Crypto regulations in Portugal 2024

Portugal is one of the oldest European countries. It was established in 1143. Lisbon is the capital of the country. It is a hub of tourism and infrastructure. The economic level of the country is high. It is a highly developed nation in every sense. It has significant gold and lithium reserves. And, it's an active sender. Interestingly, the country is always eager to embrace new technologies and business opportunities. Certainly, it is one of the reasons why it remains one of the most powerful economies in the world. The attitude towards crypto is also inherently positive. It is one of the most crypto-friendly countries in Europe. From liberal tax frameworks, to supportive crypto policies, the country offers everything a crypto enthusiast needs. Interesting? Read it!

1. Crypto Regulation in Portugal: Overview

Currently, there is no specific crypto regulatory framework in Portugal. Anti-Money Laundering (AML) and Counter-Terrorism Financing (CFT) laws are now the main ones regulating crypto activities in the country. These rules are actually guided by EU standards. Implementation of Markets in Crypto-Asset Regulation (MiCAR) Once efforts by the European Securities and Markets Authority to establish EU market rules for crypto-assets are completed, the country's crypto regulatory framework will become more transparent. Portugal's legal environment recently began to adapt to EU initiatives. The DLT Pilot Regime, which allows new market opportunities for trading and financial instruments based on distributed ledger technology (DLT), has been incorporated into the Portuguese legal environment. Crypto businesses in the country must follow a registration process. Banco de Portugal handles this registration process as well as compliance of registered companies with AML/CFT regulations. Any crypto translation above EUR 1,000 is not possible for a single party, unless the necessary formalities, including the identification process, have been resolved. The full implementation of MICAR is expected to be completed by the end of this year. Some sensitive areas like sales and promotion remain in the gray area until then.

1.1. Markets in Crypto-Assets Regulation by the European Securities and Markets Authority: Know better

Markets in Crypto-Assets Regulation (MiCA) is an important development in the European Union. It will be effective from June 2023. Its main goals are promoting market integrity and financial stability. He considers creating policies to better regulate crypto-asset issuance and trading as key strategies to achieve it. It mandates transparency, disclosure, authorization and control of transactions. The authority responsible for implementing the MCA is the European Securities and Markets Authority. ESMA is currently developing technical standards through public consultation. The MCA is expected to come into force by the end of 2024.

2. Crypto regulation in Portugal: what's new

Here are the major developments that have occurred this year in the crypto regulatory landscape.

March 27, 2024: Worldcoin faces a temporary ban in Portugal due to data privacy issues.

April 12, 2024: The Nova SBA Blockchain Club organized the fourth Lisbon Blockchain Conference on April 24. The event explored the impact of blockchain technology on business and the economy.

April 26, 2024: Operation Samurai arrests an American in the Greater Lisbon area. He is suspected of co-creating the Bitcoin Mixer Samurai Wallet. The platform is said to be involved in the illegal transfer of more than 100 million euros.

3. The Crypto Taxation Framework in Portugal is explained

Portugal is famous for its tax-free policy. No capital gains tax or VAT is payable on individual investors.

For professional crypto traders or frequent/short-term traders, the scene is a bit different. As of January 1, 2023, a new tax system is in place in the Portuguese Personal Income Tax Code. The code categories crypto income into three different categories: capital income, capital gains and self-employment income.

Capital income means income from crypto investments – for example, income from stocks. This income attracts about 28%.

Capital Gains apply if you sell crypto held for less than a year. These gains are generally taxed at a flat rate of 28%. However, if your taxable income, including these gains, exceeds €78,834, the gains may be subject to progressive tax rates. These rates are between 14.5% and 53%.

Self-employment income is income from crypto-related self-employment such as mining activities. This attracts progressive rates between 14.5% and 53%.

For businesses, income from crypto operations is taxed as business income. If the business's total revenue from crypto operations is less than EUR 200,000 in the previous year, 15% of the revenue is paid in installments after deduction.

A unique aspect of the Portuguese tax regime is the ‘exit tax'. If you cease to be a tax resident, a 28% tax will be applied on the difference between the market value of your crypto assets and the purchase price. This is calculated using the First-In-First-Out (FIFO) method.

4. Crypto Mining in Portugal: What you need to know

Crypto mining is not illegal in Portugal. Cryptocurrency mining in Portugal comes with certain tax laws.

A flat rate of 5% of costs applies to individual miners. If you earn 100 euros from mining, you will only be taxed on 95 euros, but if you sell mined crypto, you will be taxed on 85% of the income.

For businesses, 95 percent of the total revenue from mining is taxable as a process.

5. Timeline in the Evolution of Crypto Regulation in Portugal

2016: Cryptocurrencies are ruled not legal tender; So unpaid.

August 2017: Law no. 83/2017 established to combat money laundering and terrorist financing.

July 2018: Law no. 38/2018 adopted the MiFID II requirements for the sale and promotion of crypto assets.

April 2020: The Digital Transformation Action Plan is published, encouraging digitalisation, business transformation and flexible rules for technology testing.

August 2020: Directive (EU) 2018/843 from Law no. In the year 83/2017 Strengthening the country's framework for combating money laundering and terrorist financing.

August 2020: Banco de Portugal issues notice directing registration for virtual property service providers.

December 2024: MCR to be fully implemented.

A final note

With its progressive crypto regulatory framework and tax regime, Portugal stands as a top destination for crypto enthusiasts. It is rightly regarded as the most crypto-friendly country in Europe. The upcoming implementation of MiCAR promises to enhance this already robust framework. It is expected to foster a more friendly environment for crypto activities. However, some gray areas and tax concerns remain, although they are minor compared to other countries in the region. Portugal can solve these issues in the coming years. After completion, the country can become a leader in the global crypto market, taking a major role in the West

See also: Crypto regulations in Switzerland 2024