Despite the turbulence that broke out in the crypto market this summer, there is an important long-term marker that should be considered in any complex assessment — the combination of adoption and regulation. The latest report by EUBlockchain Observatory, named “EU Blockchain Ecosystem Developments,” tries to measure this combination within the European Union, combining the data on each and every member country from Portugal to Slovakia.
As the original report counts more than 200 pages, Cryptox prepared a summary with the intent to capture the most vital information about the state of crypto and blockchain in Europe. Previously we’ve covered Western and Northern Europe, but this cycle finishes with the Southern Europe region.
Greece
Numbers: Over 10 blockchain solution providers.
Regulation and legislation: According to the report, “blockchain, along with their derivative cryptocurrencies as well as alternative forms of blockchain financing, remain largely unregulated in Greece.” In 2022, Greece announced a draft bill on “emerging information and communication technologies, strengthening digital governance and other provisions,” introducing requirements for the deployment of artificial intelligence (AI), Internet of Things (IoT), blockchain and other distributed ledger technology (DLT). Virtual asset providers are required to register with the Hellenic Capital Markets Commission (HCMC).
Taxes: The income that arises from cryptocurrency transactions is taxed under the capital gains tax, which constitutes 15% for individuals.
Notable initiatives: HCMC and the Bank of Greece have both implemented their own Innovation Hub, while the latter launched a regulatory sandbox in collaboration with the European Bank for Reconstruction and Development.
Local players: Mobiweb Technologies, an offshore web development company; Synaphea, a provider of blockchain solutions to business; Metabloq, a blockchain-based software developer.
Italy
Numbers: $46.5 million (47 million euros) in total funds raised by blockchain projects, 97 blockchain startups.
Regulation and legislation: In 2019, the Italian Parliament approved a definition for DLTs and recognized the legal validity of smart contracts.
Taxes: In 2016, the Revenue Agency issued a ministerial resolution that addressed certain aspects of the tax treatment of Bitcoin (BTC) and other cryptocurrencies. In accordance with that resolution, an individual’s income from exchanging crypto isn’t subject to taxation. However, if the individual’s account balance exceeds 51,645.69 euros (about $51,000), they are subject to capital gains tax, which constitutes a flat 26% rate.
Notable initiatives: Since 2015, the Ministry of Economy and Finance has launched two pilot projects to test DLTs in public administration. The first one was SUNFISH (Secure Information Sharing in federated heterogeneous private clouds), which used smart contracts on a blockchain infrastructure to ensure integrity and secrecy in the exchange of information between the Ministry of Economy and Finance and the State Police. The second one was PoSeID-on, a platform for personal data management and data protection.
In 2017, the Ministry of Agricultural, Food and Forestry Policies launched Wine Supply Chain 4.0, a pilot project enhancing the traceability of the wine supply chain.
In 2019, the Ministry of Economic Development partnered with IBM to test a platform based on the private permissioned infrastructure of IBM Hyperledger Fabric to provide a solution for stakeholders in the textile supply chain.
Local players: Volvero, a blockchain-based car-sharing app; EvenFi, a regulated peer-to-peer crowdlending platform; EcoSteer, an IoT and blockchain software company.
Malta
Numbers: $139.5 million (141 million euros) of total funds raised.
Regulation and legislation: In 2018, the Maltese parliament enacted three laws establishing a comprehensive regulatory framework for blockchain and digital currencies. The Virtual Financial Assets Act regulates the field of initial coin offerings, digital assets, digital currencies and related services, while the Innovative Technological Arrangements and Services Act enables the Malta Digital Innovation Authority to oversee the registration of technology service providers.
The country’s financial regulatory framework recognizes four distinct categories of digital assets, subject to a different set of rules: electronic money, financial instruments, virtual (utility) tokens and virtual financial assets (VFAs).
Taxes: Electronic money and utility tokens are not on the list of capital assets in the Income Tax Act and are thus not subject to capital gains tax, while securities and VFAs are.
Notable initiatives: Malta was the first country to install a blockchain-based IP register and transfer 60,000 records using the blockchain network. Following that, the government of Malta launched three new blockchain projects: a project for the certification of food products produced on the island of Gozo, a blockchain-based property planning system for ensuring transparency of processes, and a blockchain-based copyright and IP system.
