SINGAPORE

REGULATIONS

Cryptocurrency service providers in Singapore are regulated under the Payment Services Act (2019), which is administered by the Monetary Authority of Singapore (MAS). MAS takes a risk-based licensing approach that looks at which activity is being carried out. Those that pose a larger money laundering risk such as cryptocurrency exchanges are scrutinised heavier than say, a money changing service.

However, not every aspect of crypto is explicitly regulated by MAS. Read on to find out how FinReg regards whether a particular business type is regulated, and if so, whether Singapore will be “friendly” to such a business

NFTs

MAS does not explicitly regulate NFTs. However, MAS will still consider characteristics of an NFT to assess whether or not it constitutes a capital markets product. If it does, it falls under the ambit of the Securities and Futures Act (SFA). While it might appear that Singapore is adopting a “wait-and-see” approach, recent news regarding DeFi applications suggests that Singapore is not necessarily unfriendly to novel and possibly game-changing applications of Blockchain.

A landmark court judgement made recently regarding a worldwide proprietary injunction of an NFT should leave NFT-owners in Singapore feeling assured that the law is willing to protect them even in novel circumstances. In short, you can sue for matters relating to the ownership of an NFT.

Do note that depending on your type of business, your NFT related activities could be subject to more regulations in the future, as MAS is constantly reviewing the regulatory state of NFTs. For more information, click here.

FinReg Verdict
FinReg gives “NFTs in Singapore” a Rating of MODERATE due to the “wait and see” approach taken by MAS

Centralised Exchanges

If you intend to set up a business that plans to operate as a cryptocurrency exchange, you need to apply for a license under the PSA. Also, depending on the type of token that you offer through your exchange, you might also require a licence under the Securities and Futures Act (SFA).

Singapore takes a strict approach towards regulation because Singapore wants to guard against the possibility of money laundering and terrorism financing using digital assets. Hence, if your company’s vision and/or mission aligns with Singapore’s need to protect its residents, Singapore might be an ideal place to set up you cryptocurrency centralised exchange

FinReg Verdict
Given the robust and stringent measures in place, FinReg gives “Centralised Exchanges” a Rating of CRYPTO-FRIENDLY

Accepting and Processing Payments

Businesses accepting crypto payments are considered "digital payment token transfer service". Under the Payment Services Amendment Act, the definition of Digital Payment Token service does include the transfer (and by extension accepting and processing payments)

As such, they are regulated on the same level as Centralised Exchanges. As such, FinReg gives “Accepting and Processing Payments” a Rating of CRYPTO-FRIENDLY

General Payment Services

Your intended crypto-business might not strictly be a crypto exchange or accept/process payments in cryptocurrency.

Due to the numerous ways in which your business may interact with cryptocurrencies, if your query cannot be answered via a search here, we recommend that you speak with one of our trusted partners to obtain better regulatory clarity.

Taxes and Your Crypto Business

Generally, if your business chooses to accept digital tokens (such as Bitcoins) for remuneration, revenue or trades in digital tokens, you are subject to normal income tax rules. We understand you are busy people! You can read more about the details of taxes on cryptocurrencies here.

LEVEL OF ADOPTION

Singapore embraces innovation and blockchain/distributed ledger technology (DLT) adoption. However, it takes great steps in mitigating money laundering risks by being proactive with regulations, instead of “waiting and seeing”.

On one hand, the government has taken serious steps to embark on blockchain-related initiatives, such as Project Ubin and Project Guardian . On the other, MAS has been adamant on its stand that retail investors should strictly not be exposed to crypto assets. This has led to Bitcoin ATM providers removing their ATMs in Singapore, and advertising restrictions on digital payment token (crypto) services.

NFTs

Despite MAS’ guidelines, Singaporean retail investors seem to have taken a liking to investing in cryptocurrency or even NFTs (non-fungible tokens). Singaporean crypto-media platform Chain Debrief launched its genesis NFT collection Enlightened Rats which were quickly minted and sold out.

It was reported that there is a growing number of Singaporean creators and artists that are selling and auctioning their artworks using NFTs as a medium, as it “democratises” creativity and it makes it easier to “verify a piece’s authenticity as it is tied to the creator”.

It was also reported that the sons from Singapore’s wealthiest families “are teaming up to create a private social networking app” based on NFTs.

FinReg Verdict
Given that it is evident that there is demand for NFTs/NFT related services in Singapore, FinReg would give a Rating of CRYPTO-FRIENDLY

Centralised Exchanges

Centralised Crypto Exchanges seem to be popular with Singapore residents, with Coinhako (a homegrown exchange) having a total of 400,000 registered users. It also experienced massive growth of 500% during the first few months of 2021.

