Crypto Compliance and Taxation Outlook of the EU - Espay Exchange
                     
Introduction
● The European Union has managed to contribute at least 22% of all economic activity 
in the globe. In 2018, the gross domestic product of the EU exceeded $18 trillion. 
Cryptocurrency investors and advocates are watching the EU very closely. Any 
decision that is made by the EU about digital currencies will impact the global market 
as well as enterprise adoption of blockchain technology. The European Union has 
been solidly divided on the role Europe must play in the digital currency and 
blockchain ecosystem. The state members of the EU have their own policies and 
attitudes toward Cryptocurrencies. In this article, we cover EU crypto regulations 
according to the regions that come under its territory. We also will cover the Crypto 
taxation outlook of the EU countries. Let’s get started. Europe
Crypto Compliance Outlook of the EU
● Most of the member states in the EU, token trading and ICOs are evaluated on the 
basis of case by case. However, questions of utility VS security tokens are still on the 
way. Issues regarding regulating white label Cryptocurrency exchange are still in play. 
In this article, we will be covering a few of the member states of the EU, reviewing 
their policies.
● In 2012, the Europe Central Bank managed to become one of the first regulatory 
bodies who wrote about Cryptocurrency as an emerging trend. The ECB and EU have 
released new reports, general rules about Cryptocurrencies.
● Regulatory in the EU has considered Cryptocurrencies as a lawful activity. However, 
they do not consider digital currencies as money for traditional means of exchange 
and commerce. Although, Cryptocurrencies are not discouraged or prohibited in the 
EU, the Europe Central Bank has not intended to issue a blockchain-based currency 
as a replacement for the euro.
● Exchanges and other service providers are not regulated at a regional level. 
Nonetheless, the EU and ECB leave exchange regulation up to the judgment of 
member states. When a Crypto exchange receives approval from the national 
government, approval functions as a passport for operation around the Eurozone.
Crypto Compliance Outlook of the EU
● In 2018, the EU agreed on the text for the Fifth Money Laundering Directive. This 
directive will include every Cryptocurrency exchange that put forward fiat 
conversion. As regulated institutions under money laundering legislation of the EU, 
crypto exchanges will need to execute KYC and CDD (Customer due difference) on 
every exchange user.
● The mixture of regulations and initiatives that have been taken by individual member 
states of the EU has made it quite complex for blockchain startups to establish 
themselves in the EU. There are seven EU countries that recognized the hidden 
challenges of navigating several regulations. These seven EU countries have started 
an initiative, known as “Mediterranean Seven”.
● The objective of this initiative is to encourage the use and development of blockchain 
technology. These EU countries involve France, Spain, Italy, Greece, Malta, Portugal, 
and Cyprus. Now, let’s discuss the EU states’ attitudes towards Cryptocurrency.
 France
● Crypto Regulatory Sandbox: Only two ordinances on blockchain technology have 
passed the French legislature. The first ordinance recognized a fine definition of 
Cryptocurrencies in French law as a type of coupon. The second ordinance uncovers 
those hidden potential utilizations toward financial instruments, but 
Cryptocurrencies still continue to be mainly unregulated in France. France’s markets 
regulator, AMF is considering a regulatory sandbox that is meant to study the impact 
of security tokens in the European Union. 
● The government of France has indicated signs towards increased regulation and 
legislation in the upcoming years. Bitcoins and cryptocurrencies are not legal tenders 
in the EU. However, the ownership of such currencies is legal. France
 Trading Ban – No
 Banking Ban – NO
 Tax Haven Region– No 
 Best Place for License– No because French regulators have recently released strict 
rules of licensing for digital asset service providers. `
 Germany
● Crypto Regulatory Sandbox: The Germany Federal Financial Supervisory Authority 
(BaFin) has undertaken the regulation of Cryptocurrency exchanges in Germany. If 
you are willing to open a Cryptocurrency service that trades these virtual currencies 
that are qualify by BaFin, you will require approval from BaFin.
● The Germany Federal Financial Supervisory Authority makes regulations on ICOs on 
the basis of case by case. It does not include any kind of guidelines for what makes a 
token a security versus a virtual currency.
 Trading Ban – No
 Banking Ban – NO Germany
● Tax Haven Region- Yes, foreign investors do not have to bother about the taxes on 
interest burden. Germany retains the privacy of account holders. 
● Best Place for License- Germany harshly regulates crypto assets. A company seeking 
to do custody for crypto assets is restricted to provide any other regulated financial 
or banking services, which requires authorization.
 Ireland
● Crypto Regulatory Sandbox– Similar to Germany, Ireland has ruled to find that 
Cryptocurrencies can either be tradable securities or financial instruments. This 
determination was also based on a case by case. Capital gains taxes apply to 
transactions where Cryptocurrency is traded for a profit. The finance organizations of 
Ireland have encouraged many initiatives to create Europe-wide cryptocurrencies’ 
regulation.
 Trading Ban – No
 Banking Ban – NO
● Tax Haven Region- Yes, Ireland is a host to business tax rate of 12.5%, and artists Ireland
relish a tax-free income.
● Best Place for License- Yes, Ireland is considered as one of the major European 
markets for Cryptocurrency companies.
 Italy
● Crypto Regulatory Sandbox: Italy agreed that Crypto exchanges are exempt from 
VAT, and it has rulings dating back to 2016 that classify Crypto profits as “corporate 
income” subject to the applicable tax regulations. When a Cryptocurrency exchange 
is willing to function in Italy, they will have to follow the similar registration process 
recommended by other European countries. The Laws in Italy treats Crypto exchange 
providers in the same ways as other money exchange operators do. 
