Introduction
The EU Blockchain Observatory recently published a report on the adoption and regulation of cryptocurrency and blockchain technology in the European Union. The report provides valuable insight into the current state of cryptocurrency and blockchain adoption, and regulation within the European Union.
This comprehensive report includes data on each member country within the EU, allowing for a thorough understanding of the varying approaches to these technologies across the region.
While the full report spans over 200 pages, this article aims to highlight the most significant findings specific to the regions of Southern Europe.
Southern Europe and Crypto Adoption
The report on the adoption and regulation of cryptocurrency and blockchain technology in the European Union provides valuable information on the current state of these technologies in each member country. This includes the countries of Southern Europe such as Spain, Italy, Greece, Cyprus, Portugal, and Malta, which have each taken their own approaches to the regulation and adoption of blockchain and cryptocurrency.
- In Spain, there are over 200 blockchain companies, and $86 million in total funds have been raised. Digital currencies are not considered legal tender in Spain and are largely governed under legislation related to commodities. The National Securities Market Commission has issued guidelines on the content and format of promotional campaigns for cryptocurrencies to ensure that the advertising of these products is accurate and transparent, and includes warnings of associated risks. Capital gains from the exchange of digital currencies are subject to a variable tax rate ranging from 19%-23%, and digital currency mining remains unregulated.
Spain has implemented a regulatory sandbox for novel fintech projects, including blockchain and digital currencies, and the BBVA bank became the first in the world to utilize blockchain technology in its financial products in 2018.
- Italy has 97 blockchain startups and has raised $46.5 million in total funds for blockchain projects. In 2019, the Italian Parliament approved the legal validity of smart contracts and defined distributed ledger technologies. The country’s tax agency has also issued guidelines for the taxation of Bitcoin and other cryptocurrencies, stating that individual income from exchanging crypto is not subject to taxation, but if an individual’s account balance exceeds a certain amount, they are subject to a flat 26% capital gains tax.
The Italian government has also implemented several pilot projects using blockchain technology, including SUNFISH and PoSeID-on, and has partnered with IBM to test a blockchain platform for the textile supply chain.
- Greece has over ten blockchain solution providers, but the technology remains largely unregulated in the country. However, a draft bill was introduced in 2022 that would introduce requirements for the deployment of AI, the Internet of Things, blockchain, and other distributed ledger technologies. Virtual asset providers would also be required to register with the Hellenic Capital Markets Commission (HCMC).
Income from cryptocurrency transactions in Greece is taxed under the capital gains tax, which is 15% for individuals. HCMC and the Bank of Greece have both established innovation hubs, and the Bank of Greece has also launched a regulatory sandbox with the help of the European Bank for Reconstruction and Development.
- In Cyprus, there are 48 blockchain companies, and $148.4 million in total funds have been raised. The country does not currently have specific legislation related to digital currencies or blockchain technologies, but the Distributed Ledger Technology Bill was published for public comment in 2021 and is currently undergoing legal vetting.
At present, the income from cryptocurrency trading is taxed under corporation tax at a rate of 12.5% since cryptocurrency is recognized as a taxable asset. Once the umbrella blockchain law is enacted, the finance ministry will provide further guidance on the taxation of cryptocurrencies. Cyprus has established an Innovation Hub, and in June 2020, VeChain announced that the Mediterranean Hospital of Cyprus would be using its blockchain-based solution to store COVID-19 test results.
- In Portugal, there are 28 blockchain startups, and $43.5 million in funds have been raised by blockchain providers. While cryptocurrencies are not recognized as legal tender in Portugal, there is a distinction between utility tokens and security tokens based on their functionality. The central bank regulates the registration of virtual asset service providers. Legal entities providing services related to cryptocurrency are subject to a capital gains tax of 28%-35%, and the country’s proposed budget for 2023 includes a 28% tax rate for individuals.
Portugal has implemented a number of pilot projects using blockchain technology, including the Participa.gov platform for citizens to present and discuss civic initiatives and the use of blockchain to track and enhance the safety of food products in the agricultural sector.
- Malta has raised $139.5 million in total funds for blockchain projects and has established a comprehensive regulatory framework for the technology. The framework includes the Virtual Financial Assets Act, the Innovative Technological Arrangements and Services Act, and the Malta Digital Innovation Authority. Malta recognizes four categories of digital assets, each subject to a different set of rules: electronic money, financial instruments, virtual (utility) tokens, and virtual financial assets. Electronic money and utility tokens are not subject to capital gains tax, but securities and virtual financial assets are subject to the standard tax rate of 35%.
Malta has also implemented several pilot projects using blockchain technology, including the registration of educational certificates and the creation of a land registry.
Conclusion
Overall, the countries of Southern Europe have taken varied approaches to the regulation and adoption of blockchain and cryptocurrency. While some have established comprehensive regulatory frameworks and implemented pilot projects, others have yet to implement specific regulations for these technologies. However, all of these countries have recognized the potential of blockchain and have taken steps to explore its use and integration into various industries.