The seamless and transparent transactions facilitated by cryptocurrencies attract investors, raising the popularity of cryptocurrencies to an unimaginable level. Cryptocurrencies offer numerous advantages over traditional fiat currencies, however, the government regulations associated with the platform intimidate their benefits sometimes. The recent announcement of a Portuguese bank BiG Halts Crypto transactions is one such example of how crypto investments are affected by government regulations.
Banco of Investment Globais (BiG) Suspends Fiat Transactions to Crypto
Banco of Investment Globais (BiG), one of the largest banks in Portugal, has suspended the transaction of fiat currencies to crypto. The act that shook the crypto market was in compliance with guidelines published by the European Central Bank (ECB), European Banking Authority (EBA), and the Portugal Bank, citing the risks associated with digital investments including money laundering, terrorism financing, and other cyber threats. According to reports, only BiG has suspended the transactions and all other banks are still allowing crypto transactions.
What Led to the BiG Halt Crypto Transfers?
The European Security and Exchange Commission has always shown a rigid approach to cryptocurrencies, imposing strict regulations on the platform. The action of the BiG is considered a part of the ongoing trend of crypto regulations in Europe, scrutinizing the crypto landscape. Not only Portugal, but many countries are creating strict regulatory frameworks for cryptocurrencies.
Portugal was one of the countries that welcomed the crypto industry warmly, enabling crypto transactions tax-free, however, in 2023, the country implemented a new tax scheme that made tax mandatory on short-term crypto holdings while exempting long-term investments tax-free. Short-term investors are required to pay 28% of their gains as tax.
Legality of Cryptocurrency in the European Union
The legality of cryptocurrencies varies from jurisdiction to jurisdiction. In most countries, cryptocurrencies are not illegal, however, there are implications and regulations a crypto platform must abide by. There are also countries and states that restricts or ban the trade of cryptocurrencies.
In Europe, trading cryptocurrency is legal. In 2015, the Court of Justice of the European Union exempted cryptocurrencies from VAT (Value Added Tax). According to the European Central Bank, cryptocurrencies are convertible decentralized virtual currencies and are not subject to traditional financial regulations. However, in 2016, the European Parliament made a proposal necessitating the need to monitor virtual currencies in order to combat the issues of money laundering and terrorism financing.
MiCA Regulation
Since 30 December 2024, crypto asset services operating in the European Union have been made conditional in accordance with the MiCA regulations. Article 43(3) states that crypto service providers that enable services by abiding by the law before 30 December are allowed to continue the service until 1 July 2026.
The MiCA regulation helps the European Union streamline the integration of blockchain technology and distributed ledger without affecting the security of users and investors. The regulation enables legal certainty in crypto assets, ensuring a secure platform for crypto transactions.
Final Thoughts
Cryptocurrencies are investments for the future, showcasing a strong growth potential. Cryptocurrencies utilize blockchain technology to enable secure, decentralized, and transparent transactions. Though the crypto market owns numerous advantages over traditional fiat currencies, government regulations and their rigid approach towards crypto platforms are concerning many, preventing them from investing in the platform.