Cryptocurrency Concerns
vs Regulations in Europe

The European cryptocurrency market is a constantly evolving space, with increasing investor demand, cautious but forward-looking governments and a diverse palette of regulations and concerns country by country. Here is the current intelligence of the European crypto market, from early birds through pioneers to mining havens.

Let’s look at some data. 4 percent of European internet users own cryptocurrency, across 17 markets, according to the 2019 report by GlobalWebIndex. Switzerland has the highest rate of crypto ownership in Europe (among the highest in the world) and London has the highest concentration of crypto holders. The European markets with the most cryptocurrency holders also tend to have wealthier, younger online populations.

But understanding crypto holders is only one part of the puzzle — the related governmental regulations and concerns continuously form the opportunities and limitations of the market, balancing between a future-driven attitude and a cautious approach designed to protect investors.

Here we take a snapshot of the European crypto market, focusing on the countries that are the most active in the space, starting with the broader regional context.

Macro view on the cryptocurrency market of Europe

To date, the European regulatory environment for digital assets has largely been driven by individual countries, which have made their own rules, decided on their own classifications and often gone in different directions. However, the European Union (EU) has slowly but surely begun to show an increased interest in harmonizing the European regulation of digital assets.

Markets in Crypto-assets

The European Commission’s proposed Markets in Crypto-assets (MiCA) is set to open a new era for crypto legislation. It aims to create and harmonize a comprehensive regulatory framework for digital assets and their service providers across the EU. This includes any activities related to crypto assets, from issuance to provision, applying to both individuals and businesses. The planned regulations deal with rules of trading, marketing and supervision of digital assets, the governance of token issuers and crypto service providers, and last but not least, implementing consumer protection rules to ensure market integrity.

Once finalized and adopted across the EU, MiCA will introduce standardized definitions for elements of the digital assets market that were previously missing and have hindered policy making by individual countries — including classifications for crypto assets, types of tokens (asset-referenced, significant asset-referenced, electronic money, utility) as well as definitions of crypto asset services and service providers.

MiCA also includes the layout for a regulatory system for “stablecoins” as well, such as the Libra initiative of Facebook (now known as Diem), highlighting the EU’s need for a rapid adaptation of technological progress in finance. The European Commission’s current plan, laid down in MiCA, is for the European Banking Authority to take on the supervisor role of stablecoin issuers.

An updated MiCA text is expected to be agreed by the European Parliament in the Autumn of 2021, though it is reported that that Members of the European Parliament have tabled 1,160 amendments! Once agreed the European Parliament will negotiate with the European Council and the European Commission, the so called trilogue negotiations, to produce a finalized MiCA Regulation.

Anti-Money Laundering

Effective 10 January 2020, the 5th Anti-Money Laundering and Counter Terrorist Financing Directive, known as 5AMLD, came into effect in the EU. 5AMLD widened the regulatory perimeter to capture crypto, and entities dealing with crypto, through new definitions of “virtual currency” and “virtual asset service providers” (or VASPs). Effectively, 5AMLD brought cryptocurrency businesses into the same AML/CFT (Anti-Money Laundering/ Combating the Financing of Terrorism) and KYC (Know-Your-Customer) framework as traditional finance institutions.

The UK, since it was still a member of the EU, implemented 5AMLD into UK law and appointed the Financial Conduct Authority (FCA) as the supervisor of UK crypto asset businesses for AML/KYC purposes.

In some cases enthusiastic countries, like Finland, implemented these new rules into their local legislation ahead of the 10 January 2020 date. Also, there are examples, like LocalBitcoins, which had made the necessary changes even prior to that, in March 2019, thus becoming the first digital asset exchange in Europe to align its business to 5AMLD. The company introduced a new sign up and verification process for its users, including both individual and corporate traders.

There were however contrary examples like Deribit who left the Netherlands for Panama, and the UK company Bottlepay who shut down their services in December 2019, in response to the new rules (note: Bottlepay appears to be back in business and is currently providing services under the UK’s temporary permissions regime).

The practical effect of all of this was that existing crypto providers (crypto exchanges and crypto wallet services) who were EU based, or targeting EU investors, spent a good part of 2020 focusing on the registration process. In the UK the volume of applications even meant that there is a temporary permissions regime in place to allow the FCA to work through the back-log of applications.

As we move into the second half of 2021 the EU has published proposals in July for further anti-money laundering and countering the financing of terrorism rules, including proposals for a new EU Anti-Money Laundering Authority and 6AMLD to replace 5AMLD. Of particular impact for crypto is a proposal for sender and beneficiary information to be sent with transfers of cryptoassets. These proposals align the EU with the June 2019 proposals of the Financial Action Task Force, or the so called “travel rule”. Just a few days later the UK also published their consultation on this topic - Amendments to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 Statutory Instrument 2022.

