Top Ten Crypto Friendly Countries
Blockchain technology is steadily changing the world. The benefits of distributed ledgers on financial and governmental processes are convincing governments to develop strategies for blockchain adoption. However, the lack of clear regulations and fear that initial coin offering (ICO) fraud is on the rise have held back most from taking expedient action.
“I believe that initial coin offerings – whether they represent offerings of securities or not – can be effective ways for entrepreneurs and others to raise funding, including for innovative projects,” U.S. SEC Chairman Jay Clayton advised. “However, any such activity that involves an offering of securities must be accompanied by the important disclosures, processes and other investor protections that our securities laws require. A change in the structure of a securities offering does not change the fundamental point that when a security is being offered, our securities laws must be followed. Said another way, replacing a traditional corporate interest recorded in a central ledger with an enterprise interest recorded through a blockchain entry on a distributed ledger may change the form of the transaction, but it does not change the substance.”
“Investors should understand that to date no initial coin offerings have been registered with the SEC. The SEC also has not to date approved for listing and trading any exchange-traded products (such as ETFs) holding cryptocurrencies or other assets related to cryptocurrencies. If any person today tells you otherwise, be especially wary.”
There are countries, however, that have thrown caution to the wind to be able to claim dominance of this emerging market. This article will look at the ten most crypto friendly countries today and how their approaches differ from the cautious approach favor by nations like the United States.
It is hard to start a business in Switzerland. By one estimate, it is just as easy to start and incorporate a business in Switzerland and it is to do so in the Democratic Republic of the Congo – which is currently amid the armed Ituri conflict and is plagued with open corruption.
According to the World Economic Forum’s Global Competitiveness Report, Switzerland – while being the world’s most competitive economy – is also the 54th-easiest to navigate its business incorporation process and the 56th-fastest to complete. It takes, on average, six weeks for new business owners to complete the paper-work intensive process to register with the government.
With blockchain technology, that process is cut to less than two hours, with most of that time being the time needed to deliver the paperwork.
Switzerland, as both a measure of necessity and as a way to corner this emerging business sector, is now recognized as the most blockchain-friendly nation in the world. With the establishment of virtual cryptocurrency hub in Zug and its unofficial tax-free status on crypto investments, Switzerland is distinguishing itself from other nations that are taking a “trust but verify” approach to blockchain.
One perspective take on why Switzerland may look at crypto as a boon has to do with its banking industry. For centuries, Switzerland was the center of global banking and wealth management. The opaqueness of the system made the country the ideal place to hide offshore holdings. The smuggling of money in and out of Switzerland have become so ubiquitous that the term “Swiss bank account” came to mean any illicit offshore money hiding.
However, Switzerland has allowed some sunlight into its banking system as of late, with some arm-twisting from the United States’ IRS and Department of Justice. The IRS Criminal Investigations Division shut down Switzerland’s oldest private bank and slapped many of the elite Swiss banks with billions in fines for aiding American tax evasion.
By being ICO-friendly, the Swiss is seeking to regain its seat at the global financial market world. With friendly tax laws, the Swiss is not encouraging “off-shore crypto investing” – the country has joined the rest of the EU in embracing strong Know Your Customers and Anti-Money Laundering regulations – but it is keeping an eye open to be the global capital for crowdsale investing.
It is hard to get your head around the idea that a real country – with borders and flesh-and-blood citizens – would create a virtual country. But, that’s exactly what Estonia did.
“Successful countries need to be ready to experiment. Building e-Estonia as one of the most advanced e-societies in the world has involved continuous experimentation and learning from our mistakes,” Estonia’s E-Estonia website reads. “Estonia sees the natural next step in the evolution of the e-state as moving basic services into a fully digital mode. This means that things can be done for citizens automatically and in that sense invisibly.”
“In order to remain an innovative, effective and successful Northern country that leads by example, we need to continue executing our vision of becoming a safe e-state with automatic e-services available 24/7.”
Estonia can be classified as having gone full hog onto blockchain. Although the nation’s plans to embrace a national cryptocurrency has been shot down as rumors – the country has left opened the possibility of using tokens as part of its “e-residency” identification program – Estonia is moving forward towards placing on the Internet everything an Estonian citizen needs to be a part of the Estonian digital community.
On one platform, a citizen can vote, file his/her taxes, secure his/er digital identification, have access to enhanced public safety tools, have access to his/her health data and health insurance information, and gain access to Estonia’s public services.
