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Cryptocurrencies in Europe

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The general notion of cryptocurrencies in Europe denotes the processes of legislative regulation, distribution, circulation, and storage of cryptocurrencies in Europe. In April 2023, the EU Parliament passed the Markets in Crypto Act (MiCA) unified legal framework for crypto-assets within the European Union.

The legality of cryptocurrencies in Europe

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There are some regulatory policy recommendations for EU states to follow in the course of cryptocurrency adoption and regulatory framework development that are given below in chronological order.

  • In 2013, the European Banking Authority (EBA) issued a public warning about the possible risks of virtual currencies.[1]
  • In 2014, The EBA issued a decision on virtual currencies, which included a list of more than 70 risks associated with its dissemination.[2]
  • In 2016, the European Central Bank issued an analysis of virtual currency schemes, acknowledging the potential advantages of virtual currencies.[3]
  • In 2017
    • The European Securities and Markets Authority (ESMA) published a study in 2017 on the use of distributed ledger technology (DLT) in securities markets.[4]
    • Also in the same year, ESMA released two statements on initial coin offerings (ICOs), one on investor risks and the other on the laws that apply to companies that participate in these offers. After that, the European Commission directed the EBA and ESMA to evaluate the applicability and appropriateness of the existing EU financial services regulatory framework to crypto assets.[5][6]
  • In 2018
  • In 2019
    • During the G7 meeting of July 2019 risks posed by global stablecoin projects were discussed.[10]
    • FINMA, the Swiss financial authority, published a supplement to its ICO guidelines outlining how it treats so-called ‘stable coins’ under Swiss supervisory law.[11]
    • In 2019, ECB highlighted the paper series with a discussion about stability in crypto-assets.[12]
  • In 2020
    • In September 2020, The European Commission has today adopted a new Digital Finance Package, including Digital Finance and Retail Payments Strategies, and legislative proposals on crypto-assets and digital resilience.[13]
    • In 2020, the ECB released a report about stablecoins’ regulatory status.[14]
    • In 2020, the European Commission proposed a pilot regime for market infrastructures that wish to try to trade and settle transactions in financial instruments in crypto-asset form.[15][16]
  • In 2021
    • In July 2021, The European Central Bank is launching a pilot project for the "digital euro". Also, it has officially launched a 2-year-long study on the creation of a Digital Euro and the various nuances that would involve.[17]
    • In July 2021, the European Commission released a statement that would apply what is known as the travel rule to crypto transactions to make them more traceable.[18][19]
    • In September 2021, European Securities and Markets Authority published a report on Trends, Risks and Vulnerabilities where crypto assets are considered a high-risked innovational financial technology.[20]
  • On April 20, 2023, the EU Parliament passed the Markets in Crypto Act (MiCA), a unified legal framework to regulate crypto-assets in the European Union,[21] in order to mitigate money laundering and help reduce consumer risk by making providers liable for losses.[22]

Cryptocurrency market  

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According to Chainalysis, Europe's growth was largely driven by so-called "whales[23]", large institutional investors shifting enormous sums of cryptocurrency.[24][a] According to Chainalysis, Europe has the world's largest crypto economy, collecting $1 trillion in the previous year, or 25% of all crypto activity worldwide.[26]

Different countries have their own approach to cryptocurrencies legalization, distribution, and storage.

Germany

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Germany continues implementing crypto into the national regulation. First, they started with licensing crypto custody service providers and defining crypto assets as financial instruments.[27] Now private funds are allowed to keep 20% of their investments in crypto.[28]

In August 2020, the Ministry of Finance and the Ministry of Justice of Germany promulgated a bill to regulate electronic securities in the country (eWpG-E).[29]

United Kingdom

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Although the United Kingdom affirmed in 2020 that crypto assets are property, it has no cryptocurrency regulations and does not consider cryptocurrencies to be legal tender.[30][31] Mining of cryptocurrencies is permitted.[32]

In March 2022, the Financial Conduct Authority (FCA) declared that all cryptocurrency ATMs in the country were illegal and would need to be shut down. None of the ATM's operators had successfully registered with the agency. The FCA cited a failure to comply with know your customer laws (KYC), which track and prevent money laundering, as well as the high risk to customers, due to a lack of regulation and protection. At the time, Coin ATM Radar listed 81 such ATMs in the country.[33][34]

Ukraine

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In September 2021, the Parliament of Ukraine passed a law to legalize cryptocurrency. The law divided virtual currencies into secured and unsecured assets and establishes an obligation for crypto service providers to comply with anti-money laundering laws.[35]