Stablecoins

Finally, in the second half of 2021, we are expecting to see further developments of international standards for stablecoins. This will build on the work being done by the Financial Stability Board, and their 2020 paper Regulation, Supervision and Oversight of “Global Stablecoin” Arrangements, as part of the G-20 roadmap to enhance cross-border payments.

Concluding Comment

Over time, these global and EU initiatives will ultimately replace individual country regulations, which in turn, should provide operators in the digital asset space with greater certainty and the ability to operate in multiple countries based on harmonized rules.

Until then, at the moment, the concerns and regulations around cryptocurrencies form a colourful landscape in Europe, country by country. Below we take a closer look at some of them, to give a comprehensive picture of each crypto market and a better understanding of how crypto is shaping Europe.

Germany

Germany: The early bird

Germany is considered to be a cryptocurrency pioneer. Based on 2019 data, over 86 percent of the adult internet population in the country know about cryptocurrencies, 14 percent own them (compared to 19 percent owning stocks) and 10 percent previously owned some. A recent Statista survey reported over 5 percent of the German population having owned or used cryptocurrencies in 2020.

  • The country’s crypto adoption rate can be considered fast compared to the European average – in 2019 Börse Stuttgart, Germany’s second largest stock exchange, opened the country’s first regulated cryptocurrency trading platform BSDEX. Potential investors also have other options like Bitcoin.de which is the largest Bitcoin marketplace in Europe, with over 1,000,000 customers.

  • The Deutsche Bundesbank is one of the Central Banks involved in the project to develop a digital euro. The Governing Council of the European Central Bank decided in July 2021 to commence the investigation stage aiming to address key issues regarding the design and distribution of the digital euro. Jens Weidmann, President of the Bundesbank, favours a limited introduction of the digital euro to mitigate any potential disruption to the banking sector.

  • Additionally, the Bundesbank has been successfully experimenting with DLT-based securities settlement in central bank money. Frankfurt, Munich and Stuttgart.

  • Germany has a total of 59 bitcoin ATMs, spread around mostly in Düsseldorf, Berlin,

  • As early as 2011, German regulator, BaFin (Federal Financial Supervisory Authority), expressed that bitcoin and related assets are "units of account" akin to artificial currencies, stating that bitcoin is not a legal currency but can be used for payments. Interestingly there were court decisions which disagreed with BaFin’s approach of treating bitcoin as a financial instrument, however, this issue has now been resolved (see third bullet point below).
  • September 2019, the German Government publishes a national strategy for blockchain (in German).
  • Germany implemented 5AMLD expansively by defining crypto assets as “financial instruments” in its Banking Act (e-money and certain monetary values expressly excluded), introducing a new service called “crypto safekeeping” or “Crypto Custody Business” (the custody, administration and safeguarding of crypto assets), and allowing banks to sell and hold cryptocurrencies for their clients. These rules became effective on 1 January 2020.
  • On 26 May 2021 the Ministry of Finance launched a consultation on the implementation of the Travel Rule. This consultation closed on 14 June 2021.
  • Spezialfonds, a type of institutional investment vehicle, are permitted from 1 July 2021 to invest up to 20% of their assets in cryptocurrencies. Union Investment, a US$500m asset manager, is planning a pilot program to add bitcoin to a number of investment funds.

  • When final, the Markets in Crypto-Assets Regulation will apply in Germany
  • 5.2%

    Owned or used crypto in 2020

  • 59

    Bitcoin ATMs in the country

  • Do not possess status of currency or money but can be accepted as a means of exchange

    Definition of Crypto

  • Involved with the Digital Euro. Experimenting with DLT-based securities settlement in central bank money

    Central Bank Digital Currency status

  • Cryptoassets are regarded as “financial instruments” under German law

    Fun Fact

    Last updated September 2021

Sources:

BaFIN, Blockchain Research Lab, Bloomberg, CoinATMRadar.com, CoinTelegraph, Deutsche Bundesbank, European Central Bank, Financial Times, Global Compliance News, Global Legal Insights, Ministry of Finance, Norton Rose Fulbright, Statista (2020 Global Consumer Survey).

UK

UK: The cautiously proceeding

The UK left the EU on 31 December 2020 having agreed a last minute Trade and Cooperation Agreement with the EU. This meant that the UK left the EU with a deal, however the deal did not contain much detail on financial services. As the new year commences, we expect to learn more from the HM Treasury consultation on how the UK plans to treat crypto; as well as more detail on the on-going financial relationship between the UK and the EU.

  • According to FCA consumer research an estimated 2.3 million people own cryptocurrencies (up from 1.9 million in the 2020 research).
  • The Bank of England has published two discussion papers on CBDC. Firstly in March 2020 and recently in July 2021.
  • The UK has the seventh most bitcoin ATMs in the world, a total of 125 bitcoin ATMs, with over half found in London (dropping from 174 bitcoin ATMs in July 2021).