It is a reality where one can vote and challenge parking tickets – all from his/her laptop. Medical records travel ahead of new patients, so there is nothing to fill out in the waiting room. Loan applications are pre-populated, with data pulled from other applications already in the system. Most processes, such as filing taxes or completing a marriage license, usually only involve the will to do it and consent to the pre-populated form.
The realities of this digital world is that Estonia is virtually borderless, which – since 2014 – became an actuality with the establishment of E-Estonia. E-Estonia allows foreigners to engage in Estonian services, such as banking and establishing a business.
With liberal tech research regulations, low business tax rates, and an open friendliness to tech – level 3 autonomous cars (where a human driver can take control at will) are lawful on all Estonian roads, for example – the small former Soviet Bloc nation (the country has roughly the same population of San Diego) is making huge splashes in regard to future innovations. While not as ICO-friendly as other nations, the embracing of blockchain into the national portfolio makes Estonia the global model of what statecraft and national governance can look like in the future.
When it comes to blockchain, there are the usual suspects of potential uses: one could use it for fundraising, or to improve government services, or as the backboned of a new business process. Humanitarian aid does not usually make the list, but that’s exactly how Denmark is envisioning its use.
Humanitarian aid can be a controversial endeavor. Due to a lack of transparency, it is difficult to prove that aid is actually getting where it needs to go. It is not uncommon for humanitarian aid to be eaten up by large administrative costs and by inefficiencies.
However, if a refugee can be given a virtual, traceable identity, it becomes an easy matter to trace how much aid said refugee received. This transparency is what attracting Denmark and others to blockchain.
“There [are] huge opportunities in bringing the technological development into play in development cooperation. The use of blockchain and cryptocurrency is merely some of the technologies, which can give us new tools in the development cooperation toolbox,” Danish Minister for Development Cooperation, Ulla Tørnæs, said in a press release.
“It is clear that if we are to succeed in relation to the sustainable development goals we need digital and technological solutions and some of these we do not know of, but we will help find them.”
Cryptocurrency delivery of humanitarian relief takes out the middlemen and the middlemen’s costs. Using crypto also combats corruption directly and helps avoid the marginalization of refugee groups.
“Crypto and crisis is a perfect match, and aid organizations will undeniably be able to respond quicker using blockchain-based digital money, which arrives at email-speed, safely and transparently,” Marianne Haahr, project leader at Sustainia, said in the statement.
“The big challenge now is to disrupt the aid model. First step is to build trust in blockchain and its ability to facilitate all aspects of aid, next step is to disrupt the whole aid system.”
Denmark has signed up – with most EU nations – to work on and support blockchain development in Europe. While Denmark’s blockchain development – particularly, with the creation of the European Blockchain Center – place it ahead of its neighbors, it is Denmark’s willingness to use blockchain proactively to solve its problems that make the small Scandinavian country blockchain-friendly.
Canada could be called blockchain-unfriendly. Canada did join the United States and the United Kingdom in a banking ban on using credit products to buy cryptocurrencies, after all. However, low energy costs, favorable business regulations, and one of the highest average Internet speeds on the planet have led to a “kiss and make-up” attitude with Canada and the crypto community.
The home of Ethereum inventor Vitalik Buterin, Canada has made a bid to be the center of the crypto world. With the United States being hit or miss with crypto innovation, many North American entrepreneurs have found sanctuary in the Great North.
Canada being the central of the Ethereum universe is the key to the nation’s significance in the blockchain community. Research has suggested that Ethereum – and not bitcoin – is the world’s most decentralized blockchain and is, therefore, more useful in blockchain development. “Our observations show that Bitcoin has a higher capacity network than Ethereum, but with more clustered nodes likely in datacenters,” the research paper “Decentralization in Bitcoin and Ethereum Networks” by Adem Efe Gencer, Soumya Basu, and company, read. “We also observe that Bitcoin and Ethereum have fairly centralized mining processes and that further research is needed to decentralize permissionless consensus protocols further. In Ethereum, the block rewards have less variance than Bitcoin’s. Finally, Ethereum has a lower mining power utilization than Bitcoin, likely due to the high block frequency.”
“Further, we see that Bitcoin has undergone tremendous growth and can increase the block size by a factor of 1.7x without any decrease in decentralization compared to 2016. Additionally, our study uncovers that the volatility of mining rewards is an important, but often ignored, metric. Finally, we see that Ethereum would likely benefit from a relay network to increase its mining power utilization.”
While the Ethereum Foundation is a Swiss nonprofit organization, the Blockchain Research Institute – which the Enterprise Ethereum Alliance is a member of – is based in Canada. This makes Canada the center of blockchain development and the center of the research ecosystem, despite that fact that Canada lags behind the U.S. in actual infrastructure dollars.