The Netherlands

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In July 2020, The Dutch Central Bank (DNB) said the euro system's central bank digital currency (CBDC) should be more programmable than Bitcoin.[36][37]

Estonia

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Estonia published its AML Bill as early as 2018.[38] According to the Organization for Economic Cooperation and Development (OECD), Estonia's tax policy is one of the most competitive in the world. There is no income tax in this jurisdiction, therefore funds received through ICOs are not subject to it, and Bitcoin and altcoins are not subject to VAT.[39][40] As of 2021, 55% of all crypto currency service providers in the world are registered in Estonia according to the Estonian Financial Intelligence Unit (FIU) (Estonian: Rahapesu Andmebüroo (RAB)).[38] On 25 March 2024, the United States Treasury imposed sanctions against the Estonia-based Timur Evgenyevich Bukanov (Russian: Тимур Евгеньевич Буканов) associated Bitfingroup OÜ.[41]

France

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Government policy appears to be supportive of crypto, if it would be possible to regulate.[42] In March 2020, the Central Bank of France began to study the topic of CBDC, in May it sold securities for the digital euro, and in September 2020, France announced the launch of CBDC based on the Tezos blockchain.[citation needed]

Spain

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In Spain, there is no specific virtual currencies' legislation, except for the law approved in July 2021 on preventing and fighting tax evasion.[43]

Austria

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Investors were cautioned by the Financial Market Authority (FMA) that cryptocurrencies are risky and that FMA does not monitor or control virtual currencies, including bitcoin or any cryptocurrency trading platforms.[44][45]

Hungary

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In 2014, in a press release the central bank of Hungary, Magyar Nemzeti Bank (MNB),  stated that Cryptocurrencies are "much riskier" than conventional forms of electronic payment, such credit cards.[46]

Denmark

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The Financial Supervisory Authority of Denmark declared in a statement that it will not regulate the use of bitcoin and that it is not a form of currency.[47]

The Financial Supervisory Authority (FSA) released a statement on 17th December 2013 that supporting the European Banking Authority 's warning. In 2017, FSA notified that it has no regulatory control over bitcoin transactions, hence it does not prevent anyone on the establishment of such business.[48]

In 2013, FSA's chief legal adviser stated that Denmark might consider changing existing financial regulation to include virtual currencies.[49]

Sweden

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The Swedish Tax Agency issued a preliminary decision on Value Added Tax (VAT) on bitcoins, declaring that trading bitcoins is not subject to Swedish VAT, but is instead subject to the Financial Supervisory Authority regulations and treated as a currency.[47]

Financial Supervisory Authority and the central bank in a statement publicly declared that bitcoin is legal but not an official form of payment or legal tender.[45]

Czech Republic

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Czech Republic Govt. stated that businesses and people who purchase, sell, store, manage, or mediate the acquisition or selling of virtual currencies or offer similar services are required to adhere to anti-money laundering regulations.[44]

For the purposes of accounting and taxes, Bitcoin is categorized as an intangible asset rather than as electronic money.[50]

Switzerland

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Swiss Govt declared that Bitcoin businesses in Switzerland are regulated by anti-money laundering laws and may need a banking license in certain situations.

On December 5, 2013, a proposal was submitted by 45 Swiss Parliament members concerning digital sustainability, which urged the Swiss government to evaluate the opportunities for utilization of bitcoin by the country's financial sector.[51]

In response to the parliament's recommendations, the Swiss Federal Council issued a report on virtual currencies in June 2014.[52]

Norway

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In December 2013, the Norwegian Tax Administration said that they did not classify bitcoin as currency but rather as an asset. Wealth tax is applied on profits. In business, use of bitcoin will be subject to tax sale tax.[53]

Luxembourg

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In Luxembourg, the first BitLicense was issued in October 2015.[54]

See also

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Notes

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  1. ^ As of June 24, 2023, Tether is the preferred blockchain for Yevgeny Prigozhin and his Wagner Group because Tether still supported the trading of Russian rubles across digital-asset exchanges.[25]

