With the advent of cryptocurrencies, people got a convenient alternative to fiat assets. They are widely used today in most industries and activities. Yet, the decentralized essence of digital assets has two sides to the medal. On one side, it is the most prospective for investments and transactions, its blockchain-based technology makes it highly protected. On the other, the problem of cryptocurrency legislation still exists and not all states and regions provide clear policies for cryptocurrency-related activities.
Let’s learn which are the most crypto-friendly states using the guidelines provided by Fintech Harbor Consulting LTD. In this article, we focus on licensing and tax policies provided under the jurisdiction of top cryptocurrency countries. We hope this information may be helpful for people who want to learn how to start a crypto business.
Canada
Canada is the first on our list due to its rapidly developing interest in cryptocurrencies, and thus, the engaging conditions this country offers to traders and investors.
Regulatory Framework for Cryptocurrency
The Canadian regulatory framework is built on the principle of clarity. You have to comply with the KYC policy and suspicious activities check, and then you can apply for a crypto license in Canada.
Tax Policies for Crypto Businesses
The Canada Revenue Agency sets the principle of taxing income from digital currencies. You have to pay income taxes for half of your crypto deposits or gains and 100% of your commercial income.
How to Obtain a Crypto License in Canada
You can apply for your license if you start your business in Canada, register your company, and comply with the requirements for a Canada MSB license.
Switzerland
Switzerland traditionally supports businesses and provides a loyal policy towards entrepreneurs. Crypto is not an exception.
Overview of Crypto Valley and Blockchain Regulations
The Swiss Financial Market Supervisory Authority (FINMA) is the sole authority regulating crypto-related deals and transactions, making it convenient for all financial players to enter the cryptocurrency market.
Taxation and Compliance for Crypto Companies
The name of a ‘Crypto Valley’ was given to Switzerland due to its loyal tax policy. Even advanced and professional traders should pay no more than 0-13.2% of their income, and for annual income calculation, the tax rule is 0.5-0.8% of wealth tax.
Steps to Launch a Crypto Business in Switzerland
The process of launching of crypto business in Switzerland is quite simple and logical. You have to register a company, comply with preliminary requirements set by the FMSA, open your corporate account in local banks, and then apply for a license.
Estonia
Meet Estonia on our list as one of the most crypto-friendly states worldwide.
Why Estonia is a Leader in Crypto Licensing
The main thing to know about the Estonian cryptocurrency market is that its government developed the most straightforward process for people who want to obtain crypto licenses. That’s why it became a friendly environment for crypto among North European and Baltic countries.
Tax Incentives for Cryptocurrency Entrepreneurs
At once, in Estonia, you are obliged to pay taxes for all transactions considered profitable. The tax rates are 20%.
Licensing Process for Crypto Companies in Estonia
You can get your crypto license in Estonia without any effort. The procedure is provided by local virtual currency centers which are legislated for licensing. Thus, you can apply for a license online from any part of the globe which makes it easier for businesses and individuals from this region, for example, compared to a crypto license in Poland.
Singapore
Singapore remains one of the biggest business hubs. Blockchain and cryptocurrency-based businesses are welcome too!
Crypto Regulations Under the Monetary Authority of Singapore (MAS)
Suppose you want to operate crypto assets in Singapore. In that case, you have to obtain the license of a DPT service provider issued by the local MAS authority which is the main virtual assets regulator.
Taxation of Crypto Assets in Singapore
When you buy, sell, or convert crypto assets, you pay an 8% tax for goods and services.
Starting a Crypto Business in Singapore
You can launch your crypto startup in Singapore with the following steps:
- Company registration
- Governmental fees payment
- MCL license application
That’s eating pears if you compare it to other countries!
United Arab Emirates (UAE)
If you are interested in which country has the most crypto investors, be sure that the UAE keeps the palm. Over 30% of its population owns digital assets.
Crypto Licensing in Dubai and Abu Dhabi
Since 2023, the UAE has broken the rules by the administration of a free zone for cryptocurrencies and digital assets for 100% foreign companies in the emirate of Ras Al Khaimah. That made moving businesses and licensing in the UAE a great perspective for investors and traders.
Tax-Free Benefits for Crypto Companies in UAE
At once, the UAE gained the status of one of the best crypto tax-free countries. For example, foreign companies trading crypto are free from personal or corporate income taxes, and individuals are not obliged to pay taxes for their crypto income.
Regulatory Environment for Blockchain Startups
The UAE has introduced a special governmental initiative called Project Aber, aimed at supporting blockchain startups. Additionally, the UAE actively promotes the integration of digital assets into various transactions and services.
Malta
Malta has also become a favorable destination for businesses engaged in innovations and FinTech.
How Malta Became the “Blockchain Island”
The reasons for obtaining the cryptocurrency license in Malta are quite simple:
- The country gained the name of a ‘Blockchain Island’ due to multiple relevant businesses relocating to it.
- At once, the Maltese government created the Malta Financial Services Authority, which regulates the whole process of crypto operations.
- You can get a residency permit if you invest in the Maltese economy.
Tax Advantages for Crypto Investors in Malta
Cryptocurrency investments in Malta are tax-free. At once, you should remember that business income taxes are relevant for crypto traders and their levels fluctuate from 0 to 35% depending on the residency status and the levels of profit gained.
Licensing Requirements for Crypto Businesses
Although Malta is recognized as one of the most crypto-friendly states, you still have to get its license to comply with legal requirements. The application requires you to prepare a whitepaper and business plan, contact a VFA agent, and register your business. Then you can apply for your license in local principal approval offices.
United States
The United States is a cradle of innovations and FinTech businesses. Yet, some peculiarities relate to contradictions between state and federal legislation rules. It concerns crypto businesses too.
Most Crypto-Friendly States for Business
If you are looking for the states that are the most friendly to cryptocurrency operations and businesses, the best idea is to start your business in the following ones:
- Wyoming
- Florida
- Texas
- Colorado
- New Hampshire
Compliance with their federal regulations is the easiest to maintain for crypto businesses.
Federal and State-Level Crypto Regulations
The trick is that the US provides quite a complex set of cryptocurrency regulations. For example, at the state level, your operations may be supervised by FinCEN, SEC, or CFTC authorities, and often, by multiple of them at once. At the same time, federal laws and regulations for crypto and digital assets differentiate from state to state.
Tax Policies for Cryptocurrency in the US
Unfortunately, the US is not a tax-free state, and for cryptocurrencies, it offers the following tax rates:
- For short-term income gained with crypto – up to 37%
- For long-term investments, taxes are 0-20%
- For collectible NFTs, rates are up to 28%
We hope that with the help of this guide, you may determine the best place for your crypto business among the best crypto-friendly countries.
FAQ
What are the most crypto-friendly countries for starting a business?
As you can see, these countries are already indicated on the list below,
Which countries offer the best tax benefits for cryptocurrency investors?
Singapore, Malta, and Switzerland offer tax-free regulations for crypto.
How do I choose the right country for obtaining a crypto license?
Just consider which country provides the easiest license-obtaining procedure and decide on your goals as the reasons to select the best country for cryptocurrency licensing depend on them. You can use this guide to make a win-win decision.