Global venture funding falls 27% year-over-year. The daunting crypto winter makes Bitcoin lose two-thirds of its value. Is there any space remaining 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 decline and raising more than $14 billion in the first half of 2022 alone.
Whether you are a founder, a venture capital investor or simply a specialist looking for growth-promising positions, you may find this list of top five hubs for crypto startups helpful.
Singapore
Singapore, one of the world’s largest financial centers, has long developed the fame of a fintech mecca by providing easy access to global financial markets and regulatory transparency. Crypto projects are not an exception.
The absence of capital tax on crypto gains and comprehensive rulings of the MAS (Monetary Authority of Singapore) are among the country’s highlights.
For instance, MAS issues special regulations on e-tokens (including accounting, due diligence and promotion) and provides a convenient framework for conducting ICO, allowing issuers to maintain a great degree of autonomy.
Dubai
Another major financial hub, Dubai, is famous for being a tax haven country, maintaining a high capital turnover and making it easy to attract investments. The government undertakes a pro-crypto approach, but the regulation is yet to be finalized.
VARA (Virtual Assets Regulatory Authority) is on its way to establishing the full licensing process. However, startups can already use their ‘minimal viable product’ license and follow the regulatory guidelines on marketing advertising promotions related to crypto assets.
Furthermore, Dubai boasts a lenient taxation system – zero percent for taxable income up to $102,096 and nine percent for income above the threshold.
Slovenia
A somewhat unexpected country to appear on the list, Slovenia earns its position by providing crypto ventures 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 the EU standards – thus ensuring a frictionless market entrance for Slovenia-based companies.
Nevertheless, compared to Singapore and Dubai, Slovenia has relatively more bureaucratic red tape in requiring every crypto startup to follow its strict AML and KYC rules.
The taxation is also higher – 19% corporate income tax and 22% VAT (not imposed on mining and crypto-trading companies). Still, these tax rates are competitive by EU standards.
United Kingdom
The United Kingdom, just like Singapore and Dubai, has solid ambitions to advance its fintech potential to the level of a global crypto hub. However, at this moment, the legislative framework lacks completeness.
As in Slovenia, cryptocurrencies in the UK are regulated only for AML and KYC purposes, and companies are obliged to register in the Financial Conduct Authority system.
The corporate tax rate is 19% – slightly better than average on the global scale, while capital gains from crypto assets are also taxed at a rate from 10% to 20%.
Switzerland
Switzerland has long been renowned for its traditional banking and wealth management industry. However, today it is also embracing the transformation to the blockchain, with large firms opening crypto branches and startups entering the market.
The government made the transition process compatibly smooth – the company only needs to register with Switzerland’s federal tax administration and comply with the rules of FINMA (Financial Market Supervisory Authority).
Switzerland also doesn’t impose income or capital gains tax on crypto businesses.
Conclusion
Summing up, all of today’s leading crypto hubs have several common characteristics.
First and foremost, it is the transparency and efficiency of the regulatory framework – certainty in the existing crypto legislation, the ability to found a startup without dealing with excessive bureaucratic red tape, lucidness in taxation and low tax rates.
Secondly, these hubs exhibit strong network effects. It is easy to gain access to global financial markets, as they attract venture capitalists’ attention. In addition, the concentration of other crypto startups makes it easy to hire qualified professionals.
