Swiss powerhouse and French unicorns
Despite the turbulence that erupted in the crypto market this summer, there is one important long-term marker that should be considered in any complex assessment – the combination of adoption and regulation. The latest report from the EUBlockchain Observatory, called “EU Blockchain Ecosystem Developments,” attempts to measure this combination within the EU, combining the data on each and every member state from Portugal to Slovakia.
Since the original report counts more than 200 pages, Cointelegraph prepared a summary with the intention of capturing the most important information about the state of crypto and blockchain in Europe. We started from a group of countries usually labeled as “Western European.”
Austria
Number: 50 blockchain solution providers, 50 million euros ($48.72 million) in total funds raised
Regulation and legislation: A register of Virtual Asset Service Providers (VASPs) was established by the Financial Market Authority a year later, in 2020. Regulators have adopted an “overall non-restrictive approach” towards crypto and blockchain operations, and crypto mining remains largely unregulated.
Taxes: As is the case in most European countries, digital currency exchange is exempt from VAT. Capital gains from the sale of crypto are subject to a progressive income tax of up to 55% for individuals and 25% for corporations, but digital tax rules may apply if the digital currency generates interest income and thus qualifies as an investment asset.
Notable initiatives: In November 2019, the Austrian Blockchain Center (ABC) was established to explore blockchain applications in finance, energy, logistics, public administration and the Internet of Things. ABC, which currently involves more than 21 institutions and 54 companies in its public-private partnership model, aims to become the world’s largest blockchain research center. Blockchain is also a key facilitator of the Smart City Vienna and Open Government Data initiatives.
Local players: Bitpanda, a Vienna-based trading platform whose market capitalization exceeded $4 billion in 2021, Blockpit, a digital asset investment platform responsible for more than $500 million in revenue in 2017, and Conda, a crowdfunding platform for Austrian startups.
Belgium
Number: 47 suppliers of blockchain solutions, 992 professionals in blockchain.
Regulation and legislation: According to the report, there are currently “no specific laws or regulations” in Belgium. In 2017, the Financial Services and Markets Authority (FSMA) published a communication on an overview of laws and regulations that may apply to initial coin offerings (ICOs) and crypto-assets.
At the same time, FSMA maintains a red list of fraudulent crypto companies. Nevertheless, utility token offerings are considered “a common option” for raising capital. The FSMA characterizes cryptoassets as investment instruments given that they can provide rights to income or returns, a means of storage and exchange given their convertibility into other assets or a token of utility if they provide access to certain products or services.
From May 2022, registration for VASPs and custodial wallets is mandatory. The bidders must meet certain conditions, including legal entity status and maintaining a minimum capital of 50,000 euros.
Taxes: The tax is 33% on any cryptocurrency income, depending on how the individual invests. A pure increase in value over time escapes taxation, but the investor is obliged to prove his holding strategy. There is no specification on the required holding time.
Notable initiatives: “Blockchain for Europe” represents international blockchain industry actors at EU level, with a main focus on participation in regulatory debate. The HIVE Blockchain Society is a nonprofit blockchain association that aims to promote the understanding of distributed ledger technology and to inform the Belgian and international community about its developments.
Local players: Keyrock, a company that develops financial infrastructure for cryptoassets using scalable, self-adaptive algorithmic technologies, Credix, a decentralized credit marketplace powered by Solana blockchain technology, and Delta, a Bitcoin (BTC) and cryptocurrency portfolio tracking app.
France
Number: 160+ blockchain startups, 180 million euros ($175.4 million) of revenue raised
Regulation and legislation: France established a friendly legal framework for ICOs in 2016, allowing issuers to register cash coupons directly on the blockchain. In 2017, the Financial Market Authority (AMF) launched the support and research program UNICORN for digital assets. France also authorizes the registration and transfer of unlisted securities using blockchain technology.
Taxes: The country’s highest administrative court reduced the tax burden on profits from cryptocurrencies and set a flat tax rate of 30%.
Notable initiatives: The public deposit and dispatch fund makes direct investments in crypto projects. The fund has invested 300 million euros ($292.3 million) in blockchain and AI in the European Commission’s investment program for the future.
Community self-organization: The French Digital Asset Association (ADAN) operates as a professional lobby group on behalf of the industry.
Local players: Ledger, a leading global cryptocurrency hardware wallet provider, Coinhouse, a crypto asset management and transaction services company, offering staking, storage and custody services, and Sorare, a fantasy football gaming platform using blockchain technology based on Ethereum.
Germany
Number: 343 blockchain launcher
Regulation and legislation: Since 2013, virtual currencies have been the “units of account”. In 2020, Germany introduced the terms “encryption agent” and “crypto depository.” The latter requires a license from the supervisory body BaFin. Virtual currencies are not considered legal tender in the country and are usually treated as investment assets or so-called “surrogate currencies.”
Taxes: In May 2022, Germany’s Ministry of Finance has issued new cryptocurrency tax guidelines with no tax on gains from BTC and Ether (ETH) sold 12 months after acquisition.
