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Cryptocurrency is the main trend of the last 5 years in digital business. Investors and entrepreneurs see the role of cryptos differently because it is obvious that today cryptos are not only an investment asset but also an alternative payment method. However, governments could not ignore the increasing growth of the crypto market, which is why the amendment of the required regulations was only a matter of time.
Factors Determining Crypto-Friendly Country
MiCA regulations in the EU and the strict SEC policy in the US clearly demonstrate the problems that blockchain companies can face if their activities are not regulated by responsible state authorities.
There are three main reasons for that:
- AML Policy implementation on operations with cryptocurrencies.
- Using blockchain technologies for tax evasion by businesses.
- The Bankruptcy of the FTX crypto firm in the USA and increasing fraudulent schemes in the crypto market.
Therefore, governments all over the world start implementing rules for blockchain business. This process has two goals. First, to establish itself as a country friendly to the crypto community. Second, to regulate its activities by global AML standards.
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Crypto-friendly countries must meet some features, in particular:
- Clear and flexible legal regulation of the crypto activity in the jurisdiction with responsible regulatory authorities.
- Possibility to have a special license or permission by the state to provide crypto activity.
- Low taxes or special tax regimes on crypto operations in the country.
- Possibility to use cryptocurrency in daily life for services or investment.
For a new start-up in the crypto sphere that wants to provide its services worldwide, it is important to have the right legal and corporate structure for doing business. In 2023, the most crypto-friendly countries are Poland, Lithuania, and Canada. The benefits of each jurisdiction are different. It is important to check your business plan before choosing.
Top Crypto-Friendly Countries
Type of license: Registration of Activities in the Field of Virtual Currencies.
Regulator: The Tax Administration Chamber in Katowice.
Poland is a leader in the Eastern European region regarding the pace of digital technology development. It provides a favorable policy for virtual business. Since 2022, it has been considered one of the most comfortable jurisdictions for running a blockchain business.
Poland is the easiest way to start a crypto business in Europe today. This is due to two reasons:
- There are no special requirements for paid-up authorized capital. For example, in Estonia, applicants must have EUR 250,000 in funds, which makes it difficult for start-up projects to register.
- Obtaining a crypto permit is available for companies that do not have a local presence in the country. However, the firm must have an AML officer. They will be responsible for the anti-money laundering policy and communication with government agencies that regulate cryptocurrency activities.
Usually, the process of obtaining crypto authorization in Poland takes 1 month. However, to speed up the process, shareholders and directors will need to cooperate fully to prepare the necessary documents.
Despite the positive aspects of this jurisdiction, it is essential to know that the cryptocurrency business is highly risky. Opening a bank account in Poland for a Polish company will not be possible. However, if the organization has a clear business plan and effective internal anti-money laundering rules, getting a bank account in an EU EMI is possible.
It is also recommended to have two shareholders in the company structure. This will allow you to avoid a monthly insurance payment of PLN 2,000 to the Social Insurance Institution (ZUS), which is mandatory for companies with a single owner.
Type of license: Registration as a Virtual Assets Service Provider.
Regulator: Financial Crime Investigation Service (FCIS).
Lithuania is a country in the Baltic region that is recommended as a prestigious jurisdiction for digital businesses, especially IT, fintech, and internet marketing. The country has also become a new haven for crypto entrepreneurs in the EU after Estonia changed its legislation on crypto companies.
In 2022, the Lithuanian government amended the VASP (Virtual Assets Service Provider) rules. According to the new rules, the requirements for the registered authorized capital have been increased from EUR 2,500 to EUR 125,000. Also, a legal entity that has started operating in the cryptocurrency field must have a head (AML officer) who is a permanent resident of the country. The company must also provide services not only abroad but also in Lithuania.
At first glance, registration of digital assets in Lithuania looks expensive and highly regulated, but this jurisdiction has essential advantages:
- The corporate tax rate is 15%, but small companies with less than 10 employees and gross annual income of less than EUR 300,000 can be taxed at a reduced rate of 0-5%. This legal provision is quite favorable for start-ups.
- Fast terms of obtaining a license (usually, it takes 2 months).
- The average monthly salary for a Senior Manager and office rent is among the lowest in the EU.
The registered authorized capital can be paid partly throughout the year, but the start payment must be at least 25% of the EUR 125,000. This makes Lithuania one of the best crypto-friendly countries in Europe. In addition, strict regulation from the authorities opens new doors for better payment solutions for Lithuanian VASPs, because payment institutions have better trust in VASPs from jurisdictions with proper regulations.