  • Cryptocurrencies in the UK are not considered money or equivalent to fiat currency and there is no central bank digital currency planned yet.
  • As part of the UK government’s broader fintech strategy, the Cryptoassets Taskforce was created in March 2018, with members from the FCA, Her Majesty’s Treasury and the Bank of England to explore the impact of crypto assets and distributed ledger technology (DLT) in financial services.
  • According to the Taskforce, a crypto asset is a “cryptographically secured digital representation of value or contractual rights that uses some type of DLT and can be transferred, stored or traded electronically”, and the Taskforce identified its three categories as exchange, security and utility tokens.
  • In July 2019 the FCA released a Guidance on Cryptoassets, a Policy Statement that considered three broad categories of crypto assets, being security tokens, e-money and unregulated tokens (comprised of exchange tokens and utility tokens).
  • The FCA has banned the sale, marketing and distribution of certain crypto-based products for retail investors, coming into effect 6 January, 2021, despite 97 percent of respondents disagreeing with the proposal.
  • The UK Treasury is currently considering feedback received from a consultation, running between 20 July and 26 October 2020, to bring certain crypto assets into the scope of the UK’s financial promotions regulations.
  • The UK Treasury is currently considering feedback received from a consultation, running between 7 January and 21 March 2021, in relation to the UK’s proposed regulatory approach to cryptoassets and stablecoins
  • The Taskforce claimed several benefits to crypto assets when they are used as a means of exchange, for investment or as a capital raising tool, but it has identified the following risks associated as well:
    • risk of financial crime (possible use of crypto assets for illicit activities or cyber threats);
    • Speech by Charles Randell, Chair of the FCA and PSR, to the Cambridge International Symposium on Economic Crime setting out the options for the FCA to regulate cryptoassets. He said “In regulating the online world, we need to strike the right balance between fostering innovation, providing an appropriate level of protection and allowing individuals freedom to take decisions for which they are responsible.

    • risk to market integrity which can lead to consumer losses or damage confidence in the market; and potential implications for financial stability.

  • The Bank of England separately expressed a somewhat stronger opinion and concluded that crypto assets “do not currently pose a risk to monetary or financial stability in the UK” but “anyone buying crypto assets should be prepared to lose all their money”.
  • 4.7%

    Owned or used crypto in 2020

  • 125

    Bitcoin ATMs in the country

  • Not considered money or equivalent to fiat currency

    Definition of Crypto

  • Taxable

    Taxes apply for both individuals and businesses

  • ‹ £1,000

    The amount of crypto 75 percent of UK crypto owners hold


    Last updated September 2021

Sources:

Bank of England, CoinATMRadar.com, Financial Conduct Authority, GlobalWebIndex, Global Legal Insights, Gov.uk, Statista (2020 Global Consumer Survey).

Switzerland

Switzerland: The home of Crypto Valley

One of the highest country for crypto adaptation in Europe with 14 percent of asset holders in Switzerland also hold crypto which makes Switzerland the joint highest country for crypto adaptation, alongside Romania and Ireland in GlobalWebIndex’s report. A recent Statista survey reported over11 percent of the Swiss population having owned or used cryptocurrencies in 2020.

  • Another survey recently conducted by the Swiss Institute Intervista in 2020, revealed that 7 percent of savers, between 18 and 55, own cryptocurrencies. 13 percent of the youngest respondents, between 18 and 29 years old, also said that bitcoins and other digital currencies will become even more important in the future, and even 7 percent of those between 30 and 55 plans to continue investing in crypto.
  • The Canton of Zug, where Crypto Valley is located, accepts Bitcoin and Ether as payment for taxes.
  • The Swiss SIX Exchange is world's leading regulated marketplace for trading products with crypto currencies as an underlying with 63 crypto exchange traded products (August 2021). Also, SIX Digital Exchange, received authorisation from FINMA to operate a stock exchange and a central securities depository for digital assets.
  • The Swiss National Bank (SNB) does not currently have any plans to introduce a digital franc. Though it has been involved in experiments settling digital assets on a distributed ledger with central bank money.
  • Switzerland has the sixth most bitcoin ATMs in the world, a total of 129 bitcoin ATMs, spread around mostly in Zurich, Lausanne and Genève.
  • The Swiss law doesn’t define the term “cryptocurrency” or “virtual currency”. Cryptocurrencies are not considered to be either legal tender or money.
  • The Swiss Financial Market Supervisory Authority (Eidgenössische Finanzmarktaufsicht, FINMA) published guidelines on the regulatory treatment of ICOs.
  • In August 2019, FINMA published guidance on combating money laundering on the blockchain, including adopting a stricter version of the FATF guidance around transmission of sender and recipient information (the so called Travel Rule).
  • In September 2019, FINMA publishes guidance on stable coins.
  • In 2018, the Swiss Federal Council published a report on the legal framework required for DLT and blockchain in Switzerland. This led to the Federal Act on the Adaption of Federal Law to Developments in the Technology of Distributed Electronic Registers” which came into force in February 2021.
  • FINMA closed down the unauthorized providers of the fake cryptocurrency “E-Coin” back in 2017, also issuing another general warning about the dangers of fake cryptocurrencies, including suspicious activities and unauthorized business models.
  • As for consumer concerns, even many of the young Swiss are afraid of the risks of alternative investments in the form of crypto but this mostly originates from the lack of knowledge which they plan to act about.
  • 11.1%

