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The general notion of cryptocurrencies in Europe denotes the processes of legislative regulation, distribution, circulation, and storage of cryptocurrencies in Europe. In April 2023, the EU Parliament passed the Markets in Crypto Act (MiCA) unified legal framework for crypto-assets within the European Union.
There are some regulatory policy recommendations for EU states to follow in the course of cryptocurrency adoption and regulatory framework development that are given below in chronological order.
According to Chainalysis, Europe's growth was largely driven by so-called "whales [23] ", large institutional investors shifting enormous sums of cryptocurrency. [24] [lower-alpha 1] According to Chainalysis, Europe has the world's largest crypto economy, collecting $1 trillion in the previous year, or 25% of all crypto activity worldwide. [26]
Different countries have their own approach to cryptocurrencies legalization, distribution, and storage.
Germany continues implementing crypto into the national regulation. First, they started with licensing crypto custody service providers and defining crypto assets as financial instruments. [27] Now private funds are allowed to keep 20% of their investments in crypto. [28]
In August 2020, the Ministry of Finance and the Ministry of Justice of Germany promulgated a bill to regulate electronic securities in the country (eWpG-E). [29]
Although the United Kingdom affirmed in 2020 that crypto assets are property, it has no cryptocurrency regulations and does not consider cryptocurrencies to be legal tender. [30] [31] Mining of cryptocurrencies is permitted. [32]
In March 2022, the Financial Conduct Authority (FCA) declared that all cryptocurrency ATMs in the country were illegal and would need to be shut down. None of the ATM's operators had successfully registered with the agency. The FCA cited a failure to comply with know your customer laws (KYC), which track and prevent money laundering, as well as the high risk to customers, due to a lack of regulation and protection. At the time, Coin ATM Radar listed 81 such ATMs in the country. [33] [34]
In September 2021, the Parliament of Ukraine passed a law to legalize cryptocurrency. The law divided virtual currencies into secured and unsecured assets and establishes an obligation for crypto service providers to comply with anti-money laundering laws. [35]
In July 2020, The Dutch Central Bank (DNB) said the euro system's central bank digital currency (CBDC) should be more programmable than Bitcoin. [36] [37]
Estonia published its AML Bill as early as 2018. [38] According to the Organization for Economic Cooperation and Developmen t (OECD), Estonia's tax policy is one of the most competitive in the world. There is no income tax in this jurisdiction, therefore funds received through ICOs are not subject to it, and Bitcoin and altcoins are not subject to VAT. [39] [40] As of 2021, 55% of all crypto currency service providers in the world are registered in Estonia according to the Estonian Financial Intelligence Unit (FIU) (Estonian : Rahapesu Andmebüroo (RAB)). [38] On 25 March 2024, the United States Treasury imposed sanctions against the Estonia-based Timur Evgenyevich Bukanov (Russian : Тимур Евгеньевич Буканов) associated Bitfingroup OÜ. [41]
Government policy appears to be supportive of crypto, if it would be possible to regulate. [42] In March 2020, the Central Bank of France began to study the topic of CBDC, in May it sold securities for the digital euro, and in September 2020, France announced the launch of CBDC based on the Tezos blockchain.[ citation needed ]
In Spain, there is no specific virtual currencies' legislation, except for the law approved in July 2021 on preventing and fighting tax evasion. [43]
Investors were cautioned by the Financial Market Authority (FMA) that cryptocurrencies are risky and that FMA does not monitor or control virtual currencies, including bitcoin or any cryptocurrency trading platforms. [44] [45]
In 2014, in a press release the central bank of Hungary, Magyar Nemzeti Bank (MNB), stated that Cryptocurrencies are "much riskier" than conventional forms of electronic payment, such credit cards. [46]
The Financial Supervisory Authority of Denmark declared in a statement that it will not regulate the use of bitcoin and that it is not a form of currency. [47]
The Financial Supervisory Authority (FSA) released a statement on 17th December 2013 that supporting the European Banking Authority 's warning. In 2017, FSA notified that it has no regulatory control over bitcoin transactions, hence it does not prevent anyone on the establishment of such business. [48]
In 2013, FSA's chief legal adviser stated that Denmark might consider changing existing financial regulation to include virtual currencies. [49]
The Swedish Tax Agency issued a preliminary decision on Value Added Tax (VAT) on bitcoins, declaring that trading bitcoins is not subject to Swedish VAT, but is instead subject to the Financial Supervisory Authority regulations and treated as a currency. [47]
Financial Supervisory Authority and the central bank in a statement publicly declared that bitcoin is legal but not an official form of payment or legal tender. [45]
Czech Republic Govt. stated that businesses and people who purchase, sell, store, manage, or mediate the acquisition or selling of virtual currencies or offer similar services are required to adhere to anti-money laundering regulations. [44]
For the purposes of accounting and taxes, Bitcoin is categorized as an intangible asset rather than as electronic money. [50]
Swiss Govt declared that Bitcoin businesses in Switzerland are regulated by anti-money laundering laws and may need a banking license in certain situations.
