Cryptocurrency Regulations: Switzerland as a Crypto-Friendly Country in 2022
Switzerland is known as one of the "crypto-friendly" countries because of good and stable regulations, especially those in individual trading in a "private wealth asset". In the report by Thomson Reuters, Switzerland again was named as one of the top crypto-friendly countries in 2022.
Cryptocurrencies are becoming increasingly popular in the global economy. With more than 16,000 different types of cryptocurrencies and bitcoin leading the way, there are an estimated $275 billion in daily transactions.
Cryptocurrencies are still a new concept and therefore it will take several years to map out a clear framework for cryptocurrencies. Despite the recent rise in popularity of cryptocurrencies, many countries have been able to adapt and respond appropriately.
One of the main issues is the meaning and differing views on cryptocurrencies. Therefore, it is hoped that these different regulatory views can be coordinated and thus achieve a universally applicable definition.
In the United States, this contrast of views can be observed between the Securities and Exchange Commission (SEC), Treasury's FinCEN, the Federal Reserve Board, and the Commodity Futures Trading Commission (CFTC). For this reason, the President's Task Force and the Financial Stability Oversight Council are working side by side to eliminate these regulatory differences.
The Internal Revenue Service (IRS) defines cryptocurrencies as a digital representation of value that functions in the same way as a country's traditional currency, so transactions in virtual currency are taxed by law just like transactions in any other property.
In many European countries, cryptocurrencies are legal but are not considered legal tender. That is, from a legal perspective a cryptocurrency is not considered a currency. These countries also issue warnings to users of cryptocurrencies about their unregulated nature and their risks.
The European Central Bank (ECB) defines virtual currencies as "a digital representation of value, not issued by a central bank, credit institution or electronic money institution, which, under some circumstances, can be used as an alternative to money."
In Switzerland, unlike many European countries, individuals can transact in cryptocurrencies without restrictions, which is why Switzerland is known as one of the "crypto-friendly" countries.
In Switzerland, cryptocurrencies are classified as assets. Therefore, they are assets that are subject to wealth tax. However, taxes are imposed where they arise. Trading cryptocurrencies in a "private wealth asset" does not make you subject to capital gains tax. However, transactions with licensed dealers do qualify as business income and are not tax-free.
In 2021 El Salvador passed the law recognizing Bitcoin as a legal currency, the first country to do so. However, some countries banned the use of cryptocurrencies such as Algeria, Bolivia, China, and Russia, among others.