How Germany and the US Lead the World as Most Crypto-friendly Nations

Key Insights:

• Global crypto adoption rose by over 880% in 2021. 
• Germany and the US scored strongly across multiple metrics due to progressive regulatory environments and increased institutional adoption.
• Switzerland came in third place, while Singapore ranked fourth having fallen from its top spot at the end of 2021. 

The adoption of cryptocurrency resembles the adoption of any other technology. The rate at which adoption occurs is gradual until there is an explosion upwards to mass adoption, exemplified by the “gradually, then suddenly” adage that is frequently cited when technological shifts take place.

Crypto went firmly mainstream in 2021, with many labelling this as the breakthrough year for the industry, as we saw increased global regulation, heightened institutional adoption and by November, the sector had reached a $3 trillion market capitalisation.

As such, global crypto adoption rose by over 880% in 2021, according to research conducted by Chainalysis and as of 2022, TripleA estimates that there are over 320 million crypto users worldwide. Which country leads the pack? Well, there’s two in fact.

According to Coincub’s latest quarterly global cryptocurrency rankings, Germany and the United States share the top spot as the most crypto-friendly nations on earth.

Joint First Place

While Germany topped the first quarter rankings for this year, the U.S. has risen to tie for first place. Both scored strongly across multiple metrics.

Their success in becoming the two most crypto-friendly nations on earth stems from progressive regulatory environments and significant Bitcoin (BTC) investments by mainstream institutions.

For example, Germany’s move to implement a zero-tax policy on capital gains of Bitcoin and Ethereum (ETH) held for more than a year has propelled it forward to the top of the rankings.

The U.S. moved up from third place to share the top rank due to President Joe Biden’s Executive Order on Ensuring Responsible Development of Digital Assets that was signed in March this year. The directive helps to create a path toward the regulatory clarity needed for mass institutional adoption of digital assets, whilst guaranteeing responsible development of the space and providing consumer protection and financial stability.

Biden’s order also tasks the Financial Stability Oversight Council (FSOC) to investigate illicit financial activities and puts urgency on the possibility of a new government-issued central bank digital currency (CBDC).

What’s more, Coincub cited Fidelity’s decision to include Bitcoin exposure as part of select American pension funds as a crucial reason why it climbed up the crypto rankings. More specifically, in April Fidelity became the first leading provider of retirement plans to enable such access to digital coins in the United States amid growing demand for cryptocurrencies.

Coincub’s rankings tally up points across nine overall categories, which focus on government, financial services, population, taxation, talent development and industry participants, trading, fraud and environmental potential. However, they have introduced new sub-categories too like crypto education courses and initial coin offerings (ICO) to offer a more comprehensive gauge.

An Exemplary Country

Although the U.S. has newly risen to the top spot, Germany has dominated this position due to a move by financial services firm Sparkasse that enables 50 million users to buy Bitcoin directly from their bank accounts.

Germany’s Finance Ministry also released new cryptocurrency tax guidelines in May this year which stipulates that there is no tax payable on gains from BTC and ETH sold 12 months after acquisition if a profit is made.

This means that tax practitioners, businesses and individual taxpayers now have clear direction on tax requirements for acquiring, trading and selling cryptocurrencies.

Overall, Germany has taken a proactive approach to cryptocurrency regulation and oversight after it adopted a national blockchain strategy in 2019. The purpose of this strategy was to harness the technology’s potential for advancing digital transformation and to help make the country an attractive hub for the development of blockchain, Web3 and metaverse applications.

In addition, since January 2020, any business (including exchanges and custody platforms) wishing to offer cryptocurrency services in Germany must first seek approval from the Federal Financial Supervisory Authority (BaFin). This licence scheme ensures that businesses operate at the same standard as traditional  financial service providers.

Findings

Overall, Coincub’s report placed Switzerland, which is home to more than 1,000 blockchain and virtual asset service providers (VASP), in third place, while Singapore ranked fourth, having fallen from its top spot at the end of 2021 due to increased regulatory restrictions introduced by the country’s financial regulator and the central bank.