Despite the turmoil that erupted in the cryptocurrency market this summer, there is an important long-term sign to consider in any complex assessment – the combination of adoption and regulation. The latest report from the EUBlockchain Observatory, called “European Union Blockchain Ecosystem Developments,” attempts to measure this mix within the European Union, combining data for every member state from Portugal to Slovakia.
as the original report count Over 200 pages, Cointelegraph has prepared a summary with the intent of getting the most vital information about the state of cryptography and blockchain in Europe. We started from a group of countries that would normally be categorized as “Western Europe”.
Preparation: 50 Blockchain Solution Providers, Total Funds Raised 50 Million Euros ($48.72 Million)
Regulation and Legislation: A registry of Virtual Asset Service Providers (VASPs) was set up by the CMA a year later, in 2020. Regulators have taken a “generally unrestricted approach” to cryptocurrency and blockchain, and crypto mining remains largely unregulated.
Taxes: As in most European countries, the exchange of digital currencies is exempt from VAT. Capital gains from the sale of cryptocurrency are subject to a progressive income tax of up to 55% for individuals and 25% for businesses, but digital tax policies may apply if the digital currency generates interest income and therefore qualifies as an investment asset.
Notable initiatives: In November 2019, the Austrian Blockchain Center (ABC) was established to explore the applications of blockchain in the fields of finance, energy, logistics, public administration and the Internet of Things. ABC, which currently has more than 21 institutions and 54 companies in the public-private partnership model, aspires to become the largest blockchain research center in the world. Blockchain is also one of the main facilitators of Smart City Vienna and Open Government Data initiatives.
Local players: Bitpanda, a Vienna-based trading platform that surpassed $4 billion in market capitalization in 2021, Blockpit, a digital asset investment platform responsible for trading over $500 million in 2017, and Conda, a crowdfunding platform for Austrian startups.
Preparation: 47 Blockchain Solution Providers, 992 Blockchain Specialists.
Regulation and Legislation: According to the report, there are currently no “specific laws or regulations” in Belgium. In 2017, the Financial Services and Markets Authority (FSMA) published an overview of the legislation and regulations that may apply to initial coin offerings (ICOs) and crypto assets.
Meanwhile, the FSMA maintains a red list of fraudulent crypto companies. However, utility token offerings are a “regular option” for raising capital. The FSMA describes crypto assets as investment vehicles because they may provide rights to revenue or returns, or a means of storage and exchange because they can be converted into other assets or interest tokens if they provide access to certain products or services.
As of May 2022, registration with VASP and Custodian is mandatory. Service providers must meet certain conditions including status as a legal entity and maintaining a minimum share capital of 50,000 euros.
Taxes: The tax is 33% on any cryptocurrency income, depending on how the individual invests. Simply increasing the value over time evades taxes, but the investor is obligated to prove his holding strategy. There are no specification for the required booking time.
Notable initiatives: Blockchain for Europe represents international players in the blockchain industry at the EU level, with a primary focus on participating in the regulatory debate. HIVE Blockchain Association is a non-profit blockchain association that aims to promote understanding of distributed ledger technology and to inform the Belgian and international community of its developments.
Local players: Keyrock, a company that develops the financial infrastructure for crypto assets through scalable and self-adaptive algorithmic technologies, Credix, a decentralized credit marketplace powered by Solana blockchain technology, and Delta, Bitcoin (BTCCryptocurrency wallet tracker app.
Preparation: Over 160 Blockchain Startups, €180M ($175.4M) in Consolidated Revenue
Regulation and Legislation: France created a friendly legal framework for initial coin offerings in 2016, allowing issuers to register cash coupons directly into the blockchain. In 2017, the Financial Market Authority (AMF) launched a fundraising support and research program for UNICORN digital assets. France also allows the registration and transfer of unlisted securities using blockchain technology.
Taxes: The country’s highest administrative court has lowered the tax burden on profits coming from cryptocurrency and has set a flat tax of 30%.
Notable initiatives: The General Deposit and Cargo Fund makes direct investments in crypto projects. The fund has invested 300 million euros ($292.3 million) in blockchain and AI in the European Commission’s Investment for the Future programme.
Societal Self-Organization: The French Digital Asset Association (ADAN) acts as a professional lobbying group on behalf of the industry.
Local players: Ledger, a leading global provider of crypto hardware wallets, Coinhouse, a crypto asset and transaction management services company that provides storage, savings and custody services, and Sorare, a fantasy football gaming platform that uses Ethereum-based blockchain technology.
Preparation: 343 startups in the blockchain
Regulation and Legislation: Since 2013, virtual currencies have been “units of account”. In 2020, Germany introduced the concepts of “crypto assets” and “crypto custody.” The latter requires a license from the supervisory body BaFin. Virtual currencies are not legal tender in the country and are generally treated as investment assets or so-called “altcoins”.
Taxes: In May 2022, the German Ministry of Finance issued new tax guidelines for cryptocurrencies with no tax payable on gains from BTC and Ether (ETH) Sold 12 months after acquisition.