According to Gemini 2022 State of Crypto Global, it was reported that as high as 30% of Singaporeans own cryptocurrency. It is not unreasonable to think that most of these people would have used centralised exchanges to “on-ramp” in order to purchase such cryptocurrencies in the first place.

Even back in 2019, it was reported that when Binance Singapore was first launched, its “user base grow by around 20 percent per week with a substantial increase in daily trading volume”. Fast-forward 3 years later, it is not unthinkable that there is a relatively high number of Singaporean users of centralised exchanges

FinReg Verdict
Given that more and more Singaporeans are using or signing up for centralised crypto exchanges and it is expected that this trend will continue, FinReg gives a Rating of CRYPTO-FRIENDLY

Accepting and Processing Payments

In April this year, FOMO Pay (a local “integrated payment solution provider”) developed a cryptocurrency payment solution that would allow retailers to accept Digital Payment Tokens (DPT).

A few luxury retailers, such as EuroSports Global, 2ToneVintage, and Luxehouze have implemented the solution, enabling their customers to pay for their purchases using cryptocurrencies.

A report by Channel NewsAsia stated that other payment service providers have “seen a 10-fold year-on-year increase and now partners ‘hundreds’ of merchants in Singapore”

The same report mentioned that Charles & Keith (one amongst the many companies to roll out the option to use cryptocurrency as a payment method) saw that “Singapore-based customers made up 70 per cent of the cryptocurrency transactions on its site”.

Taken together, this shows that locals are increasingly using cryptocurrency as a mode of payment to pay retailers for goods and service, instead of engaging in arbitrage (buying/selling for profit). Compared to various other countries, Singapore seems to edge a little closer to potential mainstream adoption. However, it is still too early to say for sure given the volatility of cryptocurrencies in general.

FinReg Verdict
FinReg gives a Rating of NO CLEAR POSITION given the early stages of crypto payment processing.

EASE OF SETTING UP YOUR CRYPTO BUSINESS

How easy it will be to set up your crypto-business ultimately depends on the type of business you intend to set up. If your business deals with any of the regulated activities under the Payment Services Act, you will be required to obtain a licence from the MAS. See here on how to obtain a PS licence.

Furthermore, like any other business, you will need to incorporate and structure an entity accordingly.

FinReg Verdict
FinReg gives a Rating of NO CLEAR POSITION since the ease of incorporating a company, as well as the potential challenges of obtaining a PS licence, is highly subjective based on your business. We recommend consulting a professional to thoroughly evaluate your business needs in Singapore.

Centralised Exchanges

Centralised exchanges fall under the activity of “DPT service” under the PS Act, as it is facilitating the exchange of digital payment tokens. Therefore a licence is required for this business.

It is well known that in late-2021, Binance elected to withdraw from their licence application to offer digital payment token services. Separately, the head of MAS has stated that the licensing process is “stringent” and MAS would “only approve applicants with strong governance structures, fit and proper board and management, and we go through their track record”

Notably, one of the few firms that has been granted a licence by MAS has reportedly said that “MAS never talks. MAS asks questions and questions and questions. You can ask questions but they will not answer, and most regulators are like this”

Taken together, this hints at growing levels of scrutiny towards granting licences for crypto service providers, perhaps indicating a higher level of difficulty in operating an exchange in Singapore.

FinReg Verdict
From the perspective of how easy it is to set up your crypto centralised exchange in Singapore, FinReg.sg would give a rating of CRYPTO-UNFRIENDLY

NFTs

Unfortunately, there hasn't been any publicly available data whether a crypto business that deals with NFTs was successful in obtaining a licence from MAS.

Moreover, it is possible that your NFT business will not be required to apply for a Digital Payment Token licence in the first place. However, in the event that you actually require such a licence from MAS, you can expect to be subjected to the same level of scrutiny as any other business that seeks to apply for a Digital Payment Token licence from MAS.

FinReg Verdict
Because your NFT business may or may be required to obtain a licence (which would undoubtedly play a role in determining whether you will have an easy time to setup your business), FinReg.sg would give a rating of NO CLEAR POSITION

Accepting and Processing Payments

While accepting and processing crypto payments seem to be the same as a merchant acquisition service, it will also likely constitute a DPT service under the PS Act and subject to AML/CFT measures. You’ll therefore need a PS licence to run such a business.

Taxes and Your Crypto Business

Singapore is well-known for its reputation for being a “tax-haven”. That being said, depending on, among other things, the type of your business (for instance, see here for how the tax treatment of crypto mining can differ) and the type of cryptocurrencies your company interacts with, the tax treatment on your company could vary wildly.

Since the tax treatment for your company would differ from one crypto business to the other (which could play a role in determining whether it will be worthwhile to setup your business in Singapore), FinReg.sg would give a rating of NO CLEAR POSITION

We recommend that you speak to any one of our trusted professionals that has expertise in tax-related issues here if you desire greater clarity.