Notable initiatives: In September 2020, the Deutsche Energie-Agentur announced the launch of the Future Energy Lab. It involves, among other things, the pilot projects related to the application of blockchain technology in the energy sector, such as Blockchain Machine Identity Ledger (BMIL) and Smart Contract Registry. BMIL is a digital and decentralized directory for entity identities.
In the same year, one of the four electricity transmission system operators in Germany announced a multi-year strategic partnership with Energy Web that will focus on testing and validating the technological promise of blockchain-based solutions.
Community self-organization: The Blockchain Bundesverband was established in 2017 and is a non-profit association with more than 60 members. The association’s initiatives focus on education for decision-makers and the wider public. Based in Munich, the European Blockchain Association offers an independent, neutral platform for blockchain-related communities and organizations to discuss, develop and deepen shared work.
Local Startup: The Iota Foundation is developing an open source protocol that supports data and value transfer between devices and people, and BitsCrunch, a cryptoanalytical company.
The Netherlands
Number: 160+ blockchain startups, 370 million euros ($360.5 million) of funds raised.
Regulation and legislation: The central bank and the Dutch Authority for Financial Markets (AFM) maintain a one-stop shop for regulatory information for startups called InnovationHub. It is also a regulatory sandbox for new technologies with a principles-based (rather than a rules-based) approach. Compliance is determined based on the intent of laws and regulations rather than the letter. A practice of partial authorizations, when a startup does not need to meet all the banking license criteria to obtain a license, is quite common.
Notable initiatives: During the COVID-19 pandemic, Tymlez launched a project to support government transparency in medical supply chains through blockchain technology. There are projects in agriculture such as Blockchain for Agri-food, funded by the Dutch Ministry of Agriculture, Nature and Food Quality to improve supply chains.
Community self-organization: The report mentions meeting groups such as Blockchain Talks, Blockchain Nederland, Food Integrity Blockchained, Permissionless Society Blockchains and Bitcoin Wednesday Amsterdam, as well as Ethereum Dev NL and Hyperledger Nederland.
Local players: Bitfury offers mobile Bitcoin mining data centers, Aurus, a gold-backed cryptocurrency on the Ethereum blockchain, and Finturi, a blockchain-powered trade finance platform.
Switzerland
Number: 254 billion euros ($247.48 billion) of the total valuation of the top 50 companies in 2021, 877 blockchain solution providers.
Regulation and legislation: In 2019, the Federal Council updated the existing framework conditions in relation to blockchain and crypto. In 2020, the Swiss parliament passed the DLT law, which selectively adapts 10 existing federal laws. In 2021, a license for DLT trading facilities was introduced.
According to the Financial Market Supervisory Authority (FINMA), digital currencies are categorized based on their function and purpose as payment tokens, utility tokens and assets.
Taxes: The tax rules vary between the individual cantons. Digital currencies are usually treated as foreign currency for wealth taxation purposes. Their trade-in value is determined by the federal tax administration at the end of the year. Capital gains on digital currencies are exempt from income tax for individuals. Purchases with digital currency are VAT-exempt.
Notable initiatives: Blockchain has been used to issue digital self-denying identities and even vote at a regional level, while digital currencies are accepted to pay taxes and public services. The city of Zug, the capital of the so-called “Crypto Valley”, launched its blockchain-powered digital identity program in 2017. In 2021, the Swiss government started a public discussion on sovereign identities at the national level. In 2022, the city of Lugano recognized Bitcoin and Tether (USDT) as legal tender.
Community self-organization: The Crypto Valley Association and the Blockchain Federation are the largest public entities for blockchain enthusiasts and entrepreneurs. There are also popular societies such as the Swiss Association of Crypto Investors and the Bitcoin Association.
Local players: Switzerland far surpasses all the other nations on the list when it comes to globally recognized crypto companies. Suffice it to mention that such players as Cardano, Polkadot, Cardano, Solana, Cosmos and Tezos are based in this country.
Important takeaways
Nikolaos Kostopoulos, senior blockchain consultant at Netcompany-Intrasoft and member of the EU Blockchain Observatory and Forum team, discussed the report’s takeaways with Cointelegraph, comparing the European regulatory dialogue with that taking place in the US, and highlighting France’s role:
“French regulators and policy makers seem to be winning the course for a comprehensive, objective and holistic effort to establish the framework for a growing blockchain and digital asset industry. This effort is already validated by the decision of leading players such as Binance and Crypto.com to invest heavily in their French headquarters as their EU base, but also the fact that France is home to some of the biggest EU blockchain startups.”
While France’s regulatory efforts remain within a larger EU context, Switzerland continues to lead the way in attracting startups and creating the most welcoming legal environment for them. Kostopoulos believes that this unique position cannot only be explained by the country’s centuries-old tradition as a safe haven for big money.
“There are many reasons why Switzerland is more advanced and progressive compared to countries like Belgium or France. The country has established procedures, progressive financial legislation, human resources and infrastructure to support a framework to accelerate financial innovation,” he said.