Notable initiatives: In September 2020, Deutsche Energie-Agentur announced the launch of the Future Energy Laboratory. It includes, among other things, pilot projects related to the application of blockchain technology in the energy sector, such as the Blockchain Machine Identification Book (BMIL) and the smart contract registry. BMIL is a decentralized digital directory of device identities.
In the same year, one of Germany’s four electricity transmission system operators announced a multi-year strategic partnership with Energy Web that will focus on testing and validating the technological promises of blockchain-based solutions.
Societal Self-Organization: Founded in 2017, Blockchain Bundesverband is a non-profit association with over 60 members. The association’s initiatives focus on educating decision makers and the general public. Headquartered in Munich, the European Blockchain Association provides an independent and impartial platform for blockchain-related communities and organizations to discuss, develop and clarify joint work.
Local Startups: The Iota Foundation is developing an open source protocol that supports the transfer of data and value between devices and humans, and BitsCrunch, a crypto analytics company.
Preparation: More than 160 blockchain startups, and 370 million euros ($360.5 million) in funds have been raised.
Regulation and Legislation: The central bank and the Dutch Authority for Financial Markets (AFM) maintain a one-stop shop of regulatory information for start-ups called InnovationHub. There is also a regulatory sandbox for emerging technologies using a principles-based approach (rather than a rules-based approach). Compliance is determined based on the intent of laws and regulations rather than their rhetoric. Partial licensing practice, when a startup does not need to meet all banking licensing criteria to obtain a license, is fairly common.
Notable initiatives: During the COVID-19 pandemic, Tymlez launched a project to support government transparency in medical supply chains through blockchain technology. There are projects in agriculture such as Blockchain for agri-food, funded by the Dutch Ministry of Agriculture, Nature and Food Quality to improve supply chains.
Societal Self-Organization: The report mentions meeting groups such as Blockchain Talks, Blockchain Netherlands, Food Integrity Blockchained, Permissionless Society Blockchains and Bitcoin Wednesday Amsterdam, as well as Ethereum Dev NL and Hyperledger Netherlands.
Local players: Bitfury provides mobile Bitcoin mining data centers, Aurus, a gold-backed cryptocurrency on the Ethereum blockchain, and Finturi, a blockchain-backed trade finance platform.
Preparation: €254 billion ($247.48 billion) of the total valuation of the 50 largest companies in 2021, 877 blockchain solutions providers.
Regulation and Legislation: In 2019, the Federal Council updated the existing framework terms regarding blockchain and crypto. In 2020, the Swiss parliament passed the comprehensive DLT law, which selectively adapts 10 existing federal laws. In 2021, a license for DLT trading facilities was introduced.
According to the Financial Market Supervisory Authority (FINMA), digital currencies are classified based on their function and purpose as payment tokens, interest tokens and asset tokens.
Taxes: Tax rules differ between individual cantons. Digital currencies are generally treated as foreign currencies for wealth tax purposes. The exchange value is determined by the Federal Tax Administration at the end of the year. Capital gains on digital currencies are exempt from income tax for individuals. Purchases in digital currencies are exempt from VAT.
Notable initiatives: Blockchain has been used to issue self-sovereign digital identities and even vote at the regional level, while digital currencies are accepted to pay taxes and public services. The city of Zug, the capital of the so-called “crypto valley,” launched its blockchain-powered digital identity program in 2017. In 2021, the Swiss government began a public debate on self-sovereign identities at the national level. In 2022, the city of Lugano recognized Bitcoin and Tether (USDT) as legal tender.
Societal Self-Organization: The Crypto Valley and Blockchain Consortium are the main public entities for blockchain enthusiasts and entrepreneurs. There are also popular societies such as the Swiss Association of Cryptocurrency Investors and the Bitcoin Association.
Local players: Switzerland by far beats all the other countries on the list when it comes to globally recognized crypto companies. Suffice it to mention that players like Cardano, Polkadot, Cardano, Solana, Cosmos and Tezos are located in this country.
Discussing the takeaway report with Cointelegraph, Nikolaos Kostopoulos, Senior Blockchain Adviser at Netcompany-Intrasoft and a member of the EU Blockchain Monitor and Forum Team, compared the European regulatory dialogue to the one taking place in the US, highlighting France’s role:
French regulators and policy makers seem to be winning the course for a comprehensive, objective and comprehensive effort to create a framework for the growing digital asset and blockchain industry. This effort is already validated by the decision of notable players such as Binance and Crypto.com investing heavily in their French headquarters as their EU base, but also by the fact that France is home to a few of the largest EU startups.”
While French regulatory efforts remain in the context of the larger EU, Switzerland continues to lead the way in terms of attracting startups and creating the most welcoming legal environment. Kostopoulos believes this unique position cannot be explained simply by the country’s century-old tradition of being a safe haven for big money.
There are many reasons why Switzerland is more advanced and progressive compared to countries like Belgium or France. The country has put in place progressive financial procedures and legislation, human resources and infrastructure to support a framework for accelerating financial innovation.”
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