SWITZERLAND

REGULATIONS

In Switzerland, The main regulatory bodies governing the cryptocurrency area are

(i) Swiss Financial Market Supervisory Authority (FINMA)

(ii) Swiss Federal Government, and

(iii) Financial Action Task Force (FATF; An intergovernmental authority formed to combat money laundering). The government has demonstrated a positive and progressive attitude towards cryptocurrency/crypto asset regulations.

The general consensus is that the regulatory framework governing cryptocurrency-based businesses is well-developed and stable, but only to the point of combatting money laundering.

The legislature governing this is the Swiss AMLA (Anti-Money Laundering Act), which is enforced by FINMA & FATF (For further clarification, you may refer to the FINMA-published guidance on blockchain payments). In other words, according to the Crypto Valley Association, the Swiss legislature currently has no specific definition for cryptocurrency / virtual currency and cryptocurrency activities.

According to Global Legal Insights, it is a case-by-case basis whether or not an offer and sale of stablecoins, asset tokens and utility tokens will be deemed as securities, as currently there is no statutory guidance nor case law governing this clarification. Nevertheless, FINMA has published guidelines on what they consider to be securities (Effekten). Should a crypto asset offered/sold constitute a security, it will fall under the relevant securities laws.

However, Switzerland is still regarded as an open and progressive jurisdiction to operate crypto-based business, with a transparent regulatory framework that is easily accessible and promotes certainty.

NFTs

There are currently no published guidelines for the treatment of NFTs in Switzerland. However, you may be subject to taxes (e.g Capital Gains Tax, Income Tax etc) as the professional dealing in NFTs may be deemed as a self-employed activity where NFTs will be treated as business assets; Guidelines for this are also not clear.

Additionally, one may be subject to the Swiss Value Added Tax (7.7%) if there is regular professional dealing in NFTs, unless they are directly sold by their creator. We understand this is confusing. For a clearer picture and to address aspects such as Intellectual Property Laws, do consider speaking to our trusted professionals here for a proper KYC procedure.

FinReg Verdict
Given that NFTs are not explicitly addressed, FinReg gives a rating of NEUTRAL. Businesses should be aware of the potential changes in laws that may alter the prospects of NFT related activities.

Crypto Exchanges

You can obtain a cryptocurrency exchange licence from FINMA to operate in Switzerland. However, other than that there is no specific regulatory framework or guidelines for cryptocurrency exchanges in Switzerland, given that cryptocurrency itself is not defined nor regulated in Swiss law.

For further clarification on licensing guidelines, you may refer to the FINMA license guidelines.

Also note that crypto exchanges will still be subject to the scrutiny under Anti money laundering laws, (favourable) taxes and regulation by FINMA pursuant to the licence. Under the AMLA (Anti-Money Laundering Act) and the FATF Mutual Evaluation Report: Switzerland (2016) key practices firms should adopt is:

(i) A risk-based approach, expounded under the FATF-issued Guidance on Risk-Based Supervision

(ii) Customer due diligence; Firms should keep updated customer data such as customer identities and nature of business operations.

(iii) Transactions should be monitored and reported to the Money Laundering Reporting Office (MROs) when suspicious activity is carried out.

(iv) Terminate business relationships with customers carrying out potential money laundering practices, after notification to MROs but without being notified of an investigative outcome for 40 days.

For more information, you may refer to this quick overview by CharlesRussellSpeechlys or contact a trusted professional here.

FinReg Verdict
FinReg views Switzerland as CRYPTO-FRIENDLY for exchange services due to its comparatively relaxed guidelines.

Accepting & Processing Payments

Most notably, the Swiss canton Zug and Zermatt municipality (also known as Crypto Valley) accept Bitcoin and Ether for tax payments. In another canton, Lugano, cointelegraph reported that the city administration shared that “the ultimate goal is to accept crypto for payment of all goods and services in the city of Lugano”. In March 2022, residents of Lugano will be able to use Bitcoin, USDT Tether, and LVGA token to transact, invest and pay taxes; In other words, it may be considered “de facto” legal tender depending on the nature of your transaction.

Transactional payment services such as Worldline and Bitcoin Suisse also accept cryptocurrency as payments in Switzerland.

FinReg Verdict
Overall, the position on this seems promising and the governing bodies seem to adopt an open and innovative stance. FinReg gives a rating of CRYPTO-FRIENDLY, especially from a retail consumers point of view.

LEVEL OF ADOPTION

The Financial Times reported that there are currently “960 crypto start-ups in Switzerland, employing more than 5,000 people”. (Nearly half of these start-ups - 433 - are based in the canton Zug). Why is this the case?

