Picture this: you're on a beautiful island basking in the sun as you sip your fruity cocktail. You've just cashed out on some big crypto winnings and you let out a chuckle, for this island doesn't tax you on your crypto. It is one of the most crypto friendly countries, there are Bitcoin ATMs everywhere and you can pay with your favorite crypto anywhere you go.

Sounds like paradise? Well, that’s the island I dreamed about last night. Even though we are still far from having a crypto friendly island, there are some countries out there that are a bit nicer to us crypto lovers than most.

Let’s dive in. First on our list is…

Ukraine  

Why they're a crypto friendly country:

  • Accepting donations to fund defense against Russia
  • The highest percentage of crypto owning citizens in the world
  • Pro-crypto exchange legislation

The most serious entry on our list is Ukraine. It’s also a powerful example of how the crypto community can make a change for the better.

After Russia declared war on Ukraine, they needed money to help fund the defense of their own country.

The official Ukraine Twitter called on the crypto community to aid their efforts, asking for donations via BTC, ETH, or USDT.  

Shortly after their tweet went out, the founder of Polkadot, Gavin Wood, replied: "If you post a DOT address, I'll personally contribute $5m." Two days passed, they posted a DOT address and the $5 million was donated.

Only four days after they asked for crypto donations, Ukraine had received over $54 million in total assets.

Announcing an airdrop to incentivize participation certainly helped. However, they got some heat when they backtracked on the idea after "careful consideration". Instead, the Vice Prime Minister (and Minister of Digital Transformation) of Ukraine, Mykhailo Fedorov, has announced they plan to release an NFT that will help support Ukrainian Armed Forces.

Crypto, before this event, had been in a weird grey zone in Ukraine, not legal but also not illegal. But the love that the crypto community gave the country has pushed them to embrace the technology.

In the wake of the huge crypto donations the country received, a law was passed that enables cryptocurrency exchanges to legally operate within Ukraine.

This law does not change the current taxation of crypto assets which is currently set to 18% income tax (plus 1.5% military levy) or 5% capital gains (plus 1.5% military levy). However, the Ministry of Finance said they will be, "actively working to amend the Tax and Civil Codes of Ukraine to fully launch the market for virtual assets".

If Ukraine is able to win this war, there is a chance the government becomes more lenient with its laws around cryptocurrency. In fact, 12.73% of Ukrainian citizens already own cryptocurrency. That is the highest percentage worldwide.

United Arab Emirates

Why they're a crypto friendly country:

  • No income tax
  • No capital gains tax
  • Thriving crypto culture in Dubai

Well, first things first, the United Arab Emirates (UAE) doesn’t want you to pay any capital or income tax. A true safe haven for the crypto lover and tax hater.

The UAE Securities and Commodities Authority (SCA) is in the final stages of bringing together legislation that will allow crypto companies and businesses to operate in the UAE. This legislation is expected to be passed by the end of the first quarter of 2022.

Dubai, the country's biggest city, is one of the most pro-crypto places in the world and has been named "Crypto City" by some.

The number of crypto projects being created (or moving to) the city is astounding. This is a result of Dubai being home to one of many 'Free Zones' in the country — areas where it's easy to be granted visas and trade licenses, even as a non-citizen. In this zone, you can find the Crypto Centre, where blockchain businesses pay zero taxes and can get visas for employees with ease.

This crypto culture can be seen through the number of blockchain events that have been thrown in the city like the Crypto Expo Dubai, Future Blockchain Summit, etc.

There are currently 400 crypto businesses in Dubai but that number is expected to exceed 1,000 by the end of 2022.

Even the most popular crypto exchange, Binance, has moved to Dubai. The Binance CEO, Changpeng Zhao, said, "the government there is very progressive, and it's a very good business environment [...] I want to show that we are committed to the place, so I bought an apartment there".

This was shortly followed by a tweet of Zhao dressed in a traditional Gutra.

Thought that was it? Nope, the University of Dubai even offers a diploma in blockchain fundamentals and development. Quite a cool thing to put on your resume.

Switzerland

Why they're a crypto friendly country:

  • Some cities treat Bitcoin (and other cryptocurrencies) as legal tender
  • Home to "Crypto Valley"
  • Tax-free capital gains for private investors

In 2018, Switzerland was the first country to have banks that offered crypto companies business accounts. They made this move as they acknowledged business accounts would help weed out bad actors from the space.

Cryptocurrencies are classified as assets on a national scale. However, some cities have announced Bitcoin and other cryptocurrencies as legal tender. This means that businesses in the area have to accept Bitcoin as payment. This reduces the need to convert your crypto to fiat making life just that little bit easier as a crypto lover.

For example, the city of Lugano. Population: 62,000. Mediterranean sea: beautiful. Legal tender: Swiss franc, Bitcoin, Tether, and LVGA Points (Lugano's own blockchain token).

Switzerland is even the home to the city Zug, which is nicknamed "Crypto Valley". The name comes from the number of blockchain startups coming from Zug — it was even the first place in the world to accept Bitcoin payments back in 2016.