References

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  1. ^ "EBA Warning and Opinion on Virtual Currencies". Archived from the original on 2017-06-07.
  2. ^ "EBA Opinion on 'virtual currencies'" (PDF). Archived (PDF) from the original on 2020-02-05.
  3. ^ "Virtual currency schemes – a further analysis" (PDF). Archived (PDF) from the original on 2015-03-02.
  4. ^ "Report on Distributed Ledger Technology Applied to Securities Markets". www.esma.europa.eu. Retrieved 2021-11-01.
  5. ^ "ESMA highlights ICO risks for investors and firms". www.esma.europa.eu. Retrieved 2021-11-01.
  6. ^ "REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on Markets in Crypto-assets, and amending Directive (EU) 2019/1937". eur-lex.europa.eu. Archived from the original on 2020-10-06. Retrieved 2021-11-01.
  7. ^ "Virtual currencies and central banks monetary policy: challenges ahead" (PDF). Archived (PDF) from the original on 2018-07-10.
  8. ^ "Virtual Currencies" (PDF). Archived (PDF) from the original on 2019-06-24.
  9. ^ "Crypto-asset markets: Potential channels for future financial stability implications" (PDF). Archived (PDF) from the original on 2018-10-24.
  10. ^ Cœuré, Benoît (2019-07-18). "Update from the Chair of the G7 working group on stablecoins". {{cite journal}}: Cite journal requires |journal= (help)
  11. ^ FINMA, Eidgenössische Finanzmarktaufsicht. "FINMA publishes 'stable coin' guidelines". Eidgenössische Finanzmarktaufsicht FINMA. Retrieved 2021-11-01.
  12. ^ "Occasional Paper Series: In search for stability in crypto-assets: are stablecoins the solution?" (PDF). Archived (PDF) from the original on 2019-08-29.
  13. ^ "Digital Finance Package: Commission sets out new, ambitious approach to encourage responsible innovation to benefit consumers and businesses". Archived from the original on 2020-09-24.
  14. ^ "Occasional Paper Series Stablecoins: Implications for monetary policy, financial stability, market infrastructure and payments, and banking supervision in the euro area" (PDF). Archived (PDF) from the original on 2020-09-24.
  15. ^ "Procedure file" (PDF). Archived (PDF) from the original on 2021-01-12.
  16. ^ "Proposal for a Regulation of the European Parliament and of the Council" (PDF). Archived (PDF) from the original on 2021-05-12.
  17. ^ "European central bank officially announces 2-year-investigation to develop digital euro". The Times of India.
  18. ^ Jones, Huw (2021-07-20). "EU to tighten rules on cryptoasset transfers". Reuters. Retrieved 2021-11-01.
  19. ^ Bateman, Tom (2021-07-21). "The EU is making Bitcoin traceable, closing crypto loophole". euronews. Retrieved 2021-11-01.
  20. ^ "ESMA Report on Trends, Risks and Vulnerabilities" (PDF). Archived (PDF) from the original on 2021-09-01.
  21. ^ Browne, Ryan (20 April 2023). "EU lawmakers approve world's first comprehensive framework for crypto regulation". CNBC. Retrieved 2023-04-21.
  22. ^ "EU passes world's first comprehensive crypto framework". fintechmagazine.com. 2023-04-21. Retrieved 2023-05-14.
  23. ^ Wisdom, Crypto (2024-02-13). "What Is a Crypto Whale?". Smart Crypto Wisdom. Retrieved 2024-02-21.
  24. ^ Bateman, Tom (2021-09-29). "'Whales' make Europe the world's new cryptocurrency capital". euronews. Retrieved 2021-12-06.
  25. ^ Shen, Muyao (26 June 2023). "Russians Appeared to Seek Refuge in Crypto During Wagner Revolt". Bloomberg News. Archived from the original on 26 June 2023. Retrieved 19 October 2023.
  26. ^ "DeFi makes Western Europe the world's largest 'crypto economy'". finance.yahoo.com. 28 September 2021. Retrieved 2021-12-06.
  27. ^ Kissler, Michael (July 2020). "Guidance on crypto assets and crypto custody under the recent amendment to the KWG". Corporate Finance. Retrieved 21 March 2022.
  28. ^ "Germany to Allow Institutional Funds to Hold up to 20% in Crypto". Bloomberg.com. 2021-07-30. Retrieved 2021-11-02.
  29. ^ "Germany: Electronic Securities Act Enters into Force". Library of Congress. Retrieved 2021-11-02.
  30. ^ "Crypto Regulations in the UK". ComplyAdvantage. Retrieved 2021-11-02.