The answer is a combination of a few factors.

Firstly, as Nils Bulling (head of strategic innovation at Swiss-based fintech Avaloq) aptly puts in this funds-europe article, “the image of a conservative Swiss financial industry is dated”. Despite its established, traditional financial sector, there has been a remarkable shift to “being attractive to entrepreneurial wealth versus old wealth … and one of the ways to do that is crypto”, as Jan Brzezek (CEO & founder of Crypto Finance AG) notes.

Secondly, Switzerland’s attractiveness to crypto-based businesses can be attributed to its reputation for political and security-related stability, which are vital for digital asset management and digitalisation.

Thirdly, granted that Switzerland faces strong competition from the likes of Dubai and Singapore, Switzerland possesses a geographical advantage as well. Shared by Lars Holst (founder & CEO of digital brokerage GCEX) in the same article, Switzerland would naturally attract any EU-based crypto funds given that it is a European digital exchange. However, this is granted that Switzerland continues placing the same or more emphasis on embracing new technologies instead of resisting and regulating them heavily.

Up to date, prominent coins such as Ethereum, Tezos, Solana, Polkadot and Cardano now call the canton Zug aka Crypto Valley home.

FinReg Verdict
Overall, FinReg would give a rating of CRYPTO-FRIENDLY given the current trend in crypto adoption both by crypto-based businesses and the Swiss regulatory authorities.

EASE OF SETTING UP YOUR CRYPTO BUSINESS

Like most jurisdictions, you must structure an entity appropriately and go through an incorporation process. The most common forms for operating a business in Switzerland is through a limited liability company (GmbH) and a company limited by shares (AG).

For more details on the incorporation process, it is recommended you seek professional advisory here as there are special requirements for cryptofinance businesses.

It is worth highlighting a few key points with respect to licences. According to the Crypto Valley Association, FINMA grants 5 types of authorisation: licensing, recognition, authorisation, approval and registration. The supervisory intensity varies depending on the type of authorisation concerned.

FINMA has released a diagram for the stance towards such supervision:

Grafik Bewilligungsformen

Source: https://www.finma.ch/en/authorisation/types-of-licensing/

TAXES AND YOUR CRYPTO BUSINESS

Taxation requirements in Switzerland will of course, be according to your business operations. However, you would be happy to find out that for instance, the canton Zug boasts one of the lowest levels regarding corporate taxes in Switzerland.

For your ease of viewing, we have tabulated the most common taxes in Switzerland:

Tax Category	Requirements
Corporate Income Tax	Corporate Income Tax is levied pursuant to which tier you belong to, and which Swiss canton you are based in note that each canton’s requirements can vary greatly: i) Federal Corporate Income Tax ii) Cantonal Corporate Income Tax iii) Communal Corporate Income Tax You can expect Corporate Income Tax to be between 12% & 21%, varying according to the Commune and Canton your business is registered in.
Value Added Tax (VAT)	Standard rate of 7.7% for all proceeds of sales made / services provided.
Capital Tax	Capital tax between cantons and communes usually vary between 0.001% - 0.5%, depending on where your business is based in.

Since taxation requirements would vary greatly across both your business operations and your location, we recommend that you speak to one of our trusted professionals here.

DUBAI

REGULATIONS

Did you know that there are two separate regulatory frameworks in Dubai?

In March 2022, Dubai approved Law No. (4) of 2022 Regulating Virtual Assets in the Emirate of Dubai, also known as the Virtual Assets Law, along with the establishment of the Virtual Assets Regulatory Authority (VARA).

However, it has also been reported that this law will not apply in the state-owned financial free zone, Dubai International Financial Center (DIFC). A separate cryptocurrency regulatory framework is being worked on for the DIFC.

So far, the Virtual Assets Law is the only law governing virtual assets, meaning details regarding the licensing regime and anti-money laundering, as well as other compliance requirements have yet to be announced.

For more details regarding regulations in Dubai, consider getting a memo here. Alternatively, connect with a trusted finreg.sg professional here.

NFTs

Under the Virtual Assets Law, a “Virtual Asset” appears to have a broad definition, and is “a digital representation of value that may be digitally traded, transferred, or used as an exchange or payment tool, or for investment purposes”. Therefore, NFTs would fall under the purview of VARA.

Notably, in June this year, an ex-Singapore politician launched an NFT-investment company (Calvin Cheng Web3 Holdings FZE) in Dubai under VARA. He allegedly said that the VARA framework has “consumer protection oversight” which other jurisdictions might not have.

