Overview: The legal side of cryptos in Europe
Cryptocurrency mining is the process of adding new transactions to the blockchain that results in adding the new units of digital currency into existence and circulation. Due to the high innovativeness of this process, the status of cryptocurrencies as well as their mining in jurisdictions may vary worldwide.
The attempts to regulate this growing industry have been undertaken by many governments, yet the certainty in many cases is still lacking. Thus, some legislations are generally friendly, neutral and/or willing to adapt it, the others are radically against it. In countries like China, Taiwan, and Iceland, for instance, some aspects of the cryptocurrency use are restricted. In China, Bitcoin is legal for individual use only, which means that companies or financial institutions cannot adopt it. In Iceland mining crypto is totally legal, however, its buying, selling and or exchanging for the state currency is not. In Taiwan, you can do all of the above, but can’t install and use a Bitcoin-ATM.
In some countries crypto is banned, e.g. Ecuador, Kyrgyzstan, Bangladesh. In Venezuela, bitcoin mining is considered a crime. Canada, Finland, France, Germany, Japan, South Korea, Jordan, Lebanon, Luxembourg, Mexico, Spain, Sweden, Switzerland have regulated the use of cryptocurrencies in order to collect taxes. In the majority of the countries, however, cryptocurrencies are still unregulated and are therefore considered legal.
Taxation in Europe
The European Union is generally a favorable area for utilizing and mining cryptocurrencies because the European Parliament accepts bitcoin as a currency or a means of payment, and doesn’t charge VAT/GST tax for exchange from fiat to BTC and/or back. However, the tax still applies to the payments for goods and services in Bitcoin in the EU. This makes Bitcoin convenient for individuals and companies, whereas the banks are not recommended to deal with cryptocurrencies. The world banks are currently more interested in the blockchain technology rather than Bitcoin and implement it. One of the major goals of the European Commission at the moment is designed a distributed ledger on which the financial data from collected from companies can be stored into a national database.
Since 2016 the government in the EU realized the potential power of cryptocurrencies to combat money laundering and terrorism compelling the cryptocurrency companies to scan exchanges and users’ wallets for suspicious activities.
In the countries where crypto mining is unregulated or tolerated there are difficulties with the taxation of such activity. In most cases, it is subject to income tax charged from a person who received bitcoin as a mining reward or upon exchange. No need to say that the monthly electricity bills from individual miners or farms are also taxed on top of the high energy charges. The practice of many industrial-scale mining pools in the Nothern Europe, China and US have only proven profitable in the areas with the lowest electricity rates per kW/h.
An Austria-based HydroMiner project, for instance, has developed a profitable ethereum (cloud) mining business strategy thanks to the facilities’ proximity to the source of electricity, the power station itself. Located in or close to the power station, the farm can consume electricity at 85% lower cost than the average in Europe as it is free from the network distribution tax. It makes mining in the Alpine region far more profitable than in China or in the north of Europe. The use of the green energy, e.g. solar and hydropower also allows reducing all sorts of environmental taxes and charges. In HydroMiner’s case, such a farm starts generating profits in less than 12 months since the start of the operation. With the concern of the EU Parliament about the environmental issues and turning to the eco-friendly energy sources, mining cryptocurrency can establish itself as a highly-progressive and technologically-innovative industry. The regulations towards crypto are quite loyal in the EU right now, there isn’t much competition while the demand for it is increasing. It’s hard to imagine a better time than now for scaling up the cryptocurrency mining and investing in it if you’re based in Europe.
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