Bitcoin and cryptocurrency trading in Malta
Malta is a cryptocurrency, blockchain, gaming, and AI hub and has been for some years – but not without a price. Fraud is part of the package and the latest involving $600 million in cryptocurrency, is one of the biggest anywhere. Needless to say, security seems to be playing catch up in a crypto industry that is flowing with investments and ideas for parting people with their money – crypto or otherwise. On the statistics alone, Malta scores highly for numbers of ICOs and, not surprisingly, numbers of crypto transactions. Whether the bottom is falling out of the so-called ‘Wild West of Cryptocurrency’ remains to be seen but meanwhile, it moves up to 23, due in no small part to its trading volumes and blockchain community.
Malta officially recognizes Bitcoin and other cryptocurrencies, without declaring them as legal tender – this is a stance in line with most countries – except El Salvador –see El Salvador Review. However, crypto is recognized as an exchange medium – having value in transactions (cavemen did it with beads and bearskins) and being able to use it as a unit of account between two parties. Malta was one of the first countries to implement digital cryptoasset-related acts with complementary legislation regarding blockchain technology. The country also has no prevailing stance on taxing crypto.
Leading global exchanges all operate within the country and are subject to The Virtual Financial Assets Act (VFA) which was one of the first pieces of legislation to establish a regulatory position for crypto exchanges, wallets advisers and other crypto service providers. Such crypto services are also obliged to register with another act, The Innovative Technology Arrangements and Services Act. It is the Malta Digital Innovation Authority that creates crypto strategy and policy going forward. With no particular new legislation on the horizon, it is The Malta Financial Services Authority (there are lots of authorities in Malta) which actively monitors crypto businesses and any risks associated with them.
Taxing cryptocurrencies in Malta
The tax situation as to crypto-assets and the buying and selling of them seems to be very simple – but it can become very complex. Much depends upon definitions and interpretations of digital assets classes and how they are used and where the originating exchange is based. Malta is definitely crypto-friendly from a tax and legal position, with a generous tax regime for non-domiciled residents, and there are no wealth, inheritance, estate or gift taxes. You may also be exempt from the capital gains tax, but all in all, it’s largely a question of having expert advice on your particular circumstances.
Whether you pay or don’t pay tax on your use and trading of crypto assets is subject to the classification and use of your holdings; hybrid tokens, utility tokens, coins, security tokens etc. In a nutshell, the tax treatment of any digital asset will ultimately depend on its purpose, and the context it is being used as well as its categorization.
The whole question of residency and domicile is central to tax and crypto. The advantage of Malta for investors is to become a non-domiciled resident and the prospective tax advantages. If you completely up and move out of Malta the tax laws of that country will apply to you
Mining is beyond the scope of most individuals and calls for significant investment in time, money and equipment. Mining is perfectly accepted in Malta (even though electricity costs can be shocking). As with income tax laws, mining may or may not be subject to VAT depending on how the mined coins are viewed. If they are viewed as a reward for the provision of services (validation of transactions) and the recipient of those services can be clearly identified, then the miner will have to pay VAT.
Crypto financial services in Malta
Most retirement and pension funds worldwide deem cryptocurrencies to be too volatile to
become part of long-term retirement schemes for mainstream pension funds. It is highly likely that a high-net-worth individual will be able to pay the higher fees associated with the higher risk of having crypto as part of retirement planning.
Malta’s banks had a quiet revolution a while back, refusing to play ball with crypto companies.
Things are easing but all banking and financial firms need to acquire a varied range of licenses to offer their services. Agribank and Paytah are deemed crypto-friendly and a crypto service provider, crypto.com, has recently been granted a license to issue payment cards and offer bank transfers to its customers.
Decentralized Finance is behind the rapid interest and growth of cryptocurrency and is underpinned by blockchain technology. Malta has highly regulated banks and financial services but there is no real movement in this area.
Using crypto in Malta
Malta doesn’t officially recognize cryptocurrencies as legal tender, however, there are lots of places to spend it including restaurants, cabs, some estate agents, workspaces and sports centers – you could even get your tattoos done using crypto.
As we’ve said above there are no gift taxes in Malta but you’ll need to take advice on your overall tax position.
Crypto regulation in Malta
Overseas exchanges all have their own protection strategies against fraud but they are by no means consistent so you need to do your homework on the exchange that you choose. This involves looking at its record against hacking and also you may want to check about the levels and scope of the insurance it carries. Customer support is also another area you could look at.
As with many government bodies, the Malta tax authorities can request information from crypto exchanges and expect compliance with their laws. You’ll need to provide your personal details.