    Owned or used crypto in 2020

  • 129

    bitcoin ATMs in the country

  • Not a legal currency but can be used for payments

    Definition of crypto

  • No plans for CBDC. Experimenting with settling digital assets on a distributed ledger with central bank money

    Central Bank Digital Currency status

  • The Canton of Zug (i.e. Crypto Valley) accepts Bitcoin and Ether as payment for taxes.

    Fun Fact

    Last updated September 2021

Sources:

BIS, CoinATMRadar.com, Coindesk, Global Legal Insights, GlobalWebIndex, Statista (2020 Global Consumer Survey), Swiss National Bank.

Sweden

Sweden: The progressive contestant

Deloitte’s 2019 report on the rise of cashless societies in the Nordics predicted that in 2025 at least one of the Nordic countries will be ‘de facto’ cashless. In Sweden alone, the value of banknotes and coins in circulation declined from SEK 110 billion in 2007 to SEK 57 billion in 2017, but had increased to above SEK 62 billion (30 June 2021).

  • As Sweden runs for the trendsetting title of Europe’s (or the world’s) first cashless society, the country is definitely not in the lead when it comes to crypto ownership as the Statista survey reports only 4 percent of the Swedish population having owned or used cryptocurrencies in 2020.
  • Sweden is where the world’s first crypto ETP (exchange-traded product) was listed on Nasdaq Nordic in 2015.
  • There are currently no bitcoin ATMs in the country.
  • Cryptocurrencies are not seen as currencies in Sweden but as means of payments, trade (thus being a financial service and a subject to mandatory reporting requirements) and capital investment
  • The Riksbank started development of a e-krona in 2017. In 2020 the Riksbank and Accenture commenced work in relation to the technical aspects of the e-krona. An enquiry is under way into the Government’s role in the payments market and the need for a Swedish CBDC.
  • The Swedish government is actively involved in the crypto space as the Swedish Enforcement Authority hosted its second online crypto auction in 2019, offering bitcoins to the public in a safe, legal way, not questionable by authorities
  • When finalised, the Markets in Crypto-Assets Regulation will apply in Sweden.
  • Sweden’s main concerns around crypto revolve around the case of the now nearly-cashless payments system versus the digitalisation of the system, the Riksbank’s 2019 paper on e-krona also identified the risk of certain groups in society finding it more difficult to make payments as they struggle to deal with digital technology.
  • In June 2021 Erik Thedéen gave a speech entitled Crypto-assets – risk and opportunities where he said “The technology behind crypto-assets has the potential to create value for society, but crypto-assets like Bitcoin also pose significant risks”. The risks identified were an absence of consumer protection, environmental concerns, financial stability risks and the potential use for money laundering, terrorist financing and avoiding sanctions.
  • 4.3%

    Owned or used crypto in 2020

  • 0

    Bitcoin ATMs in the country

  • Not currency but means of payment, trade and capital investment

    Definition of crypto

  • E-Krona project

    Central Bank Digital Currency status

  • The world’s first crypto ETP listed on Nasdaq Nordic

    Fun Fact

    Last updated September 2021

Sources:

CNBC, CoinATMRadar.com, Deloitte, Finansinspektionen, Sveriges Riksbank, Statista (2020 Global Consumer Survey), Swedish Government.

Italy

Italy: The uncertain optimist

According to the joint study of GlobalWebIndex and BitPanda, only 5 percent of asset holders own crypto in Italy, and the 2018 data by Statista found similar results with 92 percent of respondents saying they do not own cryptocurrency. Statista survey reported close to 5 percent of the Italian population having owned or used cryptocurrencies in 2020.