With Quebec’s energy surplus, Canada’s naturally cool ambient temperature, and relatively light regulations, Canada is well-suited to be a crypto-mining hotspot. However, the banking ban and news from Bank of Canada that the nation’s largest bank is taking a decided anti-crypto approach tap down the enthusiasm about Canada somewhat.
It is hard to read Australia’s commitment to digitalization. On one hand, Australia’s 2016 test for digital governance – the Australian Census, which respondents were allowed to respond to online – failed fabulously, with the census website failing temporarily under the weight of four DDoS attacks. With census-taking being mandated by law, with daily fines up to $180, this created a crisis and a national embarrassment.
Australia has since invested $750 million in IBM blockchain technology. “Under the agreement, all government agencies can access the financial benefits and technologies,” IBM wrote in a press release. “For the major agencies that partner with IBM today – Department of Human Services (DHS), the Australian Taxation Office (ATO), the Department of Home Affairs (DHA), and the Department of Defence (DOD) – the agreement improves the current arrangements and gives them the autonomy and flexibility to change the profile of their technology over the next five years. Making it easier, more efficient and cost effective to access emerging technologies such as AI, blockchain, quantum enables the agencies to accelerate the deployment of digital services that are smarter, more resilient and better integrated for Australians.”
“The agreement, led by the Digital Transformation Agency (DTA), is the highest value contract negotiated by the Australian Government, and reflects the long-term anticipated value of the agreement. This deal brings the best of IBM’s cross-brand capabilities with a small portion recognized as services signings. It positions IBM as one of the most established, transparent and easy to engage government technology partners.”
IBM was the technological partner for the 2016 Census. This has created the allusion that this investment will be a bust for the nation, as IBM already failed Australia on a high-profile project.
Despite this, Australia seems to be taking its commitment to blockchain seriously. Per a July 30 press release, the Commonwealth Bank of Australia has completed a successful trade using blockchain. “Seventeen tonnes of almonds have successfully been shipped and tracked from Sunraysia in Victoria, Australia, to Hamburg in Germany in a blockchain-based collaboration between Commonwealth Bank and five Australian and international supply chain leaders,” the press release read. “Commonwealth Bank demonstrated a new blockchain platform underpinned by distributed ledger technology, smart contracts and the internet of things (IoT) to facilitate the trade experiment, tracking the shipment from packer to end delivery in parallel to existing processes.”
“Partners were able to view and track the location of the shipment as well as view the conditions, such as temperature and humidity inside the container, via four IoT devices. This level of data provided partners in the supply chain with a greater level of transparency and efficiency regarding the location, condition and authentication of the goods being transported.”
The Australian government has also invested A$2.25 million to the Sustainable Sugar Project, which would use the money to create a blockchain to track sugar shipments across the nation.
The Netherlands is not known for being a technological power. Dwarfed by Germany, France, the UK, and in some regards, Belgium, the Netherlands has struggled to make a mark regarding innovation. However, like most small nations, the Netherlands has found that integrating blockchain in governmental operations is a valid way to save key capital.
Take, for example, managing a real estate registry. Property title searches is a major and essential industry. If a perspective buyer fails to check if a property is clear of outstanding obligations, liens, or tax burdens, there is a possibility that the sale could be challenged and forfeited. Worse, an unclear line of ownership invites fraud.
Below are two examples of real estate fraud provided by the FBI:
“On Sept. 2, 2004, in Greensboro, N.C., George Monk was sentenced to 87 months in prison, followed by three years supervised release, fined $200, and ordered to pay $224,368 in restitution after pleading guilty to numerous tax and fraud charges,” the FBI report. “Monk and others devised a scheme to utilize various mortgage brokers to submit materially false information to mortgage lenders to obtain mortgage loans. Monk recruited individuals to act as purchasers ‘straw-buyers’. He then deceived them into believing that following the purchase of the real estate in their names, that he would pay all monthly mortgage payments and promptly transfer the parcels of real property out of the straw-buyers’ name. Monk failed to pay the monthly mortgage payments allowing the property to go into default and causing the sale of the property through foreclosure.”