The company has also characterised VARA as a “new and forward-thinking regulator” and having such a licence “provides greater customer assurance and increases consumer risk protection”

FinReg Verdict
Taken together, this suggests that Dubai not only affords protection to NFT- holders but is not unnecessarily stringent or strict in its regulatory treatment towards NFTs. This could be of benefit to your NFT-business. FinReg would therefore give a rating of CRYPTO-FRIENDLY.

Centralised Exchanges

Some of the world’s largest cryptocurrency centralised exchanges (Binance and FTX) have moved operations to Dubai. Both exchanges obtained the Virtual Asset Licence in the same month that VARA was set up.

In a statement made after FTX was granted the licence, they are “scaling towards becoming the first virtual-asset service provider to enter global markets in a fully regulated manner”.

FinReg Verdict
If you are looking to scale your crypto-exchange business to the next level, yet would prefer an environment with regulations rather than none at all, it would appear that Dubai is an ideal place to set up your centralised crypto-exchange. FinReg would give a rating of CRYPTO-FRIENDLY.

Accepting/Processing Crypto payments

It is possible that if your business were to accept or process payments made in cryptocurrency, under Section 16 of VARA’s Virtual Assets Law, such activities may constitute “provision of Virtual Asset transfer services”. Hence, you might need to apply for the relevant licence from VARA.

As the exact scope of the Virtual Assets Law is unclear, we would recommend that you speak to a professional here to obtain further regulatory clarity.

FinReg Verdict
Due to the uncertainty surrounding whether your business needs a VARA licence in order to accept and process cryptocurrency payments, FinReg will give a rating of NO CLEAR POSITION.

Taxes and Your Crypto Business

There is no income tax charged on individuals. However, there will usually be a Valued Added Tax (5% at point-of-sale) levied on most goods and services, which should encompass the activities that your crypto business will engage in.

According to this article, this means that “trading and handling of virtual currencies, including the process of ‘mining’, may all have VAT consequences”

According to this news report, UAE will be introducing a federal corporate tax on business profits for the first time. The tax rate will be set at 9% for taxable income exceeding $102,000 USD and no tax up to that point.

Unless otherwise stated, you should assume that your crypto business in Dubai would be subjected to a similar tax treatment.

FinReg Verdict
Even though your business would be subjected to slightly more tax because of the new regulations, the proposed tax remains low compared to other low-tax hubs around the world. Hence, FinReg will nonetheless give a rating of CRYPTO-FRIENDLY.

LEVEL OF ADOPTION

In terms of cryptocurrency transaction volume, UAE (including Dubai) ranks third behind Turkey and Lebanon with $25.5 billion. This is definitely not an insignificant amount in terms of cryptocurrency inflow/outflow which suggests that Dubai is actively participating in cryptocurrency services.

At the governmental level, Dubai wishes to actively participate in the global development of cryptocurrency and blockchain and seeks to “establish the UAE and Dubai’s position as a key player in designing the future of virtual assets globally.”

NFTs

It was reported in May this year that Dubai’s Museum of the Future has collaborated with Binance NFT to launch “The Most Beautiful NFTs of the Metaverse”.

Dubai’s government officials believe that this partnership would make “significant contribution towards Dubai’s plans to establish a new international digital asset ecosystem”

Separately, the Dubai Police even air-dropped a free collection of 150 NFTs to “attract people who are interested in the digital trend”

FinReg Verdict
Taken together, this points towards a trend of increasing adoption of NFTs both at the governmental as well as the citizenry level. FinReg would give a Rating of CRYPTO-FRIENDLY.

Centralised Exchanges

According to Gemini 2022 State of Crypto Global, UAE’s respondents were ranked number 3 on the list, with 35% of them owning cryptocurrencies. As was stated earlier in this series of articles, it is not unreasonable to think that most of these people would have used centralised exchanges to “on-ramp” in order to purchase such cryptocurrencies in the first place. Consequently, centralised exchanges in Dubai/UAE would be widely used.

According to this report, UAE-based crypto trading platform BitOasis’ trading volume exceeded “$1.5 billion in the first half of 2021” and compared to the first half of 2020, there was “a doubling of its user base in the last six months”

Exchanges like BitOasis also have zero-fee local bank deposits and withdrawals which makes for an even more user-friendly experience for consumers in Dubai/UAE.

FinReg Verdict
Because it appears that local usage volume of Centralised Exchanges are high, FinReg would give a rating of CRYPTO-FRIENDLY.

Accepting/Processing Crypto Payments

From Real Estate Developers to hotels and to cafés, it appears that there has been an significant growth in recent years in businesses accepting cryptocurrencies as payments for their goods and services. It also seems that there is high demand for such services. According to this report, about 54% of survey participants from the UAE “believe that cryptocurrency should be used as currency, not just as an investment asset”

Dubai/UAE appears to be at an inflexion point where crypto-payments appear to be on the way to mainstream adoption. That being said, the volatility of cryptocurrencies in general has to be acknowledged, and in these volatile times where most cryptocurrencies are 90% down from their all-time highs, it is unsure whether these businesses will continue to accept cryptocurrencies as a form of mainstream payment for goods and services.

