Crypto Rules the World: How Politics and Regulation Are Shaping Bitcoin’s Future

In recent years, political shifts in the U.S. and abroad have placed Bitcoin and crypto regulation under a powerful spotlight. Since the landmark 2024 U.S. election, which brought hopes of Trump's crypto-friendly policies to the fore, nations like the UAE and the EU have begun racing to create attractive regulatory landscapes for crypto startups. As a result, pro-crypto regulations are gaining ground globally, with some countries offering tax breaks, simplified licensing, and rapid pathways for launching online businesses.

From tax exemptions to startup incentives, governments are taking diverse approaches: some are paving the way for crypto innovation, while others continue to impose strict bans. Below, we explore what makes a country "crypto-friendly", and highlight regions fostering innovation, focusing on tiny hubs like Singapore, Dubai, and a couple of less-known island nations 🏝️.

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What Makes a Country Crypto-Friendly?

Crypto-friendly countries either actively support or take a neutral stance toward cryptocurrencies and blockchain technology. Almost all countries do require some form of KYC and AML which means you have to collect some user identity documentation which is a general good practice for operating an exchange. Beside KYC, the other key traits include:

1. Clear Legal Frameworks
   These countries offer well-defined rules on taxation, payment processes, and business operations, enabling participants to innovate confidently within a regulatory structure.
2. Favorable Tax Treatment
   Many of these jurisdictions exclude crypto transactions from capital gains taxes or provide other tax benefits for blockchain businesses.
3. Government Support
   Some governments actively promote blockchain initiatives through grants, research funding, or designated business zones for crypto firms.

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Top Crypto-Friendly Countries

1. Singapore

Singapore offers a well-defined crypto licensing framework under the Monetary Authority of Singapore (MAS) via the Payment Services Act. Crypto exchanges can obtain a Digital Payment Token (DPT) license with capital and compliance requirements that are clear but manageable. There is no capital gains tax, and MAS has actively supported innovation through sandboxes and initiatives like Project Guardian. The government’s consistent support of fintech ensures Singapore’s appeal to exchange operators. Its combination of clarity, tax neutrality, and international credibility makes it a global hub for white-label crypto exchanges.

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2. UAE (Dubai)

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Dubai regulates crypto exchanges under the Virtual Assets Regulatory Authority (VARA), established to foster a controlled yet innovation-driven environment. VARA offers tailored licensing for various crypto services, including exchanges, with streamlined procedures and robust AML protocols. The UAE’s tax regime is one of the most favorable globally, with no personal income tax and free zone incentives. Dubai’s government openly champions blockchain adoption and frequently hosts global crypto events. This blend of regulatory clarity, economic freedom, and official support makes Dubai one of the most sought-after jurisdictions for crypto startups.

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3. El Salvador

El Salvador remains a pioneer in national-level crypto adoption, having declared Bitcoin legal tender and established a specific crypto regulator, CNAD. Crypto exchanges can obtain a Digital Asset Service Provider license with minimal capital requirements and a fast approval process. The country offers total tax exemption on crypto profits, attracting businesses focused on operational efficiency and profitability. Government-led projects like Bitcoin City and the Chivo Wallet highlight its commitment to crypto integration. El Salvador is ideal for startups and international operators seeking regulatory simplicity and maximum tax efficiency.

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4. Switzerland

Switzerland is highly respected for its regulatory stability and sophistication, particularly for financial services. Crypto exchanges fall under the supervision of FINMA, requiring registration or licensing depending on the services offered. The country imposes no capital gains tax for individual investors and recently approved blockchain-based exchange licenses under its DLT framework. With government support through initiatives like Crypto Valley and progressive laws, it attracts institutional-grade operators. Switzerland balances strict compliance with innovation, making it a top-tier destination for high-trust crypto exchanges. However, swiss business setup can be costly for new startups.

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5. Hong Kong

Hong Kong reasserted itself as a leading crypto jurisdiction in 2023 by mandating SFC licensing for all exchanges serving local users. The SFC’s regime includes strict investor protection measures, capital requirements, and only allows listed tokens to retail users. No capital gains tax and a strong push by the government to attract fintech companies enhance its attractiveness. Hong Kong’s status as a global financial hub ensures deep liquidity and international visibility. The regulatory clarity and institutional infrastructure make it well-suited for exchanges targeting Asia’s developed markets.