  31. ^ "Central bank digital currencies". www.bankofengland.co.uk. Retrieved 2021-11-02.
  32. ^ "Blockchain & Cryptocurrency Laws and Regulations | United Kingdom | GLI". GLI – Global Legal Insights – International legal business solutions. Retrieved 2021-12-08.
  33. ^ Moon, M. (11 March 2022). "UK's financial regulator orders shutdown of all Bitcoin ATMs". Engadget. Retrieved 11 March 2022.
  34. ^ Titcomb, James (11 March 2022). "Bitcoin cashpoints forced to shut down after being declared illegal". The Telegraph. Retrieved 11 March 2022.
  35. ^ "Parliament passes law to legalize cryptocurrency in Ukraine – KyivPost – Ukraine's Global Voice". KyivPost. 2021-09-08. Retrieved 2021-11-02.
  36. ^ "Dutch National Bank to lead way in digital euro development". Finextra Research. 2020-05-21. Retrieved 2021-11-02.
  37. ^ "Blockchain & Cryptocurrency Laws and Regulations | Netherlands | GLI". GLI – Global Legal Insights – International legal business solutions. Retrieved 2021-12-08.
  38. ^ a b Laine, Martin; Kund, Oliver; Aljas, Riin; Vunš, Marta; Tuul, Marta; Roonemaa, Holger; Černiauskas, Šarūnas; Sepioło, Mariusz (4 October 2023). "TALES FROM THE CRYPTO: HOW THE BALTIC STATES BECAME THE HUB OF MONEY LAUNDERING AND FRAUD: International criminals used Estonia's deficient cryptocurrency regulation to turn the small country into a hub of financial crime where over a billion euros have been laundered or defrauded from victims. Now the same actors are relocating to other countries who repeat all the same mistakes". vsquare.org. Archived from the original on 19 October 2023. Retrieved 19 October 2023. Alternate archive in Russian
  39. ^ "Money Laundering and Terrorist Financing Prevention Act – Riigi Teataja". www.riigiteataja.ee. Retrieved 2021-11-02.
  40. ^ Pomerleau, Kyle (2015-11-06). "Estonia's Growth-Oriented Tax Code". Tax Foundation. Retrieved 2021-11-02.
  41. ^ "Treasury Designates Russian Companies Supporting Sanctions Evasion Through Virtual Asset Services and Technology Procurement". United States Department of the Treasury (treasury.gov). 25 March 2024. Retrieved 27 March 2024.
  42. ^ "Blockchain & Cryptocurrency Laws and Regulations | France | GLI". GLI – Global Legal Insights – International legal business solutions. Retrieved 2021-12-08.
  43. ^ "Blockchain & Cryptocurrency Laws and Regulations | Spain | GLI". GLI – Global Legal Insights – International legal business solutions. Retrieved 2021-12-08.
  44. ^ a b "Regulation of cryptocurrency around the world : Albania, Algeria, Angola, Anguilla, Antigua and Barbuda, Argentina, Australia, Azerbaijan, Bahamas, Bahrain, Bangladesh, Belarus, Belgium". Library of Congress, Washington, D.C. 20540 USA. Retrieved 2023-11-27.
  45. ^ a b "Cryptocurrency regulations by country" (PDF).
  46. ^ "Sajtóközlemény: Az MNB kockázatosnak tartja a fizetésre használható virtuális eszközöket, például a Bitcoint". www.mnb.hu. Retrieved 2023-11-27.
  47. ^ a b "Regulation of Bitcoin in selected jurisdictions". Library of Congress, Washington, D.C. 20540 USA. Retrieved 2023-11-27.
  48. ^ "Advarsel mod virtuelle valutaer (bitcoin m.fl.)". 2013-12-17. Archived from the original on 2013-12-17. Retrieved 2023-11-27.{{cite web}}: CS1 maint: bot: original URL status unknown (link)
  49. ^ "Bitcoins Spark Regulatory Crackdown as Denmark Drafts Rules – Businessweek". 2013-12-18. Archived from the original on 2013-12-18. Retrieved 2023-11-27.{{cite web}}: CS1 maint: bot: original URL status unknown (link)
  50. ^ Kucharova, Ivana; Pfeiferova, Daniela; Lőrinczova, Enikő. Specifics of Cryptocurrencies from an Accounting, Tax and Financial View in a Globalized Environment (PDF).
  51. ^ "Swiss Parliament". Federal Assembly. Retrieved 2023-11-27.
  52. ^ "Federal Council report on virtual currencies in response to the Schwaab (13.3687) and Weibel (13.4070) postulates" (PDF). The Swiss Parliament.
  53. ^ "Bitcoins Fail Currency Test in Scandinavia's Richest Nation". Bloomberg.com. 2013-12-13. Retrieved 2023-11-28.
  54. ^ "SnapSwap Granted License for EU Operations". Chronicle.lu. Retrieved 2023-11-28.
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