Local players: Quidax, a digital assets exchange; Vaiot, an AI- and blockchain-centered developer of intelligent virtual assistants; Efforce, a platform for tokenized energy savings.
Portugal
Numbers: $43.5 million (44 million euros) in funds raised by blockchain providers, 28 blockchain startups.
Regulation and legislation: Cryptocurrencies are not tried as legal tender, but there is a division between utility tokens and security tokens based on the tokens’ functionality. The central bank regulates the registration of virtual asset service providers.
Taxes: The legal entities providing services related to cryptocurrency must pay a 28%–35% capital gains tax. At the time of writing, there’s no capital gains tax on individual holdings in Portugal, but that’s about to change — the country’s proposed budget for 2023 presumes a 28% tax rate for individuals.
Notable initiatives: In public admistration, the main use case is the Participa.gov platform, built on blockchain and used by citizens to present and discuss their civic initiatives. The agricultural sector applies blockchain for tracking food products while enhancing safety. Veracruz, the Portuguese almonds manufacturer, has collaborated with Arabyka to apply blockchain technology in the supply chain.
Local players: Anchorage Digital, a financial platform and infrastructure provider for digital assets; Revault, a multiparty vault architecture provider; Sensefinity, a Hyperledger-based solution for food provenance certification.
Spain
Numbers: $86 million (87 million euros) in total funds raised, 200+ blockchain companies.
Regulation and legislation: Digital currencies are not considered legal tender, and their exchange is a value-added tax (VAT) exempt. They are largely governed under legislation that relates to commodities, namely the general rules of the Civil Code and the Code of Commerce. The National Securities Market Commission issued guidelines on the content and format of promotional campaigns for cryptocurrencies in an attempt to ensure that “the advertising of the products offers true, understandable and non-misleading content, and includes a prominent warning of the associated risks.”
Taxes: Capital gains from the exchange of digital currencies are subject to a variable tax rate ranging from 19%–23%. Digital currency mining remains unregulated.
Notable initiatives: In 2018, Spain introduced a regulatory sandbox for novel fintech projects, including blockchain and digital currencies. The same year, BBVA bank became the first in the world to utilize blockchain technology in its financial products.
Local players: Belvo, a developer of open banking API solutions; Bit2Me, a cryptocurrency exchange; Consentio, a blockchain-based payment platform for logistics.
Cyprus
Numbers: $148.4 million (150 million euros) in total funds raised, 48 blockchain companies.
Regulation and legislation: No specific references to digital currencies and blockchain technologies exist in the country’s legislation. However, the Distributed Ledger Technology Bill was published for public comment in 2021 and is now undergoing legal vetting.
Taxes: According to Mondaq, at present, the income from crypto trading is taxed under corporation tax at a rate of 12.5% since cryptocurrency is recognized as a taxable asset. Jeff Bandman, instructor at the University of Nicosia and EUBOF Expert panel member, told Cryptox that once the umbrella blockchain law is enacted, the finance ministry will provide further guidance regarding the taxation of cryptocurrencies.
Notable initiatives: The local Innovation Hub was launched back in 2018 by the Cyprus Securities and Exchange Commission. In June 2020, VeChain announced that the Mediterranean Hospital of Cyprus will be employing its blockchain-based solution to store COVID-19 results.
Local players: NoBanx, a crypto deposit platform; Simdaq, a platform for mastering trading and asset management; Coinomi, a blockchain wallet.
Key takeaways
The data from the report proves that the island of Malta is still way ahead of its Southern European counterparts in terms of boosting the crypto industry. Speaking to Cryptox, Joshua Ellul, professor at the University of Malta and EUBOF Expert panel member, highlighted the role of the Maltese government in providing legal certainty to virtual financial assets and service providers — and the benefits of the country’s size for that matter:
“Such agility was possible due to Malta’s small size, which is also a reason why Malta’s levels of investments are substantially lower. This is not just isolated to blockchain but to all sectors.”
Ellul believes it’s not accidental that the upcoming pan-European Markets in Crypto-Assets (MiCA) draw on Maltese regulatory design for digital assets in some respects.
“Many say that MiCA has many resemblances to Malta’s VFA regime; some say Malta is ‘MiCA-ready.’ This, along with a healthy local ecosystem, including education programs, thriving companies, expertise in various blockchain-related services and innovative regulation, will make Malta an attractive destination to set up shop, which we hope will change investment numbers in the years to come,” he said.