  • While Italy is one of the most confident countries in the longevity of cryptocurrencies, and where buying crypto became much more accessible through the country’s mobile bank, Hype starting from March 2020, four out of five transactions are still cash-based in the country, leaving significant room for development — especially without the needed regulations and policies in place as a foundation.
  • The Bank of Italy is one of the Central Banks involved in the project to develop a digital euro. The Governing Council of the European Central Bank decided in July 2021 to commence the investigation stage aiming to address key issues regarding the design and distribution of the digital euro.
  • Italy has the twelfth most bitcoin ATMs in the world, a total of 60 bitcoin ATMs, spread around mostly in Bologna, Milan and Rome. The first bitcoin ATM operator in the country was Chainblock which started in 2013, and has since expanded its portfolio operating a crypto exchange, as well.
  • The Italian Central Bank, Banca d’Italia issued their first warning about virtual currencies in 2015, defining them as “digital representations of a value… created by private subjects who operate on the Web”, and a similar wording is from a 2017 Decree saying that these are “a digital representation of value, not issued by a central bank or a public authority, not necessarily related to a fiat currency, used as a tool of exchange for purchasing goods or services, and electronically transferred, stored and traded”.
  • The Italian Government created an advisory group about blockchain in 2018, and in Law Decree no.135 of 2019, Distributed Ledger Technologies, defined the terms “blockchain” and “smart contract”, but did not include a definition of the general term “cryptocurrency”.
  • The Ministry of Economic Development published a consultation in June 2020 in relation to a national strategy for blockchain, including recommendations in relation to Italian AML, crypto assets definitions and a Central Bank Digital Currency.
  • When finalised, the Markets in Crypto-Assets Regulation will apply in Italy.
  • Banca d’Italia’s 2015 warning raised attention to the lack of tax regulations regarding cryptocurrencies, highlighting the specific nature of these digital currencies.
  • In April 2021, Consob and the Bank of Italy issued a warning against the risks inherent in crypto-assets, including, lack of information on price-making mechanisms, volatility of prices, complexity of the underlying technology, absence of investor protection rules for crypto service providers and losses from cyber-attacks and inability to access electronic wallets.
  • 4.7%

    Owned or used crypto in 2020

  • 49

    Bitcoin ATMs in the country

  • Akin to a currency that is not legal tender in Italy

    Definition of Crypto

  • Involved with the Digital Euro

    Central Bank Digital Currency status

  • Supreme Court decision that an online sale of bitcoin was the promotion of financial instruments

    Fun Fact

    Last updated September 2021

Sources:

Banca d’Italia, Bitcoin.com, Business Wire, CoinATMRadar.com, Consob, European Central Bank, Statista (2020 Global Consumer Survey).

Austria

Austria: The fearful counselor

The report of GlobalWebIndex found that 12 percent of asset holders in Austria also hold crypto, second only to Switzerland in Europe, and Vienna standing at fourth place in the top five of cryptocurrency cities. Oesterreichische Nationalbank (OeNB), the central bank of Austria, conducted its own survey with the outcome of 1.5 percent of Austrians being crypto asset-holders and about 5 percent of the population viewed as potential adopters. Finally, the Statista survey reported over 7 percent of the Austrian population having owned or used cryptocurrencies in 2020.

  • The Austrian crypto ecosystem is a busy one. Vienna is home to Bitpanda, an exchange founded in 2014 with over two million users offering access to cryptocurrencies, stocks, precious metals, ETFs and crypto indices. Also, Blockpit facilitating and simplifying tax filing for those involved with crypto. Finally, Salamantex is a fintech company specialising in payments with digital assets.
  • The OeNB is one of the Central Banks involved in the project to develop a digital euro. The Governing Council of the European Central Bank decided in July 2021 to commence the investigation stage aiming to address key issues regarding the design and distribution of the digital euro. The OeNB has also been involved in a research project exploring the suitability of blockchain technology for issuing and settling Austrian Government bonds in real time using a wholesale CBDC.
  • Austria has the fourth most bitcoin ATMs in the world, a total of 155 bitcoin ATMs, mostly in Vienna, Graz and Linz.
  • In Austria, cryptocurrencies do not qualify as legal tender or as financial instruments but other (intangible) commodities, also treated as “other assets” for income tax purposes, and OeNB specifically stated that bitcoin is not a currency as it doesn’t provide the known functions of money, due to its limited quantity and no central authority to stabilize it.
  • In 2020, by amendment to the e Austrian Financial Market Authority Act (Finanzmarktaufsichtsbehördengesetz, FMABG), the Austrian Financial Market Authority (FMA) established a regulatory sandbox.
  • When finalised, the Markets in Crypto-Assets Regulation will apply in Austria
  • In 2018 Ewald Nowotny, then Governor of the OeNB, has pointed out the risks of cryptocurrencies in the past, as “highly speculative investments which entail high risks for individuals”.
  • The FMA has been concerned with investor protection and has warned investors several times of the potential risks of ICOs and cryptocurrencies.
  • The relative majority of respondents in OeNB’s 2019 survey agreed to the statement that with crypto, there is a “great danger of fraud and online theft”, and people with “awareness of crypto” (not asset holders nor interested) considered them as volatile, likely to bring losses, and overall an unattractive investment that doesn’t offer advantages for payments
  • 7.2%

    Owned or used crypto in 2020

  • 155

    Bitcoin ATMs in the country

  • Not money or currency, but a means of exchange

    Definition of crypto

  • Involved with the Digital Euro. Researching issuing and settling Austrian Government bonds using a wholesale CBDC

    Central Bank Digital Currency status


  • Vienna 4th in the top 5 of crypto cities in Europe

    Fun fact

    Last updated September 2021

Sources:

CoinATMRadar.com, European Central Bank, Financial Market Authority, GlobalWebIndex, Library of Congress, Oesterreichische Nationalbank, Statista (2020 Global Consumer Survey).

