Where should you set up your crypto-exchange business?
It’s critical to determine where to set up your headquarters. Many governments are still finalizing their regulatory frameworks on cryptocurrency exchange and acquisition. Some countries are better than others when it comes to launching your own crypto-exchange business.
Ideally, you’ll want to do business in a country with flexible taxation policies, as well as an openness to the adoption of cryptocurrencies in conducting regular business. Below are eight crypto-friendly countries that you should consider when choosing where to set up your HQ.
Best Countries to Start Your Crypto Exchange Business
Switzerland has been a crypto-friendly country for quite some time now, with organizations such as the Ethereum Foundation, Crypto Valley, Bitcoin Suisse, and Libra Association establishing their headquarters there. The government is open to the world of cryptocurrencies, inviting crypto exchange businesses to set up shop in their jurisdiction. One of the reasons is Switzerland’s attractive tax rate. Income earned from mining is treated as self-employment income, which falls under the income tax category. Also, the nation’s taxes for businesses and professional trading are relatively low. Swiss company “Crypto Valley,” which was valued to be worth over $44 billion, even landed itself a spot in the list of top 50 Swiss crypto firms.
Japan has always taken the lead in technology, and the same can be said with its crypto industry. The island was one of the first countries to consider cryptocurrencies as a legal method of payment. Its booming cryptocurrency industry is being adopted by many local businesses, restaurants, etc. In fact, in 2016, Japan officially recognized the function of virtual currencies as similar to real money. Additionally, income that is generated through cryptocurrency trading is regarded as miscellaneous income, which is taxed at a rate of 55%.
Singapore is another country worth considering if you’re thinking about starting your own crypto exchange business. This tech-savvy country is a central hub for investors and both local and international talent for your crypto-based startup. In 2018, Singapore’s Central Bank settled its regulations and its regulatory framework on crypto-based payments. In 2020, DBS Group Holdings launched the DBS Digital Exchange, which facilitates the trading of four cryptocurrencies, namely, Bitcoin, Ether, Bitcoin Cash, and XRP, as well as their exchange into Singapore Dollar, US Dollar, Hong Kong Dollar, and Japanese Yen. Like the other countries mentioned in this list, businesses that accept virtual currencies are subject to income tax.
Despite being a tiny country with a little over 600,000 residents, Luxembourg is home to one of the world’s largest crypto exchange businesses: Bitstamp. Crypto exchanges in Luxembourg are regulated by the Commission de Surveillance du Secteur Financier (CSSF), the governing body which supervises the financial sector — including trading facilities. In Luxembourg, cryptocurrencies are considered intangible assets, which means that virtual currencies such as Bitcoin and Ethereum are not taxable until they are disposed of. Similarly, every cryptocurrency transaction is exempt from VAT. Luxembourg also boasts a vast pool of talent from which crypto start-ups can find developers who can manage their cryptocurrency exchange software.
This massive country of nearly 53 million is considered one of the most technologically advanced nations globally. Since 2018, Germany’s Federal Ministry of Finance (BMF) has exempted transactions for Bitcoin and other cryptocurrencies from VAT. However, Germany does not consider cryptocurrencies as valid currencies or legal tender under its income tax law. Also, you can enjoy exemption from capital gains taxes if you hold on to your Bitcoin, Ethereum, Ripple, or other cryptocurrencies for more than a year. This, however, applies only to personal sales — businesses that generate income from cryptocurrencies are still subject to the appropriate corporate income taxes.
Cryptocurrencies and crypto exchanges in Portugal are not subject to VAT and personal income tax. However, since 2018, businesses that offer crypto exchange services are required to pay taxes for any cryptocurrency gains, which ranges from 28% to 35%. About paying for goods and services, Portugal has opened its doors to accept virtual payments such as Bitcoin, Ethereum, and Ripple. Perhaps the most significant benefit to starting a crypto-exchange business in Portugal is the country’s Non-Habitual Residence (NHR) scheme, which exempts crypto traders and investors from taxes when monetizing their cryptocurrencies.
Malta is pro-cryptocurrency. Malta exempts long-held cryptocurrencies from tax; however, cryptocurrency trades are treated similarly to day trading in stocks, which means that you will have to pay a business tax of as much as 35%. Malta’s Prime Minister himself has accepted blockchain technology, saying that Malta is to become “global trailblazers in the regulation of blockchain-based businesses.” Also, Malta created the Malta Digital Innovation Authority (MDIA) in 2018, which sets down the regulatory framework for crypto-exchange businesses. As the authority in all innovative technologies, the MDIA aims to certify crypto exchange platforms to ensure its users’ protection. If you’re planning on opening a crypto-exchange business in Malta, the MDIA can help ensure that your business complies with its regulations.
In Belarus, cryptocurrency mining and investments are treated as personal investments, exempting them from income tax and VAT. Cryptocurrency activities were legalized in 2018, including buying, selling, mining, and exchanging. However, in 2019, the National Bank of Belarus extended their anti-money laundering regulations to cover crypto-exchange platforms and operators. This means that crypto-exchange platforms and operators will be treated similarly to operators of casinos and other games.
Cryptocurrency regulations are starting to evolve across the globe, with more and more governments embracing digital currencies. If you’re looking to start your crypto-exchange business in a crypto-friendly jurisdiction, Switzerland, Singapore, and Malta are a few of the best places to consider for their attractive tax exemptions and rapid adoption of cryptocurrencies.
For crypto-exchange businesses, it would be a smart move to set up their headquarters in countries that are quickly becoming crypto havens. Given the advancements in crypto payments, including crypto exchange services launched by banks in countries such as Belarus, there is no doubt that an increased number of users will be taking their first steps toward crypto in the near future.
If you’re looking for reliable cryptocurrency exchange software for your crypto-exchange business, Openware has the solutions for you. Our Opendax software facilitates the trading of digital assets, cryptocurrencies, and security tokens. We handle the digital infrastructure while you handle the other aspects of your business.
Notice: Information contained herein is not and should not be construed as an offer, solicitation, or recommendation to buy or sell securities. The information has been obtained from sources we believe to be reliable; however no guarantee is made or implied with respect to its accuracy, timeliness, or completeness. Authors may own the crypto currency they discuss. The information and content are subject to change without notice. Visionary Financial and its affiliates do not provide investment, tax, legal or accounting advice.