As we expected late last year, regulation of blockchains, ICOs and cryptocurrencies have gained massive importance in the market and are shaping not only coin prices but the whole ecosystem. We are kickstarting a series of articles about the current and potential state of regulation and the framework for the months to come. We’ll divide the article by geographical area, starting with Europe.

European Union

The EU has not yet adopted a full set of regulatory requirements regarding cryptocurrencies and ICOs. The finance commissioner Valdis Dombrovskis recently mentioned that the EU may write a set of guidelines towards the end of the year or early 2019. As a result, laws and compliance requirements still differ from country to country within the bloc depending on their own agenda and market friendliness. Still, there is one area of regulation that has been addressed yet, and it is related to money laundering. In its 5th Money Laundering Directive (MLD5), the EU explicitly cites cryptocurrencies as a target medium for money laundering and terrorism financing. Under MLD5, the provisions applicable to businesses involved in fiat currencies are extended to the ones dealing in cryptocurrencies (exchanges and wallet providers mostly). The definition of a cryptocurrency is broad enough so that it can cover a wide array of cases:

a digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily attached to a legally established currency, and does not possess a legal status of currency or money, but is accepted by natural or legal persons, as a means of exchange, and which can be transferred, stored and traded electronically“.


In France, cryptocurrencies still do not have any legal basis as recently pointed out by the Banque of France (BoF) in a short note released in March. The institution reminds investors that only the Euro is legal tender in France and that cryptocurrencies (the BoF prefers the term “crypto-assets”) currently fail the test to be considered as money for three main reasons:

  • They are not suitable as accounting units due to their high volatility
  • They cannot be considered as payment intermediaries (again due to high volatility, but also high transaction fees irrespective of the amount and no repayment mechanism in case of fraud),
  • They cannot be considered as store of value (due to a lack of intrinsic value besides the required computing power to produce them)

Finally, the BoF adds that cryptocurrencies are not means of payment as they fail the related legal test (claim against actual funds in Euros).

The institution suggested that the case of cryptocurrencies and token should be dealt with at the international level with the goal to replicate existing anti money laundering, tax invasion and terrorism financing regulations and protect investors and the public. Among other options, the BoF cites a ban on products invested in cryptocurrencies or making it illegal for financial institutions to accept deposits. Institutional investors may be allowed to trade under certain conditions. Regarding ICOs, the note mentioned a framework being currently explored to define proper guidelines in terms of documentation. For the moment, any advertizing (especially online), should be avoided and this applies to derivatives also.

In terms of taxation, cryptocurrencies and tokens are considered units of accounting by French fiscal authorities. It means that gains are taxed as ordinary income when realized and coins are part of an individual’s wealth tax calculation (on a yearly basis). If trading is done on an ongoing basis, it is then considered as business related gains and treated as such.


Switzerland has been very active in trying to position itself at the forefront of Blockchain technologies and cryptocurrencies. Several private and public initiatives have been launched in both spaces, including:

Swiss Crypto Valley Association based in Zug

Swiss Blockchain Association based near Geneva

Ethereum Foundation based in Zug and official organization behind Ethereum

Also, FINMA, the Swiss financial regulatory body is one of the first to have published ICO guidelines in February of 2018:

Finma ICO guidelines

Regarding ICOs, Switzerland has decided to take a case by case approach. It means that certain types of ICOs may fall under the umbrella of financial markets regulations while others may be totally exempted. FINMA defines three different kinds of tokens: Payments (cryptocurrencies such as Bitcoin which are not linked to anything else), Utility (giving rights to access an application or service) and Assets (digital proofs of ownership of an underlying asset, like a financial derivative).

  • Payments tokens (cryptocurrencies) are not considered securities but must comply with anti-money laundering regulations.
  • Utility tokens (rights to a resource) are not considered securities if their sole purpose is to confer a right to a digital resource and the resource itself is available at issuance. If the token provides any kind of economic benefit, it will be treated as a security.
  • Assets tokens (derivatives) are considered securities and fall under the related financial and civil laws.

Of course, these are very broad guidelines and FINMA makes it clear that there will be cases where certain tokens will be considered ‘hybrids’ from a regulatory perspective. PwC has released a detailed primer on what is expected of actors involved in these three categories of tokens. The point of the Swiss framework is to leave the door open to innovation while setting hard limits to certain kinds of activities (illicit ones in particular, and KYC – Know Your Customer- requirements are expected to be strongly enforced). So far, Switzerland has successfully managed to navigate the global environment attracting a significant share of past, current and future ICOs as summarized in the following FT article:

In terms of taxation, Switzerland has no capital gains for private individuals trading in pure cryptocurrencies though they will be subject to wealth tax. Professional traders will have to report gains and losses as ordinary income though holding periods will have an impact.


The legal body in Germany responsible for understanding and classifying cryptocurrencies (term used is virtual currencies) and finance-related Blockchain applications within the existing legal framework is the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin). As per their website the BaFin has categorized Bitcoins as a financial instrument as per the German Banking Act (KWG), similar to foreign currencies. However, cryptocurrencies are not legal tender. If the cryptocurrency is issued by a central entity that also manages and maintains it the emission is subject to the Payment Service Supervision Act (ZAG) and counts as electronic money (E-Geld).

Using cryptocurrencies as means of payments – as a payee or payer – does not require the BaFin’s permission. The same applies to private individuals who mine coins as these miners are not issuing or placing them by themselves. BaFin points at their general regulations as to when activities are seen as commercial which then requires the supervisor’s permission:

This is the case for cryptocurrency trading platforms – similar to a stock exchange – that sell or buy not on their own account and execute transactions on a commission basis, called principal brokering services (see BaFin website for specific criteria). Another trigger is the operation of a multilateral trading facility which brings together buyers and sellers of financial instruments under a framework stipulating aspects of platform participation, trading and transactions.

Offering the exchange of cryptocurrencies against legal tender or vice versa as a service is considered “trading for own account” and becomes subject to permission. The same applies to mining pools that share profits from the sale of mined coins with the pool participants who in turn supply computing power for mining.

The main focus of BaFin is to protect consumers by ensuring certain standards and by keeping unreliable providers off the market, and to prevent money laundering.


In terms of taxation the classification as financial instrument leads to a similar treatment of cryptocurrencies like for stocks with detailed instructions from the Bundesministerium für Finanzen (BMF).

If cryptocurrencies held by private individuals are earning interest they are subject to special taxation on the realized changes in values (currently 27.5%). Without the interest component taxes are levied on realized profits from the sale of cryptocurrencies (or exchange to another cryptocurrency) if they have not been held for at least one year (less than one year is considered speculation and triggers speculation tax).

Mining is always considered a commercial activity similar to producing any kind of asset or commodity, and hence has commercial tax implications.




Overall, most countries are currently taking a wait-and-see approach and are calling for international cooperation regarding a topic which is cross border. For now, most actors are looking at adapting existing frameworks to the case of cryptocurrencies rather than coming up with brand new ones. 2018 should see many progress made in this direction and the recent G20 meeting concluded in March, called for a July deadline (next meeting) for a skeleton framework.


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