The relationship between cryptocurrencies and the European Union is and has been complicated. Some countries love it while others hate it. And like every other technology, the bureaucratic red tape and regulatory overreach within the EU is dragging down mainstream adoption while the rest of the world is moving ahead at full speed. Most of the crypto related activities are happening in the US, Japan, and South Korea, leaving behind Europe. With more than 300 million people and the second largest economic power, how Europe decides to go forward will impact the industry in a big way.
EU and Cryptocurrency
Currently, the European Union has a decentralized approach to crypto, legal members cannot introduce their own currencies. But regulations vary from state to state and hence how each country handles cryptocurrencies differs. For example, in Germany, it is classified as private money and no capital gain tax is levied, neither is sale tax, but it is subject to income tax if it is owned for less than a year. While in the UK, it is classified as an asset or private money on a case to case basis. Capital gains are levied on the profit gained from holdings of cryptocurrencies. But all throughout the European Union, cryptocurrencies are not subjected to VAT. Other regulations include cryptocurrency exchanges to register with their respective regulators such as Germany’s Financial Supervisory Authority (BaFin), France’s Autorité des Marchés Financiers (AMF), or Italy’s Ministry of Finance. In April 2018, the EU introduced the Fifth Money laundering Directive (5MLD) which will bring cryptocurrency-fiat currency exchanges under EU’s anti-money laundering legislation. 5MLD forces exchanges to perform KYC on customers and fulfill standard reporting requirements. EU is also working on a single supervisory mechanism to develop a way of identifying the financial risks that cryptocurrencies pose. France hasapproved an Initial Coin Offeringv(ICO) regulation in September to become Europe’s first ICO hub.
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