“On April 13, 2004, in Providence, R.I., William Ricci was sentenced to 27 months in prison fined $20,000 and ordered to perform 1,000 hours of community service for a money-structuring scheme. Ricci admitted that he generated the appearance of business cash flow by cashing checks at a check-cashing company and depositing cash and money orders generated by those checks into various business accounts. In February 1998, Ricci embarked on a scheme to obtain financing for his various real estate companies by submitting fraudulent documentation that artificially inflated the value of the companies. Ricci generated the false appearance of cash flow in those companies by cashing a series of checks all for amounts of less than $10,000 and depositing the cash and money orders obtained with those checks into his company accounts. Some of the checks Ricci cashed were payable to himself. Others were payable to existent and non-existent third parties who were made to appear as if they were subcontractors. Ricci admitted that, between February 1999 and December 1999, he structured approximately $1,307,498 with 400 checks, all for amounts less than the $10,000 reporting level.”
The Netherlands is seeking to resolve this problem with the development of the Land Registry, which would make all ownership, mortgage rights, and third-party housing data publicly available and searchable. The registry, which will be powered by blockchain, will also experiment with predictive AI data systems.
The Netherlands is also committing millions toward its National Blockchain Agenda, which will create a partnership between government, academia, and the business community toward promoting scientific research into blockchain technology. The nation is working on developing a blockchain solution to track waste shipments across the Netherlands and remove manual intervention from its processes.
Blockchain represents a new line of intervention that many in the Low Country feel enthusiastic about pursuing. With the Dutch government alone committed to 25 blockchain trials, blockchain is fated to redefine Dutch governance.
Most people cannot find Liechtenstein on a map. The sixth smallest nation in the world, the nation is slightly larger than Washington, D.C. with a population on par with Calumet City, IL. It is also one of the wealthiest nations, with an unemployment rate of just 1.5 percent, and one of the highest gross domestic products per person in the world. There are more businesses in Liechtenstein than there are citizens; this may be due to the nation’s low corporate tax rate.
The last hang-on of the Holy Roman Empire, the “piggy bank of Europe” is facing changing times. International pressure forced Liechtenstein – like Switzerland – to become transparent about its banking practices. This collapsed the dreams of Liechtenstein being a “billionaire haven.” Forced to face a new reality, Liechtenstein has joined Switzerland in embracing blockchain as a way to regain a seat at the international financial table.
“The Liechtenstein financial marketplace is well known for its openness to innovative ideas and developments. These comprise FinTech business models, including cryptocurrencies and blockchain-based financial services,” Price Waterhouse Cooper published in an advisory. “Now Liechtenstein even goes one step further and announced a comprehensive Blockchain Act at this year’s Finance Forum on 21 March 2018. According to Liechtenstein’s prime minister Adrian Hasler the new act is about integrating current business models in regulatory terms in order to give companies and their clients legal certainty. With the planned act, Liechtenstein will be one of the first countries in the world to regulate the blockchain topic to this extent and thus create the basis for extensive economic applications. The planned act is expected to be circulated for consultations this summer.”
“As reported in the media early March, the Financial Market Authority Liechtenstein (FMA) approved three Alternative Investment Funds for cryptoassets (Incrementum Crypto One Fund, Postera Fund and Coinlab Digital Asset Fund). Liechtenstein thus plays a pioneering role in government regulation of the crypto-financial market.”
Liechtenstein has committed itself fully to blockchain. The commitment is so great that – should blockchain fail – Liechtenstein may be slow to recover. The Blockchain Act, for example, will create pathways for ICO to skirt the KYC and AML barriers that prevent fiat-to-crypto conversion in other countries. This will effectively give ICOs parity with traditional businesses. What more, the Liechtenstein model would permit the tokenization of any asset, the transferability of any digital asset, and the safe storage of any digital asset – regardless of international law – granted that certain licensure requirements are met.
With crypto-to-crypto trading not being regulated, Liechtenstein can become the “digital billionaire haven.” However, if fraudulent foreign ICOs choose to use Liechtenstein to site their corrupt crowdsales, the nation and its reputation may learn too late the folly of human greed.
One of the pillars of Hercules, the British overseas territory of Gibraltar has had grave significance to the economic and political health of the Mediterranean. With the Mediterranean spanning only eight miles at the Rock of Gibraltar, the territory serves as an effective “tollbooth” to the essential sea. With the territory in current dispute with Spain, that claims the territory as an illegal seizure from the War of Spanish Succession, Gibraltar remains one of Europe’s more controversial stories.
With Gibraltar’s revenue coming from the British military and tourism exclusively and with the territory having limited natural resources, opportunities for the largely self-managed territory are few and far between. Fortunately, the blockchain offers an opportunity for those willing to take a chance.
Gibraltar became the first government to issue a fiat-backed ERC20 token. The QRG token will facilitate transactions on the collectibles market, improving transparency between buyers and sellers.
