentially be purchased for a (comparatively) small donation.
Vanuatu
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 just $130,000, you can receive Vanuatua citizenship valid for five years.
Antigua
This Caribbean nation is another popular tax haven with a crypto passport in exchange for Bitcoin. The $100,000 donation is comparatively low and goes to the country’s development fund.
The best offshore cryptocurrency 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 boost your suitcases on offshore cryptocurrency exchanges.
Binance
Binance recently received regulatory approval in Bahrain. With more than 100 cryptocurrencies on offer, Binance is the world’s largest digital asset exchange. It offers the widest selection of services, from trading to OTC trading, exchange, staking, a crypto debit card and much more. This has helped Binance become the world’s largest and most liquid centralised exchange since its launch in 2017.
FTX
FTX is a fast-growing offshore cryptocurrency exchange based in Barbados. Headed by former professional trader Sam Bankman-Fried, the exchange has exploded in growth and has signed several superstars as brand ambassadors, including Tom Brady and Stephen Curry. FTX is known for its fast listings of new tokens, as well as its customer service and user interface.
Kucoin
Kucoin is a Hong Kong-based offshore cryptocurrency exchange with a reputation as a mecca for altcoin traders. It lists over 300 different coins and often provides liquidity for coins that other centralised exchanges do not. Kucoin also has a selection of services such as free trading bots, OTC trading and crypto crowdfunding initiatives.
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