Luxembourg

Luxembourg: The small but mighty

A 2018 ING bank survey found that on average 5 percent of Luxembourg owns cryptocurrency, while early 2018 Statista data showed that 6 percent of their respondents owned Bitcoin and 2 percent held Ethereum.

Luxembourg is also a tech hub for blockchain companies, like the FinTech platform LHoFT (The Luxembourg House of Financial Technology), and an ever growing number of FinTech and RegTech companies based in the country.

  • Luxembourg is home to a notable exchange Bitstamp, one of the largest and the longest-standing global exchanges. Another large crypto-related company based in Luxembourg is Blockchain.com which launched in 2011 and now provides more than 74 million private crypto wallets to the market in 200+ countries.
  • The Central Bank of Luxembourg is one of the Central Banks involved in the project to develop a digital euro. The Governing Council of the European Central Bank decided in July 2021 to commence the investigation stage aiming to address key issues regarding the design and distribution of the digital euro.
  • There are currently no bitcoin ATMs in the country.
  • In June 2017, the Luxembourger Minister of Finance, Pierre Gramegna, recognized before Parliament that cryptocurrencies are actual currencies, as “they are accepted as a means of payment for goods and services by a sufficiently large circle of people”. Also, providers of virtual currency services in Luxembourg would be held to the same standards of anti-money laundering and terrorist financing as regulated financial service providers.
  • In July 2018, the Government of Luxembourg published a Circular stating that cryptocurrencies are not actual currencies but are considered to be intangible assets for tax purposes and when crypto is used as a means of payment, regular tax laws apply, thus placing the taxation of virtual currencies in the framework of existing tax laws.
  • The country’s parliament, the Chamber of Deputies, continues to modernize older legislation for newer technologies like distributed ledger technologies (DLT). For instance, in 2019 to permit securities to be legally held and transferred through DLT and in 2021 and the issuance of dematerialized securities through DLT.
  • When finalised, the Markets in Crypto-Assets Regulation will apply in Luxembourg.
  • The Commission de Surveillance du Secteur Financier, or CSSF, issued a warning in March 2018 about the risks of investing in ICOs and cryptocurrencies which offer no protection against theft and hacking, and lack liquidity, amongst others.
  • In this letter the CSSF also noted that the provision of financial services, including by way of cryptocurrency, required authorization from the Minister of Finance.
  • 4%

    Own crypto

  • 0

    bitcoin ATMs in the country

  • Not money or currency, but a means of exchange

    Definition of Crypto

  • Involved with the Digital Euro

    Central Bank Digital Currency status

  • The FinTech gateway of Europe home of LHoFT FinTech platform, housing FinTech and RegTech companies

    Fun Fact

    Last updated September 2021

Sources:

Clifford Chance, CoinATM Radar.com, CSSF, Elvinger Hoss Prussen, European Central Bank, ING, lessentiel.lu, LHoFT, Statista (2020 Global Consumer Survey)

Finland

Finland: The one with the tax stories

A recent Statista survey reported over 5 percent of the Finnish population having owned or used cryptocurrencies in 2020. Another data point is in 2018, the country’s Tax Administration reported that “the profits made by Finns from cryptocurrencies were over ten times higher than last year”, and based on the analysis of recent years, taxpayers own around 30 million euros from crypto-related transactions.

  • The first crypto service providers to be legally approved and registered with the Finnish Financial Supervisory Authority in Finland were Northcrypto, LocalBitcoins, Prasos (now Coinmotion), Prasos Cash Management and Tesseract Group, in November 2019. LocalBitcoins for instance is used in over 250 countries across the world, with its headquarters in Helsinki since 2012 and one of the top 100 most successful companies in Finland.
  • The Bank of Finland is one of the Central Banks involved in the project to develop a digital euro. The Governing Council of the European Central Bank decided in July 2021 to commence the investigation stage aiming to address key issues regarding the design and distribution of the digital euro. The Bank of Finland created what some regard as the first CBDC called the Avant card system.
  • The Finnish have access to 16 bitcoin ATMs, the most (five) being in Helsinki.
  • In 2014, the Bank of Finland classified bitcoin as a commodity, adding that it doesn’t meet the requirements to be considered as a payment instrument or an official currency.
  • In a 2017 blog, the Financial Supervisory Authority (FIN-FSA) categorized ICOs into three groups depending on their use: payment instrument-like virtual currencies, virtual currencies used as a payment for a certain commodity (utility coin) and financial instrument-like virtual currencies.
  • Despite the lack of regulation of cryptocurrencies in the country, the Finnish Tax Authority (Vero Skatt) issued guidance for the taxation of virtual currencies as early as 2013. Further guidance was issued in 2018. There have been a number of court rulings on these guidance documents. A copy of the most recent 2020 guidance is here.
  • In November 2019, the Act on Virtual Currency Providers was commenced in Finland. This was earlier than the 10 January 2020 commencement date set out in 5AMLD; setting statutory requirements for virtual currency providers which have to be met if they want to carry on their activities in Finland.
  • When finalised, the Markets in Crypto-Assets Regulation will apply in Finland.
  • The advisory of FIN-FSA stated in 2017 that cryptocurrencies are risky investments.
  • A 2018 paper published by the Bank of Finland described the concept of a digital currency as a “fallacy” and a “great illusion”, noting that it will never replace the current forms of money nor will ever become the singular form of money without institutional banking.
  • FIN-FSA reminded the public in 2019 that “the risks related to virtual currency investments remain unchanged…[and] include sudden major fluctuations in value, data security threats pertaining to exchange services and custodian wallet providers, and the nature of several virtual currencies as speculative investments not involving any inherent source of return.”
  • 5.1%

