How Portugal became ‘Bitcoin Heaven’ in Europe

As governments slowly clog the crypto industry with regulations and obligations, Portugal is becoming increasingly isolated in Europe – a place with few rules that investors describe as crypto-heaven.

“You don’t need to do anything else because you already have a perfect system, with zero tax on bitcoin,” said Didi Taihutu, a prominent crypto enthusiast who moved his family to Portugal from the Netherlands.

“For bitcoin, it’s heaven,” he added.

Financial authorities around the world are grappling with basic questions about cryptocurrencies.

First, are they currencies or assets? If they are assets, how do you classify and tax them?

At the moment, Portugal is one of the last countries in Europe to consider it currencies from a tax point of view, which means that profits from trade are not taxed.

The Finance Ministry told AFP it was reviewing the situation and wanted a common European framework, but pressure was mounting for swift action.

Mariana Mortagua, a member of parliament from the far left, recently called for urgent regulation and summed up the situation frankly: “Portugal has become a tax haven.”

Even those in the crypto industry accept that things have to change.

“It is difficult to justify taxing other financial assets around 28 percent but not on cryptocurrencies,” said Pedro Borges of Criptoloja, the first crypto exchange registered in Portugal.

– legal void –

Portugal has long sought foreign money by granting tax breaks and special visas to foreign investors and so-called digital nomads – those who operate online without the need for a static business website.

And the tax system isn’t the only attraction – the beaches, the climate, and the cuisine are all numbers, especially for people from Northern Europe.

“Portugal has its sun, great food and wonderful people,” said Taihutu, who has resided in the Algarve in the country’s tourist-crowded south.

“Portugal can become one of the best countries in Europe to live and invest.”

But while lifestyle is likely to remain the same, the same cannot be said of the tax system.

A London-based tax attorney, who asked not to be named, said he would not advise his clients to put their money in Portugal despite its “too lenient” tax system.

“It is not a long-term strategy for the government to attract companies into the sector, but rather a legal vacuum,” he said.

“I bet in 10 years (London) will be more permissive than Portugal.”

Britain is one of many countries trying to market itself as a “crypto hub”.

– Bubbles warning –

If internal pressures do not compel the Portuguese government to do so, intervention may come from abroad.

The European Central Bank’s Fabio Panetta sounded the alarm about cryptocurrencies late last month when he said the ecosystem showed “remarkably similar dynamics” to the sub-prime bubble that helped collapse the global economy in 2007.

Crypto assets now have a market capitalization well above the $1.3 trillion bad loans that sparked the global financial crisis.

“We must not repeat the same mistakes while waiting for the bubble to burst,” he said, calling for strong regulation.

He accused “crypto evangelists” of promising “heaven on earth” while promoting a glorious Ponzi scheme — because crypto assets generally aren’t backed by any revenue streams, they rely on money from new investors to keep prices high.

If new investors dry up, asset prices plummet.

Those already in the market need to attract fresh money, which explains the iconic Super Bowl ads, celebrity endorsements and armies of reinforcement on social media.

Taihuttu’s Instagram account plays a moving advertisement for a luxury lifestyle of beaches, skiing, travel and adventure – all apparently funded by cryptocurrency.

Like other crypto entrepreneurs, he has impressive plans – after paying his “crypto family”, he is now proposing a “crypto village” somewhere in Portugal, to sell plots of land with proof of ownership stored in blockchain.

For him, at least, the country should welcome these ideas with open arms.

“Portugal needs more jobs and economic growth,” he said. “Why should we stop the development of technology and money?”

lf-js / tsc / eb / jxb / rl

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