On December 5, 2013, a proposal was submitted by 45 Swiss Parliament members concerning digital sustainability, which urged the Swiss government to evaluate the opportunities for utilization of bitcoin by the country's financial sector. [51]
In response to the parliament's recommendations, the Swiss Federal Council issued a report on virtual currencies in June 2014. [52]
In December 2013, the Norwegian Tax Administration said that they did not classify bitcoin as currency but rather as an asset. Wealth tax is applied on profits. In business, use of bitcoin will be subject to tax sale tax. [53]
In Luxembourg, the first BitLicense was issued in October 2015. [54]
Digital currency is any currency, money, or money-like asset that is primarily managed, stored or exchanged on digital computer systems, especially over the internet. Types of digital currencies include cryptocurrency, virtual currency and central bank digital currency. Digital currency may be recorded on a distributed database on the internet, a centralized electronic computer database owned by a company or bank, within digital files or even on a stored-value card.
A cryptocurrency exchange, or a digital currency exchange (DCE), is a business that allows customers to trade cryptocurrencies or digital currencies for other assets, such as conventional fiat money or other digital currencies. Exchanges may accept credit card payments, wire transfers or other forms of payment in exchange for digital currencies or cryptocurrencies. A cryptocurrency exchange can be a market maker that typically takes the bid–ask spreads as a transaction commission for its service or, as a matching platform, simply charges fees.
Virtual currency, or virtual money, is a digital currency that is largely unregulated, issued and usually controlled by its developers, and used and accepted electronically among the members of a specific virtual community. In 2014, the European Banking Authority defined virtual currency as "a digital representation of value that is neither issued by a central bank or a public authority, nor necessarily attached to a fiat currency but is accepted by natural or legal persons as a means of payment and can be transferred, stored or traded electronically." A digital currency issued by a central bank is referred to as a central bank digital currency.
Bitcoin is the first decentralized cryptocurrency. Nodes in the peer-to-peer bitcoin network verify transactions through cryptography and record them in a public distributed ledger, called a blockchain, without central oversight. Consensus between nodes is achieved using a computationally intensive process based on proof of work, called mining, that requires increasing quantities of electricity and guarantees the security of the bitcoin blockchain.
A cryptocurrency, crypto-currency, or crypto is a digital currency designed to work as a medium of exchange through a computer network that is not reliant on any central authority, such as a government or bank, to uphold or maintain it.
The legal status of cryptocurrencies varies substantially from one jurisdiction to another, and is still undefined or changing in many of them. Whereas, in the majority of countries the usage of cryptocurrency isn't in itself illegal, its status and usability as a means of payment varies, with differing regulatory implications.
Bitcoin ATMs are kiosks that allow a person to purchase Bitcoin and other cryptocurrencies by using cash or debit card. Some Bitcoin ATMs offer bidirectional functionality, enabling both the purchase of Bitcoin and the sale of Bitcoin for cash. In some cases, Bitcoin ATM providers require users to have an existing account to transact on the machine.