    Owned or used crypto in 2020

  • 16

    bitcoin ATMs in the country

  • Not a legal currency but can be used for payments

    Definition of Crypto

  • Involved with the Digital Euro

    Central Bank Digital Currency status

  • Estimated 30 million euros owned by taxpayers from crypto-related transactions (2018)

    Fun Fact

    Last updated September 2021

Sources:

Bank of Finland, Bitcoin.com, CoinATMRadar.com, Coindesk, European Central Bank, Finansinpektionen, Statista (2020 Global Consumer Survey), Vero Skatt.

The Netherlands

The Netherlands: The innovator ready to pioneer

According to Statista, 10% of Dutch respondents indicated either owning or using cryptocurrencies in 2020. This would make the Netherlands one of the highest adopters of crypto in Europe. The Central Bank of the Netherlands (De Nederlandsche Bank or DNB) is seen as open to the idea of a retail digital euro and in 2015 commenced its “DNBCoin” pilot project, an innovative initiative, to develop prototypes to study the way the bitcoin blockchain could be used by national banking institutions.

  • Amsterdam is the headquarters for BitFury, founded in 2011, which provides technologies such as artificial intelligence, blockchain, bitcoin and high-performance computing.
  • A significant cryptocurrency derivatives platform, Deribit, was founded in Amsterdam. It announced in January 2020 that it would move its headquarters to Panama, due to its concerns over 5ALMD implementation.
  • The DNB is one of the Central Banks involved in the project to develop a digital euro. The Governing Council of the European Central Bank decided in July 2021 to commence the investigation stage aiming to address key issues regarding the design and distribution of the digital euro. In April 2021 the DNB published a paper stating “We find a clear potential for CBDC: 49% of the public is interested in opening a CBDC current account, and 54% in opening a CBDC savings account.”
  • The Dutch have access to a total of 20 bitcoin ATMs, with over half located in Amsterdam and Rotterdam.
  • The Dutch anti-money laundering and counter terrorist financing Act, Wet ter voorkoming van witwassen en financieren van terrorisme, or Wwft, has implemented the 5ALMD definition into local law (i.e. crypto is not considered to be money or a currency; but may be accepted as a medium of exchange).
  • In November 2019, the DNB announced that it would supervise the registration of companies offering cryptocurrency services in and from the Netherlands within the meaning of the Wwft. The registration process is an extensive process, similar to a license application to the DNB, with a large number of documents supporting the application being required. The first firm to be registered was AMDAX in October 2020, and while many of the firms registered by the DNB only provide services to larger investors, the first consumer-focused crypto company, BLOX, was registered in November 2020.
  • When finalised, the Markets in Crypto-Assets Regulation will apply in the Netherlands
  • In May 2014 the DNB published an article in the DNBulletin entitled “Virtual currencies are not a viable alternative” stating “Although virtual currencies were designed to function as money, to date they have not been able to fully fulfil the three functions of money: medium of exchange, store of value, and unit of account. Currently, bitcoin's viability as a medium of exchange is limited, its store of value role is even smaller, and it is virtually inadequate as a unit of account. … Consequently, virtual currencies like bitcoin are at present no viable alternative for the euro and other currencies.” (link to DNB's archive search page to find this article: step 1, click https://dnb.archiefweb.eu/#archive. Step 2, in the left hand column titled “archiefweb.eu,” below the calendar in the search bar type in title “Virtual currencies are not a viable alternative” to view the original document).
  • Also, in a January 2018 position paper the DNB said “crypto’s do not currently fulfill the role of money—in fact, they are hardly ever used for payment, and they are not a universally accepted and stable medium of exchange, a suitable unit of account or a reliable store of value. Accordingly, they do not have any implications in terms of monetary policy” (link to DNB's archive search page to find this article: https://dnb.archiefweb.eu/#archive).
  • The Dutch Authority for the Financial Markets (Autoriteit Financiële Markten, AFM) published a warning titled “Initial Coin Offerings (ICO’s): serious risks”, drawing attention to that ICOs are “vulnerable to misinterpretation, fraud, manipulation and may also be structured in a way that they are not subject to supervision by the AFM”.
  • In 2018, the Dutch Minister of Finance, Wopke Hoekstra highlighted the need for crypto regulations both on a European and international level in a letter to the Dutch Parliament, stating that the country “wants to play a pioneering role within the European and international approach [to] cryptocurrency” but a series of regulatory steps are needed first especially as ICOs can be “purely speculative in nature”.
  • Again in 2021, in the face of calls to ban bitcoin, Hoekstra was reported as saying that monitoring of crypto would be “more effective” than an outright ban.
  • 11% of asset holders
    owns crypto