Type of license: MSB (Money Service Business) License.
Authorized capital: No special requirements.
Regulator: FINTRAC (Financial Transactions and Reports Analysis Centre of Canada).
Poland and Lithuania are the most cryptocurrency-friendly countries in the EU. However, Canada is still an attractive solution for blockchain businesses worldwide.
The MSB (Money Service Business) license allows the company to provide services of “dealing in virtual currency.” This type of activity can be better divided into two main areas:
- Virtual currency exchange services include exchanging fiat funds for virtual currency and vice versa or one digital currency for another.
- Virtual currency transfer services include transferring virtual currency at a client’s request or receiving a virtual currency transfer for transfer to a beneficiary.
To get an MSB license, an applicant must meet the following requirements: implementation of an AML/CFT policy, a physical office, an experienced director, and an AML officer in the structure.
There are several advantages to choosing Canada as a jurisdiction for your blockchain business:
- FINTRAC is recommended as a reputable and flexible supervisory authority for businesses.
- The timeframe for obtaining a license takes an average of 4 weeks. For example, in most EU jurisdictions, it can take more than 1 year, which benefits businesses seeking to start operations.
- The MSB license is approved by Meta. Companies with this license can advertise their products on Facebook, Instagram, etc. This contributes to their business’s active development.
- There are no authorized capital requirements for the company and no obligation to have Canadian citizens in the structure. You can work with your team without extra costs for local staff and authorized capital.
All these advantages make Canada one of the best crypto-friendly countries in North America and the world.
Benefits of Crypto-Friendly Countries for Businesses and Individuals
Countries implementing appropriate digital asset regulations are becoming a boon for crypto entrepreneurs. They create favorable conditions for the development of companies and individuals by:
- implementing a fast registration process;
- absence or minimal amount of taxes on cryptos;
- permission for foreign companies to operate in the country;
- flexible requirements for authorized capital, etc.
All of this opens up ample opportunities for scaling a crypto business and increasing income. In addition, bitcoin-friendly countries provide legal trading in virtual finance, which effectively counteracts illegal money laundering and the development of fraud in the crypto industry.
Digital business laws and tax requirements in different countries are constantly improving. Thus, you should carefully study the current legal framework for regulating virtual currencies to find the best option.
Get detailed legal advice on choosing the most crypto-friendly countries from qualified experts at Fintecharbor.
What is a crypto-friendly country?
A crypto-friendly country is a country that implements legal rules and other regulations to provide the appropriate infrastructure for the use and acceptance of virtual finance. Thanks to such legal documents, the organization of companies or individuals engaged in various crypto activities becomes official and protects against fraud.
What countries are best to live with cryptos?
Canada is considered one of the best countries for living with crypto. This country provides an MSB license that promotes the development of companies that exchange and transfer virtual funds between e-wallets and bank cards. This greatly simplifies transactions for traders and other cryptocurrency users.
Which country has the lowest crypto tax?
Taxes in Lithuania are among the lowest. With an annual income of less than EUR 300,000, companies can be taxed at a reduced rate of 0-5%.
Which EU country is most crypto-friendly?
The top crypto countries in the European Union are Poland and Lithuania, as their policies on virtual assets create a favorable environment for the development of blockchain business.
Which country is most friendly for cryptocurrency?
Canada is rightfully considered one of the most digital asset-friendly countries. The country’s jurisdiction has several advantages that facilitate the launch of crypto start-ups and the scaling of existing companies.
How do crypto-friendly countries attract businesses and investments?
To attract investment, virtual currency-friendly countries are introducing new regulatory frameworks that create favorable conditions for companies and private entrepreneurs operating in the digital asset sector. The innovations are aimed at facilitating the registration process, establishing good taxation conditions, and regulating the activities of crypto firms by law.
Choosing a jurisdiction for your crypto project is always a crucial and stressful stage of doing business. There are important recommendations for blockchain entrepreneurs in this situation. Poland is one of the best solutions if your business is at the initial stage and you want to start with a limited budget. The only thing required of you is a clear business idea that you want to realize.
Lithuania and Canada are great countries for businesses with experience in the blockchain that are ready to invest money to make a profit in the future. These jurisdictions will provide you with reliable regulation, banking solutions, and good conditions for development. Finally, Lithuania will be the best choice if you plan to operate only in the EU.
At the same time, when the MiCA rules come into force, it may create certain problems for crypto businesses. In this case, Canada could be the best country for the crypto business due to more flexible regulations than in the EU. Because strict rules require bigger budgets, and not all businesses are ready for these new changes.