Circle is a peer-to-peer payments technology company that now manages stablecoin USDC, a cryptocurrency the value of which is pegged to the U.S. dollar. It was founded by Jeremy Allaire and Sean Neville in October 2013. Circle is headquartered in Boston, Massachusetts. USDC, the second largest stablecoin worldwide, is designed to hold at or near a stable price of $1. The majority of its stablecoin collateral is held in short-term U.S. government securities.
Bitfinex is a cryptocurrency exchange owned and operated by iFinex Inc, and is registered in the British Virgin Islands. Bitfinex was founded in 2012. It was originally a peer-to-peer Bitcoin exchange, and later added support for other cryptocurrencies.
An initial coin offering (ICO) or initial currency offering is a type of funding using cryptocurrencies. It is often a form of crowdfunding, although a private ICO which does not seek public investment is also possible. In an ICO, a quantity of cryptocurrency is sold in the form of "tokens" ("coins") to speculators or investors, in exchange for legal tender or other cryptocurrencies such as Bitcoin or Ether. The tokens are promoted as future functional units of currency if or when the ICO's funding goal is met and the project successfully launches.
Tether is a cryptocurrency stablecoin, launched by the company Tether Limited Inc. in 2014. As of January 2024, Tether's website lists fourteen protocols and blockchains on which Tether has been minted.
A cryptocurrency bubble is a phenomenon where the market increasingly considers the going price of cryptocurrency assets to be inflated against their hypothetical value. The history of cryptocurrency has been marked by several speculative bubbles.
Binance Holdings Ltd., branded Binance, is a global company that operates the largest cryptocurrency exchange in terms of daily trading volume of cryptocurrencies. Binance was founded in 2017 by Changpeng Zhao, a developer who had previously created high-frequency trading software. Binance was initially based in China, then moved to Japan shortly before the Chinese government restricted cryptocurrency companies. Binance subsequently left Japan for Malta and currently has no official company headquarters.
Cryptocurrency and crime describe notable examples of cybercrime related to theft of cryptocurrencies and some methods or security vulnerabilities commonly exploited. Cryptojacking is a form of cybercrime specific to cryptocurrencies that have been used on websites to hijack a victim's resources and use them for hashing and mining cryptocurrency.
A stablecoin is a type of cryptocurrency where the value of the digital asset is supposed to be pegged to a reference asset, which is either fiat money, exchange-traded commodities, or another cryptocurrency.
Diem was a permissioned blockchain-based stablecoin payment system proposed by the American social media company Facebook. The plan also included a private currency implemented as a cryptocurrency.
A security token offering (STO) / tokenized IPO is a type of public offering in which tokenized digital securities, known as security tokens, are sold in security token exchanges. Tokens can be used to trade real financial assets such as equities and fixed income, and use a blockchain virtual ledger system to store and validate token transactions.
Paxos Trust Company is a New York–based financial institution and technology company specializing in blockchain. The company's product offerings include a cryptocurrency brokerage service, asset tokenization services, and settlement services. ItBit, a bitcoin exchange run by Paxos, was the first bitcoin exchange to be licensed by the New York State Department of Financial Services, granting the company the ability to be the custodian and exchange for customers in the United States.
Decentralized finance offers financial instruments without relying on intermediaries such as brokerages, exchanges, or banks by using smart contracts on a blockchain, mainly Ethereum. DeFi platforms allow people to lend or borrow funds from others, speculate on price movements on assets using derivatives, trade cryptocurrencies, insure against risks, and earn interest in savings-like accounts. DeFi uses a layered architecture and highly composable building blocks. Some applications promote high-interest rates but are subject to high risk. Coding errors and hacks have been common in DeFi.
The Crypto-Asset Reporting Framework is a global initiative led by the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes which is intended to promoted the automatic exchange of information between countries to tackle emerging tax evasion risks related to cryptocurrency and digital assets.
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