  • 20
    bitcoin ATMs in the country

  • Not money, not a fiat currency
    Definition of crypto

  • Involved with the Digital Euro

    Central Bank Digital Currency status

  • 2015 experiments with DNBCoin

    Fun Fact

    Last updated September 2021

Sources:
GlobalWebIndex, CoinATM Radar.com, Global Legal Insights, De Nederlandsche Bank

France

France: Early Legislator

A recent Statista survey reported 5.6 percent of the French population having owned or used cryptocurrencies in 2020. The January 2020 study The French and new payment methods showed 74% of interviewees had heard of cryptocurrencies. France has been an early adopter of legislation related to blockchain and distributed ledger technology, including a 2016 Ordinance permitting blockchain technology for SME financing (the minibon); extended to tokenised unlisted equities and bonds via a 2017 Ordinance.

  • France has a vibrant and diverse crypto and blockchain eco-system. Including companies such as Ledger which is the global leader in hardware security devices, Sorare which provides a football fantasy game where digital collectibles can be traded and Kaiko a digital assets market data provider.
  • The Banque de France is one of the Central Banks involved in the project to develop a digital euro. The Governing Council of the European Central Bank decided in July 2021 to commence the investigation stage aiming to address key issues regarding the design and distribution of the digital euro. Additionally, the Banque de France has been involved in a number of experiments of CBDC for various wholesale markets purposes.
  • France has a total of 9 bitcoin ATMs, 3 each in Lyon, Marseille and Paris.
  • The Autorité des marchés financiers (AMF) consulted on Initial Coin Offerings (ICO) in October 2017, Discussion Paper on Initial Coin Offerings. In February 2018 it published a Summary of Responses which adopted the option to proceed with ICO-specific regulation.
  • In May 2019 the French enacted the PACTE Law n°2019-486 relating to the growth and transformation of companies. This law established a framework for fundraising via ICOs and digital assets services providers (DASP). Specifically a process for the AMF to approve ICOs thus allowing marketing of the ICO like a traditional financial security. Also, the law provided rules for services related to digital assets.
  • The AMF granted its first approval to an ICO in December 2019. Information on how to obtain approval for an ICO can be found on the AMF website.
  • In June 2021 France strengthened its implementation of 5AMLD with Ordinance n°2020-1544. The Ordinance expanded AML/KYC obligations to capture crypto-to-crypto exchanges and trading platforms. Amongst other measures, the Ordinance requires all crypto transactions to be accompanied by KYC (i.e. reduced to €0 from the previous threshold of €1000).
  • When final, the Markets in Crypto-Assets Regulation will apply in France.
  • In December 2013 the Banque de France published a report that bitcoin wasn’t a currency or means of payment under French law. The Report criticised bitcoin as a vehicle for speculation, and as an instrument of money laundering and illegal activities.
  • In 2018 the AMF, the Banque de France, and the Prudential Supervision and Resolution Authority, the Autorité de contrôle prudentiel et de resolution (ACPR), issued a press release in relation to the proposed purchase/sale of bitcoins by tobacconists across the country and some of the risks involved.

In July 2021, the AMF issued a letter proposing that ESMA be given “the power of direct supervision of public offers of crypto-assets in the EU (scrutiny of white papers) and of crypto-asset service providers”. The letter further stated that this “would create obvious economies of scale for all national supervisors and concentrate expertise in an efficient way, for the common European benefit”.

  • Owned or used crypto in 2020

    5.6%

  • Bitcoin ATMs in the country

    9

  • Definition of crypto

    Does not possess status of currenc

  • Central Bank Digital Currency status

    Involved with the Digital Euro. Involved in testing CBDCs for various wholesale market purpose

  • Fun fact

    The term “blockchain” was defined into French law in 2016

    Last updated September 2021

Autorité des marchés financiers, Banque de France, CoinATMRadar.com, Coindesk, Ekino, European Central Bank, Library of Congress, Statista (2020 Global Consumer Survey).

We're always happy to receive thoughts and feedback. If you would be interested in us investigating other countries, please let us know.

Resource Archive

Netherlands - Concerns: DNB-Virtual currencies are not a viable alternative
(Link to file)