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Global venture funding falls 27% year-on-year. The terrifying crypto winter causes Bitcoin to lose two-thirds of its value. Is there room left for crypto startups in this hostile environment? The answer is startling.
Even during the industry’s darkest days, crypto startups continue to thrive, resilient to the market downturn and raising more than $14 billion in the first half of 2022 alone.
Whether you are a founder, a venture capital investor or just a specialist looking for growth-promising positions, you may find this list of top five hubs for crypto startups useful.
One of the world’s largest financial centers, Singapore has long developed its reputation as a fintech mecca by providing easy access to global financial markets and regulatory openness. Crypto projects are not an exception.
The absence of capital tax on crypto gains and extensive rulings from the MAS (Monetary Authority of Singapore) are among the country’s highlights.
For example, the MAS issues special regulations on e-tokens (including accounting, due diligence and marketing) and provides a practical framework for conducting ICOs, allowing issuers to maintain a high degree of autonomy.
Another important financial hub, Dubai is known to be a tax haven, which maintains a high turnover of capital and makes it easy to attract investment. The government is taking a pro-crypto approach, but regulation has not yet been finalized.
VARA (Virtual Assets Regulatory Authority) is on its way to establishing the entire licensing process. However, start-ups can already use the “minimum viable product” license and follow the regulatory guidelines for marketing advertising campaigns related to crypto-assets.
Furthermore, Dubai has a lenient tax systempercent for taxable income up to $102,096 and nine percent for income above the threshold.
A somewhat unexpected country to appear on the list, Slovenia earns its position by giving crypto businesses access to the European market.
Although there is no specific crypto regulation, the use of digital assets is not prohibited, and Slovenia was one of the first EU countries to use cryptocurrency for payments.
Slovenia’s financial authorities have recently harmonized the country’s AML (anti-money laundering) and FATF (financial action task force) rules to comply with EU standardsthus ensuring a frictionless market entry for Slovenia-based companies.
Nevertheless, compared to Singapore and Dubai, Slovenia has relatively more bureaucratic red tape when it comes to requiring every crypto startup to follow its strict AML and KYC rules.
Taxation is also higher19% corporate tax and 22% VAT (not imposed on mining and crypto trading companies). Nevertheless, these tax rates are competitive by EU standards.
The UK, just like Singapore and Dubai, has solid ambitions to advance its fintech potential to the level of a global crypto hub. But at the moment the legislative framework is completely lacking.
As in Slovenia, cryptocurrencies in the UK are only regulated for AML and KYC purposes and companies are required to register with the Financial Conduct Authority system.
The company tax rate is 19%slightly better than the average on a global scale, while capital gains from crypto assets are also taxed at a rate of 10% to 20%.
Switzerland has long been known for its traditional banking and asset management industries. But today it also embraces the transformation of the blockchain, with large firms opening crypto branches and startups entering the market.
The government made the transition process reasonably smooththe company only needs to register with the Swiss Federal Tax Authority and comply with the rules of FINMA (Financial Market Supervisory Authority).
Switzerland also does not impose income or capital gains tax on crypto businesses.
In summary, all of today’s leading crypto hubs have several common characteristics.
First and foremost, there is transparency and efficiency in the regulationssafety in the existing crypto legislation, the ability to start a startup without dealing with excessive bureaucratic red tape, clarity in taxation and low tax rates.
Second, these hubs exhibit strong network effects. Global financial markets are easy to access, as they attract the attention of venture capitalists. In addition, the concentration of other crypto startups makes it easy to hire qualified professionals.
Slava Demchuk is CEO of PureFi, co-founder of AMLBot and founder of AMLSafe.
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Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making high-risk investments in Bitcoin, cryptocurrency or digital assets. Please note that your transfers and trades are at your own risk and any losses you incur are your responsibility. The Daily Hodl does not recommend the purchase or sale of cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.
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