Over the past few years, cryptocurrency has gone from being seen as an unreliable asset only computer aficionados could afford to being seen as a reliable asset available at most modern brokerages.
This widespread approval has resulted in stricter government oversight. Several nations have begun taxing cryptocurrency gains and cracking down on related financial crimes. Cryptocurrencies, however, have peculiarities that have regulators scratching their heads.
Unlike the U.S., where the SEC levies a regular capital gains tax, EU member states have varied tax rules for cryptocurrencies. Various European nations take between zero and fifty percent of any revenues made.
On the other hand, exchanges are not controlled by the EU. However, some must register with their regional government. In this article, we’ll be reviewing how cryptocurrency is regulated in a few European countries.
European Cryptocurrency Regulation
Denmark
The primary Danish regulatory body is the Danish Financial Supervisory Authority. However, EU law has an impact on how cryptocurrencies are regulated. In Denmark, cryptocurrency mining is not governed by any laws. Since cryptocurrencies do not fall under the category of “financial services,” they are not governed in the same way as traditional currencies in Denmark. Instead, financial services encompass things like mortgage lending, service payments, and the distribution of digital currency.
Like the rest of the European Union, Denmark takes the battle against money laundering very seriously. Since the EU’s anti-money laundering legislation does not distinguish between different technologies, cryptocurrencies must comply with it.
As cryptocurrency losses are not deductible for commercial purposes, they are not subject to taxation. Some cryptocurrencies don’t have to pay sales taxes or have losses that can be deducted from taxes, but others do.
Due to the success and popularity of investing in Bitcoin in Denmark, the country has changed the way it taxes cryptocurrencies.
Spain
Among EU countries, Spain was an early adopter of cryptocurrency because of its widespread acceptance and the proliferation of bitcoin ATMs and retail outlets. Even though virtual currencies don’t have a clear legal status, they are still taxed in Spain. They have to pay income tax and value-added tax.
When the hazards and volatility of cryptocurrencies became apparent in 2021, the Spanish Securities and Exchange Commission, the Comision Nacional del Mercado de Valores (CNMV), and the Bank of Spain published a joint statement. In addition, the joint statement emphasized that cryptocurrencies are not recognized as legal tender and are not supported by any central bank or other customer protection measures or authorities.
One section of the Royal Decree issued by Spain grants the CNMV the authority to control cryptocurrency advertising. By January 2022, the CNMV had sent out a notice to investors saying that it planned to stop social media influencers from promoting cryptocurrencies.
Sweden
In Sweden, Bitcoin has been publicly deemed legal but not an official means of payment or legal money by the Financial Supervisory Authority (FSA) and the central bank. From a tax point of view, they are treated as an asset rather than currency or cash.
The FSA has warned about the dangers of cryptocurrency and investment products that use cryptocurrency as an underlying asset, such as exchange traded products (ETPs). Custodians, wallet providers, and exchanges operating in Sweden are subject to the Swedish Currency Exchange Act and must register with the Swedish Financial Supervisory Authority. The statute mandates AML compliance for some categories of financial institutions that are otherwise mainly unregulated and unmanaged.
With the adoption of AMLD5, custodial wallet providers and virtual currency exchange service providers are now under the purview of the Currency Exchange Act.
There is no mining legislation in Sweden. Virtual currency mining does not necessitate any special permits or registrations.
The Riksbanken, the Swedish Central Bank, has pioneered the creation of a CBDC (Central Bank Digital Currency), the e-krona.
Employment income, self-employment income, business revenue, and investment income are each treated differently under Swedish income tax legislation. The profits from selling an asset are considered investment income. Sweden’s cryptocurrency gains are subject to a flat 30% capital gains tax. If you suffer a loss, you can claim up to 70% of it. The income tax has a progressive structure, and the average rate is currently around 32%.
Conclusion
Blockchain and digital assets are now recognized as legitimate investment opportunities in the EU, as they are in the United States. In January 2020, the governing bodies passed the 5th Anti-Money Laundering Directive (5AMLD) into law, marking the first time bitcoin providers will fall under regulatory control. Member nations must keep records of the names and physical locations of all people who claim ownership of digital assets.