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6. Germany

Germany offers full legal recognition of crypto under BaFin’s financial services framework, requiring licensing for exchanges involved in custody or trading. The process is detailed and demanding, involving extensive documentation, internal controls, and ongoing audits. Private investors benefit from tax-free crypto gains held for over one year, adding appeal. Germany is also a leader in institutional adoption, with traditional banks receiving crypto custody licenses. For well-funded operators aiming for credibility within the EU, Germany presents a secure and respected pathway.

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7. Portugal

Portugal became a crypto hotspot early due to its tax exemptions, and though some rules have tightened, it remains favorable. The Banco de Portugal handles VASP registrations, which are relatively straightforward for AML-compliant startups. Long-term crypto holdings remain tax-free, and lifestyle benefits continue to attract entrepreneurs. The regulatory process is practical, with modest capital requirements and local presence expected. Portugal combines legal accessibility and community appeal, making it a natural choice for exchange startups and investors.

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8. Estonia

Estonia has transitioned from a low-regulation environment to a rigorous but clear licensing regime overseen by the Financial Intelligence Unit. Crypto exchanges now face high share capital requirements, local staffing mandates, and extensive compliance obligations. However, the country offers a 0% tax on reinvested profits, and its digital government makes business setup efficient. It also provides a gateway to the EU under harmonized AML rules. Estonia is best for startups that prioritize structure and want long-term regulatory credibility.

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9. Cayman Islands

The Cayman Islands introduced a formal licensing system under CIMA via the VASP Act, while preserving a low-friction business environment. Exchanges must apply for a license by mid-2025 but benefit from light supervision and sandbox options. The jurisdiction is entirely tax-neutral, with no income, corporate, or capital gains taxes. Company formation is fast and the legal infrastructure supports digital asset businesses. Cayman remains a top offshore choice for cost-efficient and flexible crypto operations. Like the Swiss business setup, the Cayman Islands can also be costly for new startups.

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10. Slovenia

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Slovenia is one of the more permissive EU countries, requiring only AML registration for crypto exchanges rather than a full license. Capital gains from crypto are currently untaxed for individuals unless it is a business activity. The government encourages blockchain use and supported projects like Ljubljana’s Bitcoin City. Business costs are low, and legal frameworks are simple, especially for small teams. Slovenia offers a lightweight, accessible base for EU-facing crypto platforms.

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11. Abu Dhabi (UAE)

Abu Dhabi’s ADGM free zone licenses crypto exchanges through FSRA under a dedicated regulatory framework. The license process includes capital requirements and strict cybersecurity, AML, and custody rules, but comes with high institutional credibility. ADGM entities enjoy tax benefits and access to sandbox programs. The UAE’s broader innovation initiatives extend here as well, with government funds backing blockchain projects. Abu Dhabi is perfect for institutional exchanges needing regional trust and MENA market access.

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12. Georgia

Georgia offers fast, low-cost licensing for crypto exchanges with minimal capital and documentation requirements. Approved companies benefit from a 0% tax on retained earnings and personal income from crypto. Free Zones in Georgia can further reduce tax liability, making it a strategic base for offshore operations. The government is actively supportive, promoting blockchain through legislation and strategic plans. Georgia is ideal for budget-conscious startups seeking fast market entry and growth flexibility.

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14. Puerto Rico

Puerto Rico applies U.S. crypto regulations but offers Act 60 tax incentives, including 0% capital gains and 4% corporate tax for qualifying businesses. Licenses are issued locally by the Office of the Commissioner of Financial Institutions, and setup is simpler than in most U.S. states. Operators gain U.S. legal protections while benefiting from a low-tax jurisdiction. The requirement to become a bona fide resident is key to personal tax benefits. Puerto Rico is uniquely suited for U.S.-aligned businesses wanting offshore advantages.

↳ Example: FV Bank has provided HollaEx® software users an expedited onboard process due to Puerto Rico’s advantages crypto-friendly environment. Read more.

