When compared to many countries in the rest of the world, the regulation of cryptocurrencies in most countries in Europe is either favorable or neutral, where you can purchase bitcoin with no problem whatsoever.
While there are countries that prohibit cryptocurrency-related activities but there is a large underground segment that continues to exist anyway (e.g., Russia), other countries accept and even encourage the use of digital assets (e.g., Malta).
While searching for innovative solutions to solve old problems, Europe sees its citizens’ interest in blockchain technology and cryptocurrencies growing.
In this article, you will find out an overview of the legal regulation of cryptocurrency in European countries.
What Does the European Union Have to Say About the Legal Regulation of Cryptocurrency?
So far, the European Union has not passed any specific regulation regarding the status of Bitcoin as a currency, even though it has that both Value Added Tax (VAT) and Goods & Services Tax (GST) does not apply to the conversion between fiat currency and Bitcoin.
On the other hand, some taxes (including VAT/GST) still apply to transactions made using Bitcoin as payment means to pay for goods and services, making them more complex due to the volatile cryptocurrency price.
Also, the European Central Bank has stated that traditional financial sector regulation can be applied to Bitcoin as the digital currency does not involve traditional financial actors such as fiat currency.
The same entity classifies cryptocurrency as a “convertible decentralized virtual currency.” Regardless, some entities that participate in the European Union believe the existing rules should extend to include Bitcoin and other cryptocurrencies.
Since 2016, there have been multiple efforts of the European Parliament to develop and maintain a task force to monitor digital assets to prevent/preclude money laundering and terrorism.
Legal Regulation of Cryptocurrency in Europe – Countries in Which Digital Assets Are Legal
In Europe, most countries permit their citizens and visitants to negotiate and trade using cryptocurrencies, as demonstrated by the following examples:
- Czech Republic
- Bosnia and Herzegovina
Considerations About Legal Regulation of Cryptocurrency in Certain European Countries
Russia represents one of the biggest paradoxes in the world when it comes to the legal regulation of cryptocurrencies. Even though it is not illegal to mine Bitcoin – Russia is one of the world’s largest crypto mining hubs- its legal status is still undefined.
Until late 2016, Bitcoins were not considered illegal in Russia. Later in September 2017, Russia’s Deputy Finance Minister Alexei Moiseev stated that it was “probably illegal” to accept cryptocurrency as means of payment for products or services.
Currently, the viewpoint of the Russian Legislation considers cryptocurrency as a monetary substitute. Thus, the country’s federal law prohibits the issue of money surrogates in the Russian Federation.
In this sense, the Central Bank of Russia is constantly warning citizens against the “danger” associated with cryptocurrencies.
They state that most operations using cryptocurrency are performed outside the legal regulation of most countries (including Russia) and that cryptocurrencies are not guaranteed or provided by the entity itself.
Considered one of the favorites places for crypto enthusiasts worldwide, Malta has a crypto-friendly legal environment, as the Maltese government saw the unique opportunity to welcome a unique industry to promote wealth in their country.
With a very progressive approach to the legal matter of the question, Malta does not consider cryptocurrency as legal tender, and cryptocurrency exchanges are regulated under the VFA Act.
In this sense, the Maltese government was the first to issue three crucial cryptocurrency-related acts (MDIA, ITAS, and VFA), along with specific legislation regarding blockchain technology.
In the post-Brexit financial scenario, the United Kingdom’s viewpoint on cryptocurrency regulations has been mostly favorable.
In 2020, the UK confirmed the status of digital assets as “property”, although they did not issue any specific legal regulations regarding cryptocurrencies. Hence, cryptocurrency is not considered legal tender. Also, cryptocurrency exchanges have registration requirements.
Since January 2021, all crypto-asset firms in the United Kingdom that have a presence or a market product in the country, or provide services to UK-resident customers, must register with the Financial Conduct Authority (FCA).
The role of the FCA is to regulate all financial services in the country, which includes providing consumer protection, maintaining industry stability, and ensuring fair competition amongst the players in the financial service segment.
Currently, most European countries have favorable regulations regarding cryptocurrencies.
Cryptocurrencies are gaining more and more popularity in the world, which leads to many government regulatory bodies intensifying the debate over the regulation of digital assets.
Unfortunately, the legality of cryptocurrencies around the world is still an extremely controversial subject (e.g., Russia, China, Vietnam), as players in the traditional financial sector and central banks are opposed to the popularization of digital assets.