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Introduction to Bitcoin and crypto trading in Norway
Norway’s vast riches accumulating within its sovereign wealth fund don’t seem to be boosting the country’s crypto credentials. Perhaps old, traditional money generated by the wealth fund is a nice cozy feeling which is good enough for most people. There is no specific cryptocurrency legislation in Norway in regard to banking and money transmission or the regulation of exchanges, miners, issuers, or sponsors. At the tail end of 2021, newly amended Anti-Money Laundering Laws AML came into force. Furthermore, all crypto trading activities are taxable under prevailing tax laws. Norway, however, carries high(ish) scores on the Coincub crypto rankings for its good number of blockchain organizations, Bitcoin nodes, and, surprisingly, for Bitcoin mining. Norway moved up one place to round out the top thirty in the Q3 rankings for 2022.
Whilst Norway does not have a specific regulatory framework towards crypto, the country has concluded that the growing volume of cryptocurrencies – not to mention drastic price swings and, of course, FTX – requires that the country sets new rules, especially ones that regulate the risks associated with cryptocurrencies. Of course, this is also going on at the top level across the EU and it would seem that any legislative directives by the EU will have a significant bearing on any forthcoming Norwegian legislation.
Bitcoin and cryptocurrency trading in Norway
The crypto economy in Norway is open and progressive with a positive outlook toward cryptocurrency and the blockchain technology that supports it. Spending your coins, however, is not that easy with few directly participating stores and outlets. There are worldwide brands that accept cryptocurrencies, such as the inevitable Microsoft and Gyft, but for the most part, you could try some form of a crypto debit card to make your purchases that you top up with crypto to spend in the converted Euro flat currency.
Bitcoin trading and laws in Norway
Norway is served by all the leading exchanges and has a population with high volumes of trading and holding cryptocurrency. The crypto economy is largely unregulated, but that is not to say Norway is totally sold on Crypto. This is a country with a vast Sovereign Wealth Fund and the establishment is doing very nicely without crypto, thank you. The financial regulator, Finanstilsynet, only recently warned against the risks of investing in such a volatile currency as Bitcoin. Much public opinion has the opposite view with high trading volumes and numbers of people holding crypto.
Bitcoin tax in Norway
Although crypto or virtual currencies share many similarities with conventional (fiat) currencies, for tax purposes, they are not considered to be ordinary currencies because they are not issued or guaranteed by a national central bank. They are, however, taxable and you must report all buying, selling, and mining of cryptocurrency to the tax authorities. Holding, purchasing, or selling cryptocurrency is not reported automatically to the tax authorities, but you are responsible for reporting your activities. Income identified as gains is taxed at a rate of 22%. Any capital gains you gain from the realization of a capital asset you make as an individual are taxable, with losses deductible and this applies to your cryptocurrency whether it is purchased or mined. For example, if you sell your bitcoin for another cryptocurrency, then the gain is taxable with all gains and losses calculated in Norwegian kroner at the time of the transaction.
The taxable gross capital/wealth you have accrued is considered to be all capital objects with a sale value that you own at the end of the income year – and that includes your cryptocurrency. Using crypto as a means of payment and the exchange of virtual currency services can be exempt from VAT but you need tax advice as to the exact circumstances. Overall, the taxation of your gains applies wherever in the world your assets are located and your crypto holdings will be taxable on the gross capital wealth basis whether you gift it or not. Should you change residency, your tax matters will be applicable to your new country of residence.
Norwegian Bitcoin mining
Thinking of mining crypto? It’s a highly technical and expensive activity at the best of times, involving powerful computers – and lots of energy – but it is perfectly legal in Norway. However, if you own your own hydroelectric dam and go ahead, you are liable for tax on your gains and you must report your mining in your tax return. Mined coins count as income at market value at the time of acquisition and if you’re in possession of these at the end of the income year, the value is considered capital wealth. Keeping records of trading and mining activity is vital, the authorities can simply request it from you and you have to comply. Whether you are mining as a private individual or as a business will have a direct impact on your taxation or not.
Cryptocurrency is a big investment play among an increasing amount of population. That said cryptocurrency is still viewed as too volatile and unpredictable for most organizations offering long-term financial planning. Despite a positive attitude from the government, the risks of high price volatility remain, and traditional long-term investment organizations may steer clear, it is likely that any investment plan would probably carry higher fees due to the higher risks involved.
Norway’s financial outlook on Bitcoin and the crypto economy
Norway’s banking system is highly advanced and cash usage is low, with some four out of five peer-to-peer payments made using mobile payment services. The country also rates top in Europe in terms of Internet Banking. However, like many countries, and especially those in Scandinavia, there are wide differences of opinion about the crypto space between central and mainstream banks, and the general financial community in general. While the central bank is not particularly enamored of the potential of bitcoin and crypto in general, some mainstream banks wish to provide the services their customers are demanding. One such bank is the Norwegian savings bank, Sparebanken Øst, which has invested in a fast-growing bitcoin exchange, NBX, to match demand and challenge competitors with its range of services.
Norway and Defi, the latest developments
Central Banks around the world are all investigating or trialing some form of digital currency and Norway is definitely one of them, however, Norway’s central bank firmly believes its main mandate is to provide a stable financial system. Norway’s central bank is assessing the need for a central bank digital currency but admitted that this is still some way off – actually a position very similar to Denmark’s. Likewise, any practical assessment of decentralized finance (Defi) as a replacement for the existing financial system remains at the level of speculative debate.
Crypto regulation in Norway
The cryptoeconomy has been left with something of a ‘wait and see’ approach in Norway, with very light, or no specific regulation. There is also little statutory consumer protection for cryptocurrency buyers, unlike with traditional investments. This approach is not unlike other Scandinavian countries that have also been relatively ‘hands-off’ with crypto developments.
Cryptocurrency trading platforms in Norway are obliged to comply with anti-money laundering (AML) provisions and with little supervision from Finanstilsynet beyond that. As to the security and suitability of any exchange, it’s advisable to do some homework into their track record, levels of customer services and insurance they may or may not carry against fraud or theft.
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