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Notable mentions and niche business use cases

Saint Vincent and the Grenadines (up and comer)

SVG imposes no licensing requirement for crypto exchanges, allowing operators to incorporate and launch quickly. The tax regime is highly favorable, with no corporate or capital gains tax. However, the jurisdiction lacks formal regulatory recognition, which may affect banking relationships and credibility. SVG is best suited for offshore platforms or MVP testing phases. Long-term operators may eventually seek licenses elsewhere for added legitimacy.

↳ Looking to start in Saint Vincent? For streamlined onboarding into Saint Vincent mention 'HollaEx®' at https://www.eternitylaw.com

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South Korea (highly niche)

South Korea mandates registration with the FSC and partnership with local banks to offer real-name verified accounts, making entry challenging. Exchanges must also obtain ISMS certification and meet high capital and cybersecurity standards. A new tax on crypto gains is set to begin in 2025, signaling maturity in the market. Despite regulatory difficulty, the country offers a deep, active trading community. Best for established players or via trusted local partnerships.

Additionally, South Korean exchanges often list unique digital assets, presenting opportunities for specific investments and market-making strategies.

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Liechtenstein

Liechtenstein although costly to setup a business entity does have exchange regulation under the Blockchain Act (TVTG), offering fast-track registration and legal certainty. The FMA oversees compliance while promoting innovation through clear service categories and token definitions. The country has a flat 12.5% corporate tax and exempts private crypto gains. It is deeply integrated into the EU/EEA, giving passporting opportunities. Liechtenstein is ideal for European exchanges seeking clarity, low taxes, and strong legal status.

HollaEx® has contributed insights on crypto custody and wallet operations at Liechtenstein’s CCA Token Summit, where discussions included input from the Prime Minister of the Principality of Liechtenstein.

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Latvia

Latvia is introducing MiCA-aligned crypto licensing in 2025 via the Bank of Latvia, replacing its prior light-touch regime. It offers 0% tax on reinvested profits and low business costs, with fast application timelines expected. The government is actively encouraging crypto entrepreneurship through regulatory engagement. The new law will make Latvia a passportable EU jurisdiction. It's becoming an efficient EU base for small and mid-sized crypto ventures.

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Lithuania

Lithuania offers simple crypto registration and low entry barriers, with capital requirements aligning to MiCA by 2025. The licensing process is fast (1–2 months), and the country has been a preferred base for EMIs and crypto startups alike. Corporate tax is 15%, with reductions for small businesses and no crypto-specific taxation. It offers a cost-effective gateway to EU operations. Lithuania remains a leading launchpad for European crypto exchanges.

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The United States

The U.S. regulatory landscape is fragmented, requiring exchanges to obtain federal MSB registration and state-by-state money transmitter licenses. Licensing complexity is highest in states like New York, while others like Wyoming and Florida are more accessible. The country offers no special tax relief, and crypto is taxed as property. However, it boasts the largest user base, liquidity, and legal infrastructure globally. Ideal for well-resourced operators aiming for mainstream adoption and high regulatory standing. For more info on the US, read our US regulation article here.

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Conclusion

Crypto-friendly countries play a vital role in fostering blockchain innovation and enabling businesses to thrive within regulatory frameworks. Whether through favorable tax policies, government support, or clear legal guidelines, these regions create environments where crypto investors and entrepreneurs can flourish.

As a good rule of thumb, having some level of KYC and AML in place is a smart move no matter where you operate. Gathering basic user identity info not only protects you as an exchange operator in those rare cases of illegal activity but also makes day-to-day operations easier when troubleshooting things like user lost 2FA or login problems, helping you resolve issues much faster.

HollaEx® offers software solutions to help you start a crypto exchange and integrate blockchain into your business. Keep in mind that understanding and adhering to local regulations is essential, so we recommend* operators conduct thorough research to ensure compliance.

*We strongly recommend that you seek independent legal and financial advice tailored to your specific circumstances and conduct your own due diligence.

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We aim to publish information that is factual and accurate as of the date of publication. For specific information about crypto laws and regulations please visit the regulatory bodies website or consult a lawyer. This information is general in nature and is for educational purposes only. We do not provide financial or legal advice, nor does it take into account your personal financial situation or company business structure and legal standing. We encourage you to seek legal and financial advice from an independent advisor where appropriate and make your own inquiries.