FinReg Verdict
CRYPTO-FRIENDLY.

EASE OF SETTING UP YOUR CRYPTO-BUSINESS

How easy it will be to set up your crypto-business ultimately depends on the type of business you intend to set up. If your business falls under any of the regulated activities under Section 16 of VARA’s Virtual Assets Law, you will be required to obtain a licence from VARA.

Consider connecting with a trusted finreg.sg professional here if you desire more details on the process of applying for such a licence.

Furthermore, like any other business, you will need to incorporate and structure an entity accordingly.

Do note that you should be looking to set up/incorporate your business in the Dubai World Trade Centre free zone if you would like to be subjected to regulations from VARA

FinReg Verdict
Hence, even though you are likely to have to take the extra step to apply for the licence, past case studies have shown that it is not a very difficult hurdle to overcome. FinReg would give a rating of CRYPTO-FRIENDLY.

Since taxation requirements would vary greatly across both your business operations and your location, we recommend that you speak to one of our trusted professionals here.

PANAMA

Panama has a global reputation as a tax friendly jurisdiction. This comes as no surprise since offshore entities that conduct business outside of the Panamanian jurisdiction are subject to 0% Income Tax, Capital Gains Tax and Corporate Tax, among others. However, there are of course differing applicable tax rates if business is conducted within the jurisdiction itself.

With regard to the regulatory landscape of crypto-assets in Panama, cryptocurrency is legal. However, there are currently a lot of grey areas and regulatory uncertainty surrounding cryptocurrency and blockchain-based businesses.

Cryptocurrency Exchanges

A cryptocurrency exchange license is required for operating a cryptocurrency exchange in Panama. According to Prifinance, there are a few requirements for documents to be submitted; some of them are:

- - A business plan for the first 3 years of work
  - Technical equipment report
  - Documentation of control procedures for AML / KYC requirements implementation, including internal policies regarding the monitoring and control of operations.

If you are considering crypto operations in Panama, do consider consulting one of our trusted professionals here.

Recent Developments / Upcoming Changes

For clarity, we have devised a timeline of recent / upcoming cryptocurrency regulatory developments in Panama. This is centred around Bill No. 697, dubbed as the “Crypto Bill”, proposed by Congressman Gabriel Silva and recently approved by the Panama National Assembly.

- - Inspiration behind the Bill

In an interview with Coindesk, Congressman Silva explained that little attention is paid to the positive social impact of cryptocurrency. Over 50% of Panamanians do not have a bank account, yet almost everyone owns a mobile phone. This lack of bank accounts makes it difficult to participate in our current economy, a problem he believes the adoption of cryptocurrency by the country will solve.

One is able to receive payments in crypto in a faster and easier way through just a mobile phone, helping the average Panamanian, and a strong motivation for his advocacy of the Bill. Other motivations include the desire for Panama to become the innovation and technology hub in Latin America.

- - Key Features of Bill No. 697, dubbed as the ‘Crypto Bill’

Below are some key features of the Bill:

- - Cryptocurrency may be used as payment for everyday purchases, from buying a coffee to paying for taxes and rent.
  - Approved cryptocurrencies include Bitcoin, Etherium, Stellar, XRP, Litecoin and Algorand.
  - Decentralised Autonomous Organisations (DAOs) will be recognised as legal entities.
  - Tokenisation of goods & precious metals would be permitted.
  - An official digital wallet will be launched for citizens, allowing safe usage of cryptocurrencies in everyday payments.
  - Citizens and business will have the freedom to opt for cryptocurrency payments, it won’t replace any currently existing currencies i.e the US Dollar / Panamanian Balboa

- - Approval of Bill by Panamanian National Assembly

According to Coindesk, the Bill was approved with a whopping 40-0 vote on April 28, 2020 during a plenary session by the Legislative Assembly.

- - President Laurentino Cortizo’s Stance

At this juncture, the President (under advice from his staff / team of lawyers) has 2 options:

- - Veto the Bill, preventing it from becoming official Panama law.
  - Approve the Bill with his signature, allowing the Bill to come into effect under Panama law.

President Cortizo opted to veto the Bill. In an interview with Bloomberg New Economy, the President explained his decision – despite the Bill being “innovative law”, the decision to deny the Bill’s passing was due to specific aspects boiling down to Anti Money Laundering and Counter Terrorism Financing concerns.

