Slovakia has seen a growing interest in crypto and blockchain technology in recent years. Despite the absence of a fully developed crypto regulatory structure, the government has acknowledged the importance of nurturing innovative businesses within the crypto space.
Now, while some taxation concerns have been addressed, the country is still exploring ways to address the evolving nature of cryptocurrencies. Let’s look at the current state of crypto regulation in Slovakia.
Current state of crypto regulation in Slovakia
Crypto regulation in Slovakia is currently in a state of flux. There is no specific legislation that governs cryptocurrencies, but there are some existing laws that can be applied to them.
For anti-money laundering and counter-financing of terrorism (AML/CFT) regulation, the Slovak AML Act (Act No. 297/2008 Coll., as amended) applies to “persons providing services related to virtual currencies, not mentioning the crypto assets.”
Therefore, the operation of virtual currency exchange and provision of service of virtual currency wallet (custody) is regulated by the AML Act. All Slovakia cryptocurrency exchanges and custodians are subject to these AML/CFT obligations.
On the other hand, there is no specific Slovakian financial services regulation to cover Slovakia cryptocurrency. The National Bank of Slovakia (NBS) maintains a stable monetary policy framework and supervises participants in the Slovak financial market. However, it does not directly regulate any Slovakia cryptocurrency. It is responsible for overseeing the implementation of the EU’s Markets in Crypto-Assets (MiCA) Regulation, which is expected to come into force in 2024.
Despite the lack of specific crypto regulation in Slovakia, the country is taking steps to ensure that the cryptocurrency sector operates responsibly and competently. The need to take such steps arises from Slovakia’s emerging crypto trends.
Slovakia’s emerging crypto trends
Cryptocurrency is rapidly gaining popularity in Slovakia, and the regulatory landscape is evolving to keep pace. One of the most notable trends is the surge in Slovakia cryptocurrency exchanges.
Surge in Slovakia cryptocurrency exchanges
Due to Slovakia’s lack of comprehensive crypto regulations and the growing demand for crypto, the country’s count of Virtual Asset Service Providers (VASPs) has increased. Slovakia is home to over 550 VASPs — ten times more than the number of VASPs in France, despite having only one-tenth of its population. These VASPs include both virtual wallet providers and cryptocurrency exchanges.
This surge is concerning because a lack of regulatory oversight and the sheer number of VASPs operating under a registration issued by a Trade Licensing Office might lead to a breeding ground for criminal activity. This trend thus demands immediate crypto regulation in Slovakia.
New Slovakia crypto tax
On the positive end of crypto regulation in Slovakia is the introduction of the new Slovakia crypto tax. In June this year, the National Council of the Slovakia Republic approved an amendment that reduces personal income tax on profits gained from the sale of cryptocurrencies held by the user for at least one year.
Under the new regulation, the tax rate is reduced to 7%, a significant drop from the previous 39%. This provision rewards long-term holders and incentivizes investors to hold onto their assets. This reduced tax rate also applies to crypto-assets acquired before the amendment as long as the sale or transfer of ownership occurs after January 1, 2024.
Cryptocurrency payments for goods and services up to €2400 per year are exempt from income tax as per the new regulation. This exemption creates a favorable environment for small transactions and promotes financial inclusivity. Additionally, the bill exempts crypto income from a 14% health insurance tax if it isn’t marked as an investor’s business property.
The new regulation also clarifies the definition of the sale of crypto assets. It specifies that a sale involves exchanging cryptocurrency for traditional currency or stablecoins, excluding exchanges between crypto-assets. The regulation also abolishes income tax on staking income, meaning individuals will only be required to pay taxes on income when they sell the cryptocurrency.
This update of Slovakia crypto tax aligns well with their efforts toward adopting the broader European Union’s vision for cryptocurrency regulation.
Approach toward MiCA regulation
Slovakia is taking a measured approach to crypto regulation. The country is patiently waiting for the EU’s MiCA Regulation, which is expected to establish a standardized framework for overseeing crypto-assets throughout the EU. The NBS, in particular, is very involved in the MiCA regulations. Once implemented, the MiCA Regulation will grant NBS the power to supervise crypto-asset service providers (CASPs) within Slovakia.
Future of crypto regulation in Slovakia
The future of crypto regulation in Slovakia is looking bright, given the increasing number of VASPs in the country and the new Slovakia crypto tax rules. As the 2024 implementation of MiCA regulations draws near, the harmonization of EU regulations with Slovakia’s favorable taxation position Slovakia as a potential hub for web3 innovation within Europe.
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