Italy
 Trading Ban – No
 Banking Ban – NO
● Tax Haven Region- No, but Crypto exchanges are exempt from VAT
● Best Place for License- Yes, not being regulated by any specific law until now, the use 
or trading of Cryptocurrency is not subject to any special licensing requirements. You 
just need to keep proper accounting records and also file the essential documents 
with the tax authorities.
 Malta
● Crypto Regulatory Sandbox – The government of Malta has been loudly pro-
Cryptocurrency, and they consider blockchain as an opportunity to bring 
improvement as well as investment in Malta. While the official ruling is not yet on the 
books, it is now expected to be a crypto-friendly set of regulations in the EU. The 
ambition of such a ruling would be to craft an understandable framework for 
blockchain startups or White Label bitcoin exchange Software development 
companies, and in turn these startups would have access to the European market via 
their Maltese headquarters.
 Trading Ban – No
 Banking Ban – NO
 Tax Haven Region- No Malta
 Best Place for License- Yes
Crypto Taxation Outlook in
Europian Union
● In 2018, the EU agreed on the text for the Fifth Money Laundering Directive. This 
directive will include every Cryptocurrency exchange that put forward fiat 
conversion. As regulated institutions under money laundering legislation of the EU, 
crypto exchanges will need to execute KYC and CDD (Customer due difference) on 
every exchange user.
● The mixture of regulations and initiatives that have been taken by individual member 
states of the EU has made it quite complex for blockchain startups to establish 
themselves in the EU. There are seven EU countries that recognized the hidden 
challenges of navigating several regulations. These seven EU countries have started 
an initiative, known as “Mediterranean Seven”.
● The objective of this initiative is to encourage the use and development of blockchain 
technology. These EU countries involve France, Spain, Italy, Greece, Malta, Portugal, 
and Cyprus. Now, let’s discuss the EU states’ attitudes towards Cryptocurrency.
 France
● For companies, cryptocurrencies’ profits are prone to tax under the general 
corporation tax regime for losses and profits.  Currently, corporate income tax is 
levied at the 33.33% rate. The standard rate is assumed to be gradually reduced to 
25% in 2022. Profits from Cryptocurrency mining and speculation are treated as 
commercial and industrial profits subject to the ongoing income tax schedule.
● According to the French Supreme Court, Cryptocurrency assets that are associated 
for tax purposes to intangible assets, their VAT treatment should look similar to the 
following aspects:
● When Cryptocurrency is exchanged for fiat currencies, no VAT is due on the 
Cryptocurrency’s value and in respect of the fees. If there is any VAT, it will be France
charged by the intermediary. 
● Revenue that is received from Cryptocurrency mining activities is subject to VAT as a 
supply of goods or services.
● Acquisition of services or goods through Cryptocurrency payments are also subject to 
French VAT.
 Germany
● In Germany, the tax treatment is not completely settled by the regulation. Profits will 
be taxable as current income, capital gains, or not at all. Cryptocurrencies will be 
regarded as an asset for the purposes of tax. The scope of taxation will depend on 
whether the Cryptocurrency is held as business or private asset.  However, 
companies are treated as holding assets as business assets. If anyone has held them 
as business assets, all profits will be subject to tax. If anyone has held them as a 
private asset, then profits from lending are taxable as income. Payments made in 
cryptocurrencies are treated as a Cryptocurrency sale and lead to the tax outcomes. 
Cryptocurrencies mining is subject to tax as a business income based on different 
circumstances. 
● VAT treatment in Germany has issued on the following guidelines: Germany
 Generally, revenue obtained from Cryptocurrency mining tasks is outside the 
scope of VAT.
 Revenue obtained for the provision of wallets for which certain charges are 
made is subject to VAT. 
 When cryptocurrencies are exchanges for fiat currencies, the Cryptocurrency 
transfer is exempt from VAT. 
 Charges for the provision of a platform to sell and buy in cryptocurrencies are 
considered a technical service subject to VAT.
 Italy
● The Italian Tax Authority has provided some specific guidelines to understand 
Cryptocurrency taxation (direct taxes and VAT) outlook of Italy. A few of them are 
given below:
 Any individual, who is occupied in speculative activities, will be taxed at 26%.
Italy
 Traders in the cryptocurrency industry are subject to tax on profits as 
income. This will also involve non-residents trading via a permanent 
establishment in Italy.
 For those companies that are subject to corporation tax, the losses or profits 
on exchange movements among cryptocurrencies are taxable.
 If you want to pay in Cryptocurrency for any service or good, the value of the 
supply on which VAT is due will be the Euro value of the Cryptocurrency at 
the moment the transaction takes place.
 The sale and purchase of Cryptocurrency in an exchange for Euros are 
considered as a foreign currency transaction. And that transaction margin is 
exempt from VAT.
 Spain
● If any individual has held Cryptocurrency as an investment, the Cryptocurrency will 
be considered as an asset for capital profits tax. The capital profit is charged when 
the Cryptocurrency is handed over by the individual who is paying tax. For companies 
that are subject to corporate tax, losses, or profits derived from exchange activities 
among crypto and other kinds of currencies are taxable.
● Revenue obtained from Cryptocurrency mining movements is outside the scope of 
VAT. Charges made over the value of the Cryptocurrency for sorting or carrying out 
any Cryptocurrency transactions are exempt from VAT.
Spain
Final Thoughts
● The European Union is the second-largest economy across the globe. It is 
right behind famous Asian countries like South Korea and Japan in terms of 
Cryptocurrency investment. The future of Cryptocurrency in the EU depends 
on shared regulations and clean frameworks for blockchain businesses 
moving ahead. If you want to invest in centralized trading solutions or 
centralized exchange platform, you must have a good understanding of legal 
compliance and taxation outlook of the EU.
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