The Financial Action Task Force, an intergovernmental organisation that monitors Money Laundering and Counter Terrorism Financing worldwide, periodically releases lists of jurisdictions under Increased Monitoring. In its 4th March 2022 release (around the time President made his decision to veto the Bill), and latest release dated 17th June 2022, Panama is among the “jurisdictions with strategic deficiencies … to counter money laundering, terrorist financing, and proliferation financing”.

- - Future Regulatory Developments

In conclusion, FinReg has a NEUTRAL stance for Panama’s crypto-friendliness. The regulatory landscape seems optimistic, yet it is still uncertain and in development. As such we cannot comment on how the regulations in Panama affect various facets of crypto/blockchain applications and use cases.

If Congressman Silva can propose a new version of the Bill that adequately addresses the aforementioned concerns, and Panama can improve its situation with respect to FATF, Panama may well become one of the most crypto-friendly jurisdictions.

Since taxation requirements would vary greatly across both your business operations and your location, we recommend that you speak to one of our trusted professionals here.

Seychelles

This African island country is another jurisdiction that has proven to be popular for crypto businesses to base their operations.

For instance, companies such as KuCoin and BitMEX have chosen Seychelles as their preferred spot for their company headquarters.

That being said, Seychelles appears to be fraught with legal and regulatory uncertainties in the crypto realm. Depending on your business goals, Seychelles may or may not be the ideal place to set up your business.

REGULATIONS

According to the CV VC African Blockchain Report the regulatory status in Seychelles is said to be “legal”.

“There is no separate legislative or regulatory framework with respect to virtual assets in Seychelles” according to this recent article. As such, cryptocurrency and crypto asset regulations have been described as “underdeveloped”.

Although a news report in 2021 stated that the authorities were looking to either mandate a licence requirement for crypto businesses or to impose a blanket ban altogether, there has not been any further developments since then regarding this issue.

Much like other jurisdictions your crypto business might still fall under the purview of the Securities Act, 2007 if the underlying asset falls under the definition of a Security as set out in Schedule 1 which includes, among other things, stocks, shares, debentures, instruments which confer contractual or proprietary rights and options to acquire or dispose of currencies or precious metals.You may also be subjected to rules and regulations contained within the Anti-Money Laundering and Countering the Financing of Terrorism Act, 2020. This would be dependent on whether your crypto business is a “reporting entity” as set out in the First Schedule of the aforementioned Act.

Given significant regulatory uncertainties, we recommend connecting with a trusted finreg.sg professional here to determine whether your crypto business might fall under the purview of either the Securities Act, 2007 or the AML and CTF Act, 2020

FinReg Verdict

Given the lack of licensing requirements and overall lack of specific regulations, FinReg gives a rating of CRYPTO-FRIENDLY if you desire a regulatory environment that has minimal rules that would dictate how you would set-up and operate your business.

TAXES AND YOUR CRYPTO BUSINESS

The taxes that your crypto business will be subjected to in Seychelles would ultimately depend on the incorporation type of your crypto business.

Since there is no specific legislation surrounding cryptocurrency or digital assets, you can reasonably assume that there will be no additional taxes for crypto activities or transactions.

According to this source, there are 3 main company types in Seychelles. Domestic, International Business and Special License. If you choose Seychelles as the place to set up your crypto business, you will most likely choose to incorporate your company as an International Business. This is advantageous because if you operate your business outside of Seychelles, you will be exempt from tax.

Otherwise, you may have to pay taxes of 15% on the first SCR 1,000,000 of taxable income and 25% on the remainder.

FinReg Verdict

FinReg gives a rating of CRYPTO-FRIENDLY because most crypto businesses can, and would be able to qualify for tax exemptions, making it ideal to set up your business in Seychelles if your business goal is to minimise costs as much as possible.

LEVEL OF ADOPTION

According to the Chainalysis 2021 Geography of Cryptocurrency Report under the 2021 Global Crypto Adoption Index, Seychelles is ranked at just 79 out of 144 countries.

Whilst this modest ranking does not seem to offer much insight into the level of cryptocurrency adoption in this African island, we can assume that there is a reasonable level of cryptocurrency activity in Seychelles.

In addition, the current government appears to be placing their focus on E-Money instead, with a recent government report stating that the Cabinet has “ approved the policy proposal for the regulating of E-money in Seychelles” and this is to “allow for the expansion of payment services such as e-cards, e-wallets and mobile money, amongst others.”

Notably, this report stated that “all cryptocurrencies are also not considered as E-money for the E-money Regulations”. This seems to imply that the government does not plan to include cryptocurrencies as part of “the adoption of innovative technological platforms”.

FinReg Verdict

Therefore, FinReg would give a rating of NO CLEAR POSITION. Information regarding the usage or adoption towards cryptocurrencies or digital assets by the everyday Seychellois presents a moderate view at best, and it is unclear whether the government will be willing to extend its efforts to cryptocurrencies other than E-Money adoption.

