The state of crypto in Southern Europe: Malta leads the way

by · November 3, 2022

Despite the turbulence that erupted in the crypto market this summer, there is one important long-term marker that should be considered in any complex assessment – ​​the combination of adoption and regulation. The latest report from the EUBlockchain Observatory, called “EU Blockchain Ecosystem Developments,” attempts to measure this combination within the EU, combining the data on each and every member state from Portugal to Slovakia.

Since the original report counts more than 200 pages, Cointelegraph prepared a summary with the intention of capturing the most important information about the state of crypto and blockchain in Europe. In the past we have covered Western and Northern Europe, but this cycle ends with the Southern Europe region.

Greece

Number: Over 10 suppliers of blockchain solutions.

Regulation and legislation: According to the report, blockchain, along with their derivative cryptocurrencies as well as alternative forms of blockchain finance, 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), the Internet of Things (IoT), blockchain and other distributed ledger technologies (DLT). Virtual asset providers are required to register with the Hellenic Capital Markets Commission (HCMC).

Taxes: The income arising from cryptocurrency transactions is taxed under capital gains tax, which is 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 partnership with the European Bank for Reconstruction and Development.

Local players: Mobiweb Technologies, an offshore web development company; Synaphea, a provider of blockchain solutions to the business world; Metabloq, a blockchain-based software developer.

Italy

Number: 46.5 million dollars (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 this resolution, a person’s income from the exchange of crypto is not 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 amounts to a flat rate of 26%.

Notable initiatives: Since 2015, the Ministry of Economy and Finance has initiated two pilot projects to test DLTs in public administration. The first 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 information exchange between the Ministry of Economy and Finance and the State Police. The other was PoSeID-on, a platform for handling personal data and data protection.

In 2017, the Ministry of Agriculture, Food and Forestry Policy launched Wine Supply Chain 4.0, a pilot project that improves 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 textile supply chain stakeholders.

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

Number: 139.5 million dollars (141 million euros) of total funds raised.

Regulation and legislation: In 2018, the Maltese Parliament passed 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 regulations recognize four different categories of digital assets, subject to a different set of rules: electronic money, financial instruments, virtual (utility) tokens and virtual financial assets (VFA).

Taxes: Electronic money and utility chips are not on the list of capital gains in the Income Tax Act and are thus not subject to property tax, while securities and VFA are.

Notable initiatives: Malta was the first country to install a blockchain-based IP registry and transferred 60,000 records using the blockchain network. After 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 estate planning system to ensure transparency in processes, and a blockchain-based copyright and IP system.

Local players: Quidax, a digital asset exchange; Vaiot, an AI and blockchain-centric developer of intelligent virtual assistants; Efforce, a platform for tokenized energy savings.

Portugal

Number: 43.5 million dollars (44 million euros) in funds raised by blockchain providers, 28 blockchain startups.

Regulation and legislation: Cryptocurrencies are not tested 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 service providers of virtual assets.

Taxes: The legal entities that offer services related to cryptocurrency must pay a capital gains tax of 28-35%. At the time of writing, there is no capital gains tax on individual holdings in Portugal, but that is about to change – the country’s proposed 2023 budget calls for a tax rate of 28% for individuals.

Notable initiatives: In public administration, the most important use case is the Participa.gov platform, built on blockchain and used by citizens to present and discuss their community initiatives. The agricultural sector uses blockchain to track food products while increasing security. Veracruz, the Portuguese almond producer, has partnered with Arabyka to apply blockchain technology in its 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 certification.

Spain

Number: $86 million (€87 million) in total funds raised, 200+ blockchain companies.

Regulation and legislation: Digital currencies are not considered legal tender, and their exchange is exempt from value added tax (VAT). They are largely governed by legislation relating to goods, 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 cryptocurrency promotions in an effort to ensure that “advertisements for the products offer true, understandable and non-misleading content, and include a prominent warning about the associated risks.”

Taxes: Capital gains from the exchange of digital currencies are subject to a variable tax rate that varies from 19%-23%. Digital currency mining remains unregulated.

Notable initiatives: In 2018, Spain introduced a regulatory sandbox for new fintech projects, including blockchain and digital currencies. In the same year, BBVA bank became the first in the world to use 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

Number: $148.4 million (€150 million) in total funds raised, 48 blockchain companies.

Regulation and legislation: There are no specific references to digital currencies and blockchain technologies in the country’s legislation. However, the Distributed Ledger Technology Bill was published for public comment in 2021 and is now under legal scrutiny.

Taxes: According to Mondaq, the income from crypto trading is currently taxed under corporate income 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 Cointelegraph that once the Umbrella Blockchain Law is passed, the Ministry of Finance 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 use its blockchain-based solution to store COVID-19 results.

Local players: NoBanx, a crypto deposit platform; Simdaq, a trading mastery and asset management platform; Coinomi, a blockchain wallet.

Important takeaways

The data from the report proves that the island of Malta is still way ahead of its southern European counterparts when it comes to growing the crypto industry. Joshua Ellul, professor at the University of Malta and member of the EUBOF expert panel, highlighted the role of the Maltese government in providing legal certainty to virtual financial assets and service providers – and the advantages of the country’s size for that matter:

“Such agility was possible because of Malta’s small size, which is also a reason why Malta’s investment levels are significantly lower. This is not just isolated to blockchain, but to all sectors.”

Ellul believes it is no coincidence that the upcoming pan-European markets for crypto-assets (MiCA) draws on Maltese regulatory design for digital assets in some respects.

“Many say MiCA has many similarities with Malta’s VFA regime; some say Malta is “MiCA ready”. This, together with a healthy local ecosystem, including educational programs, thriving companies, expertise in various blockchain-related services and innovative regulation, will make Malta an attractive destination for setting up shop, which we hope will change investment figures in the years to come. ,” he said.