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Iceland is a high-tech, high-value country with plenty of cheap energy, and not surprisingly cryptocurrency figures prominently, especially amongst the crypto mining community.
While adopting a light-touch regulation regarding crypto, Iceland does, however, have strong AML laws and adheres to the European Union’s 4th Anti-Money Laundering Directive whereby Virtual Asset Service Providers (VASPs) exchanges and wallets require registration to be able to operate.
Despite the adoption of crypto amongst the population, the country’s Financial Supervisory Authority (FSA) advises caution with all aspects of crypto activity as there is very little consumer protection. As a result, the FSA does have a comprehensive Fintech Help facility to support and guide businesses and individuals with compliance issues directly.
Iceland’s Government has been supportive of the cryptoeconomy, with a positive stance on VASPs, with many startups and businesses attracted by the crypto environment. Bitcoin trading in Iceland has been progressing smoothly the LocalBitcoins exchange is a leading exchange ranked by trading volumes. Iceland has a tradition of being a global investor – obviously keen to make up for the disastrous financial problems during the credit crunch. Bitcoin trading is seen as yet another means of spreading risk and enjoying investment opportunities outside of traditional financial services and products. Lowish tax and light-touch regulation are also a benefit to crypto in Iceland.
Iceland’s central bank recently issued a detailed report on all aspects of Fintech within the country, acknowledging that cryptocurrency is not heavily regulated and subject to risks that the consumer must be made aware of. However, on the matters of a Central Bank Digital Currency (CBDC) the Bank states that it could be a feasible alternative to the traditional money payments system and it has an open mind about the pros and cons of a ‘Rafkrona’ centralized digital currency. Much, it seems, would depend upon the actual design of a CBDC according to Iceland’s central bank and, as in many countries, the assessment is ongoing.
There was previously no taxation on mining in Iceland, but now the activity incurs a tax on gains of 20%. The country is a magnet for Bitcoin data centers (remember that nice cheap, clean energy?). All companies creating value in Iceland pay tax and mining was deemed no different, despite the slow start.
Taxation for individual investors is often said to be tax-free, but whilst there is no specific legislation for Bitcoin tax, the position seems unclear as to whether gains from trading are taxed as part of the general income generated or completely exempt from tax altogether.
Iceland made it into the Coincub Top Five Mining countries in the world (link to page) due in no small part to the fact that Iceland’s power grid is self-sufficient and has almost 100 % green, renewable energy from its well-known hydroelectric and geothermal sources.
Even so, the vast consumption of energy being used in mining is a growing and controversial issue in the country, whether that energy is green and abundant or not.
As we have seen across the world, where the Bitcoin and cryptocurrency craze has initially boomed, it is the potential of blockchain technology that is being taken up avidly by the business community and learning establishments. Blockchain is a rising technology, being adapted and deployed within infrastructure, manufacturing, finance, and the service industries and Iceland has several institutions providing advanced blockchain and cryptocurrency education courses. Way back (in crypto terms) in 2019, Iceland’s Financial Supervisory Authority FSA approved Reykjavik-based Monerium, backed by blockchain software company ConsenSys, to operate as an e-money business. A first for a European company operating across the European Economic Area (EEA) whilst not being a direct EU member.
Initial Coin Offerings – ICOs
Iceland is a crypto mining hotspot but the acceptance of ICOs as a means of fundraising for start-up companies appears to be slow with only a handful of companies sourcing financing this way.
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