As for taxes? Well, their income taxes are quite confusing for someone who doesn't come from the country. They have three different types of income tax that apply on top of each other. However, the levels of taxation are quite progressive. If you make €50,000 taxable income you'll pay around 5% in taxes… not too bad!

If you hit a few requirements as a private investor, you will pay no capital gains tax. You won't be hit with a capital gains tax if:

  • You HODL'd for at least six months
  • Trading turnover is less than 5x of your holding at the start of the financial year
  • Net capital gain cannot be more than 50% of your total income
  • You cannot have any debt financing
  • Derivatives solely used for hedging

Hit those requirements and you're as good as gold. No capital gains tax for you! If you don't (or if you're a business/self-employed trader) you will be hit with a tax.

Malta

Boating on the Mediterranean Sea.
Photo by Rick Barton / Unsplash

Why they're a crypto friendly country:

  • Recognizes crypto as a medium of exchange, a unit of account, and a store of value
  • No capital, wealth, or inheritance tax on crypto
  • Named itself "Blockchain Island"

Crypto is yet to become legal tender in Malta but it is recognized as a medium of exchange, a unit of account, and a store of value.

Where Malta starts to look really tasty for crypto investors is when you realize Malta does not apply any capital, wealth, or inheritance taxes to cryptocurrencies. Wow! Now it is starting to sound like that dream island of mine.

Because of these non-existent taxes, Malta has become a safe haven for crypto whales. Resulting in over $71 billion of crypto passing through the country, which has named itself 'Blockchain Island'.

This being said, income tax still applies when being paid in crypto, be it from an employer or from staking/mining rewards. If you earn €50,000 you'll be taxed 25% and for anything over €60,000 you'll be taxed 35%.

Singapore

Why they're a crypto friendly country:

  • Named the best 'crypto economy'
  • Crypto-noob-friendly laws
  • No capital gains tax

Q4 2021 saw Coincub crown Singapore as the best crypto economy. Stating: "Singapore has taken the top spot thanks to a booming crypto economy, positive legislation, and the world’s second-highest percentage of crypto-owning population."

The country does, unfortunately, apply income tax to cryptocurrencies and NFTs but does not apply any capital gains tax. If you're earning up to SG$80,000 (roughly US $66,000) you'll only be taxed 7%. Then going up to 11.5% for any earnings up to SG$120,000. For more information on income tax in Singapore, check out the HSBC website.

Operating as a crypto company in Singapore is fairly straight forward too. All you have to do is register for a MAS (Monetary Authority of Singapore) operating license, once you've been accepted, you're ready to get working.

Singapore is conscious it must cater to a new crypto audience so have passed consumer protection laws. Such as banning cryptocurrency-related advertisements in public spaces.

Some would see this as possibly non-crypto-friendly, however, I would disagree. For mass adoption to happen we must look after people entering the space. Looking after this audience is why they have a spot on our list of the top crypto friendly countries.

El Salvador

Estero Jaltepeque
Photo by Enrique Alarcon / Unsplash

Why they're a crypto friendly country:

  • Legal tender
  • Home to "Bitcoin city"
  • No crypto tax

Well, I'm sure we all know why this one is on the list.

On September 7th 2021, El Salvador nationally made Bitcoin legal tender. Not just a couple regions like Switzerland — it’s a mode of payment across the whole country. The crypto community rallied at a possible flagship moment for the start of mass adoption.

Each Salvadorian was able to claim $30 of Bitcoin using the government's Chivo app. The President of El Salvador, Nayib Bukele, made this move as a hope to get the 70% of the country's population who are unbanked to embrace the blockchain. Good marketing, eh?

A 'Bitcoin City' has been planned using Bitcon to fund the construction. The coin-shaped city will use a local volcano's geothermal energy to power Bitcoin mining. The world is starting to sound more and more like a simulation as the days go by.

As for crypto tax? President Nayib Bukele said: "If a person has assets in bitcoin and makes high profits (or small profits), there will be no tax [...] There will be no taxes to pay on either the capital increase or the income."

Maybe once this Bitcoin city is up and running, my dream island will be a reality. Now… where did I put my passport?

Bonus: California — The Crypto Friendly State

  • Most crypto ATMs in the US
  • Most 'crypto-ready' state

Okay, okay I know California is not a country but I'm sure our U.S. readers would like to know the most crypto friendly state. We think it might be California.

A study named The Golden State as the most 'crypto-ready' state. Factoring in crypto search engine searches, the number of crypto ATMs, and crypto-related bills passed created the "Crypto Ready Index".

California earned a score of 5.72 out of 10 — over two points higher than the US state average of 3.8.

Interestingly, California has the highest number of crypto ATMs in America at 2,473 — which is 11.75% of the nation's total crypto ATMs. Well done Cali! 👏

Which is the country for you?

Whether you want to move to the sunny beaches of El Salvador or go skiing in Switzerland, there is a crypto-friendly haven somewhere out there for you. Now if you move to any of these countries on our recommendation we'd love you to tell us how it is! And, maybe you could even invite us over? We wanna see Bitcoin City!

Check out writer Ryan S. Gladwin's website, follow him on Twitter, and of course, subscribe to the weekly Hedgehog newsletter!