EASE OF SETTING UP YOUR CRYPTO BUSINESS

As mentioned earlier, the 3 main ways you can incorporate your crypto business are Domestic, International Business and those with a Special Licence.

As there are no additional requirements imposed on businesses dealing with cryptocurrencies or digital assets, you should only have to deal with the paperwork in the incorporation process as well as fulfilling any (if at all) AML/CTF requirements.

It appears that the registration process for your business can be very speedy. According to this article, registering an International Business in Seychelles “can take just two days and the approval process can last less than 30 minutes”

As information related to the ease of satisfying AML/CTF requirements appears to be scant, we recommend connecting with a trusted FinReg professional here if you desire more details.

FinReg Verdict

As it seems that setting up a business (crypto related or otherwise) in Seychelles is relatively easy and quick, FinReg would give a rating of CRYPTO-FRIENDLY if you are concerned about how easy it will be to incorporate and set up your crypto-business in Seychelles.

British Virgin Islands (BVI)

QUALITY OF LIFE

The British Virgin Islands (BVI) are a British dependent territory, with a British Governor appointed through the Crown and a legal system strongly following that of the UK. Over 50 islands comprise the BVI, the main island being Tortola (approximately 21 square miles large).

Apart from being an ideal holiday destination, the BVI is an attractive place for prospective business owners and more recently, blockchain and cryptocurrency based businesses as well. This is due to the fact that there are no minimum capital requirements, or that only 1 director and 1 shareholder (of any nationality) is required to set up an International Business Company (IBC) in the BVI.

However, in this online report, BVI’s reputation as an infamous tax haven is expounded upon where numerous scandals painted the BVI as an “economy based on secrecy and low taxes”, which is a “recipe for bad governance, corruption and criminality”.

Thus, depending on your business goals and operations, the BVI may or may not be suitable for your crypto business to operate from a public perception point of view.

REGULATIONS

The main governing body regulating financial activity within the BVI is the BVI Financial Services Commission (FSC). Briefly, cryptocurrency business activities in the BVI are regulated up to the point that these activities fall within any of the existing legislation governing the BVI, given that there currently is no specific piece of legislation governing all cryptocurrency related activities.

For your consideration, depending on its activities, it is possible your cryptocurrency related business may fall within the purview of these Acts:

Accordingly, entities conducting any regulated financial services activities will be required by the BVI FSC to obtain the relevant licence(s) or go through registration processes.

As shared by FreemanLaw, the following factors may be taken into consideration when determining licensing requirements:

1. The way the virtual / crypto asset is utilised;
2. The types of business activities proposed or conducted;
3. Whether the business activities are analogous with those conducted through traditional businesses; and
4. The characteristics and economic substance relating to an offering / issuance.

For example, transmission services involving a BVI entity or operation within the BVI, together with digital currencies has recently been amended to fall under the Financing and Money Services Act (Revised 2020) as constituting a money transmission service.

FinReg Verdict

Overall, there is some regulatory certainty governing cryptocurrency and cryptoassets. The BVI has also strengthened its Anti Money Laundering systems and implemented more robust compliance screening requirements in hopes of countering its bad reputation for money laundering in the past. Lastly, like numerous other jurisdictions, it is reported that the BVI is adopting a ‘wait and see’ approach as well in terms of implementing more stringent cryptocurrency regulations. Thus, at the present stage FinReg gives BVI’s regulatory landscape a rating of CRYPTO-FRIENDLY.

TAXES AND YOUR CRYPTO BUSINESS

As stated earlier, the BVI has long possessed a reputation as a tax haven. According to GuidemeSingapore, the majority of the Government’s revenue comes from company registration and license fees, interestingly, not taxes. Below is a helpful table from the same article summarising the effective taxes a business will incur when operating in the BVI, as well as pertinent/common ones that a business will not incur:

Type of Tax	Tax Status / Rate in BVI
Headline Corporate Tax	Nil
Personal Tax	Nil
Sales Tax	Nil
Capital Gains Tax	Nil
Income Tax	Nil
Duty on Trade	All exports duty exempt; Import duty of up to 20% on items including household items, clothing & reading materials
Withholding Tax	NA

For deeper insight into the regulatory landscape for business incorporation in the BVI (including how to best structure your business entity), we suggest purchasing our FinReg memo which includes coverage on the process. You may also consider contacting one of our trusted professionals here.

FinReg Verdict

Overall, FinReg gives a rating of CRYPTO-FRIENDLY as the business incorporation and operation process as an IBC is relatively straightforward and cheap in terms of taxes payable, should you choose to conduct business either within the BVI itself or outside of the BVI.

Crypto-Friendly Country Comparison