“Gibraltar is at the forefront of this promising digital financial engineering and has received high acclaim within the global distributed ledger technology and cryptocurrency communities,” the QRP whitepaper read. “On January 1, 2018, Gibraltar became one of the first jurisdictions in the world to create a friendly regulatory structure for businesses and individuals who are using block chain or distributed ledger technologies to transfer value between parties.”
“The goal of the QRG Coin is that philatelic markets and auction houses will be only the first of many collectables markets to adopt the QRG coin as the trusted medium for the transfer of value. Sports memorabilia markets, fine art auction houses, antique car dealers and many others will benefit greatly from the increased efficiency and security inherent in QRG Coin transactions versus traditional payment systems. For many auction houses and online players, use of the trusted verification mechanism of the QRG Coin will allow them to expand their market globally.”
This news was met by the announcement that Gibraltar started its own crypto exchange. This move preempts the territory’s planned move to establish regulations to make Gibraltar ICO friendly. The regulations – the first in the world specifically designed to accommodate ICOs – would require “authorized sponsors” who would be responsible for ensuring that the ICO meets all disclosure and financial crime laws. These disclosure laws require that all ICO provide information that provides “adequate, accurate and balanced information to anyone buying tokens.”
With clear rules established, Gibraltar may be the next hotspot for ICO development, which would improve the nation’s financial fortunes.
Like Gibraltar, Malta has issued a set of laws to create a regulatory framework for blockchain technology. The tiny Mediterranean island off the coast of Sicily has emerged as the “blockchain island” for its wholehearted embracing of the technology.
The three bills – “The Innovative Technology Arrangements and Services Act,” “The Virtual Financial Assets Act,” and “The Malta Digital Innovation Authority Act” – will establish the rules in which ICOs can operate in the country. “The Malta Digital Innovation Authority Act,” for example will provide “for the establishment of an Authority to be known as the Malta Digital Innovation Authority, to support the development and implementation of the guiding principles described in this Act and to promote consistent principles for the development of visions, skills, and other qualities relating to technology innovation, including distributed or decentralized technology, and to exercise regulatory functions regarding innovative technology, arrangements and related services and to make provision with respect to matters ancillary thereto or connected therewith.”
With major exchanges Binance (which left Japan after being shut down for operating without a license), BitBay, and OKEx already situated in Malta, these laws are likely to increase the number of crypto businesses in the country. Malta has joined a race with Liechtenstein, Gibraltar, and San Marino to be the next hotspot for blockchain. Binance is currently sponsoring new fintech startups and entrepreneurs via the MSX Fintech Accelerator seeking to set up in Malta.
“Virtual currencies and Distributed Ledger Technology (DLT) are a new disruptive phenomenon in the digital currency and technology arena. The hype around their potential as a disrupter has been intense, with remote gaming being one of the sectors that may benefit from the use of virtual currencies and DLT technology,” read a guidelines document from the Malta Gaming Authority. Like Malta’s public transportation network, Malta’s gaming is seeking to improve its processes using blockchain technology. “The Malta Gaming Authority’s (MGA) strategy to be at the forefront of remote gaming regulation while embracing innovation, is balanced with the recognition that a prudent approach in this area is sensible and needed.”
“The characteristics of virtual currencies, while often cited as drivers for their adoption, simultaneously pose a number of risks which need to be addressed in a well-thought-out manner.
In the light of the regulation uncertainty of the major nations, tourist hotspot Bermuda is seeking to make its mark on the blockchain landscape. Bermuda – an archipelago of islands – can be challenging when it comes to securing critical and government services, especially if one does not live on the main island.
The need for innovation in communications and remote governance makes blockchain a perfect fit for the country. Bermuda’s passage of a law allowing start-ups offering ICOs to apply with the minister of finance for speedy approval suggest that Bermuda is taking blockchain very seriously.
Bermuda is also considering a law that would allow crypto exchanges and other businesses on the island, which will be similar to the approach that Bermuda took with insurance. Bermuda is currently a global leader in the insurance arena. The nation is also developing a blockchain digital identification program and has signed an agreement with Binance to underwrite educational programs about blockchain tech and to support blockchain startups.
“The pace of technological innovation moves in today’s world has challenged established norms of doing business,” Bermuda Premier and Minister of Finance David Burt said during the announcement of the Binance deal. “The new normal demands that those who would participate in this evolving space are equally as innovative, flexible and immediately responsive to the requirements of doing business.”
“This Government promised to usher in an era of business development that, at its core, would diversify Bermuda’s economy and provide opportunities for Bermudians to be more than spectators to economic success.”