Cashless societyAccording to Sweden's central bank, the Sveriges Riksbank (hereinafter:-“SR”), the proportion of Swedes who use cash fell from 39 to 9% between 2010 and 2020. According to the 2021 Worldpay Global Payments Report, Swedes utilized cash for only 9% of all transactions in 2020. These statistics provide reasonable grounds for believing that cryptocurrencies are treated favourably. One of the major regulatory authorities, Finansinspektionen (hereinafter:-“FI”), has defined cryptocurrency as a category within its jurisdiction. Despite the fact that FI and SR have officially stated that Bitcoin and altcoins are legal, no regulations relating to cryptocurrencies and their associated activities have been implemented. Depending on the nature of their activity, Swedish economics and finance regulations can be applied to companies that deal with cryptocurrencies. Sweden has rules and regulations governing financial services, taxation, and money laundering. Cryptocurrency-related activity can fall into any of the above-mentioned categories.
Also, there is not a specific definition of cryptocurrency. The Swedish Currency Exchange Act 2020 defined "virtual currencies" in the same way as the Fifth AML Directive:
‘a digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily attached to a legally established currency and does not possess a legal status of currency or money, but is accepted by natural or legal persons as a means of exchange and which can be transferred, stored and traded electronically’.
However, they are treated as an asset rather than a currency or cash in terms of taxation. According to SR, cryptocurrencies are "digital units created and transmitted between users using cryptographic computing."
The classification of tokensSwedish legislation does not address the question of token categorisation. Nevertheless, on September 24, 2020, the European Commission adopted the New Digital Financial Package, which includes the draft Proposal for the Regulation of Crypto-asset Markets (hereinafter:- «MiCA»).
Various types of crypto-assets fall into the scope of MiCA:
- Crypto-assets generally, as a “catch-all” category (e.g., bitcoins, ether, litecoins, etc.)
- Utility Token (e.g., Filecoin token, Basic Attention Token, etc.)
- ART – Asset-Referenced Token (e.g., Libra Basket Coin, etc.) - is linked to several fiat currencies or commodities.
- EMT – E-Money Token (e.g., USDC, Libra Euro, etc.) - is pegged by a single fiat currency
Licensing requirement for VASPsThere is no license requirement for virtual asset providers in Swedish jurisdiction, nonetheless, Sweden has implemented registration requirements, which means that custodians, wallet providers, and exchanges must register with FI and receive the necessary permit to operate.
- for natural persons - SEK 46,000 (3927.13 euro)
- for legal persons - SEK 65,000 (5549.2 euro)
- the application for registration;
- its internal rules for complying with the Anti-Money Laundering and Terrorist Financing Act (2017:630) and;
- the information about the qualifying holdings of owners in accordance with FFFS 2011:14.
Emi licenceThe license for electronic money institute is issued by FI, that gives a permission to issue electronic money. Permission may be granted to a Swedish limited liability company or a Swedish economic association. An electronic money institution shall have a start-up capital which at the time of the decision on the permit corresponds to at least EUR 350,000.
Section 6 of Law (2011:755) on electronic money outlines the following conditions for permission to issue electronic money:
- the articles of association do not contradict this legislation or any other constitution;
- there are grounds for believing that providing adequate control for the electronic money issuance activities will be carried out;
- that the person holding a qualifying holding is appropriate to exercise a significant influence over the management of the undertaking;
- anyone who is to be a member of the board of directors of the company is suitable for such a task; and
- has sufficient insight and experience.
Applicants must pay following fees in conjunction with their application:
- the fee for an application for authorisation is SEK 200,000 (16808.51 euro);
- the fee for an application for exemption from the authorisation obligations is SEK 120,000 (10085.11 euro).
- an annual supervision fee of SEK 75,000 (6303.19 euro);
- registered issuers must pay an annual fee of SEK 25,000 (2101.06 euro).
Anti Money Laundering requirementsSwedish government has established the following applicable legislation in respect of AML:
- Law (2017:630) on measures to combat money laundering and terrorist financing - the purpose of this Act is to prevent financial and other business activities from being used for money laundering or terrorist financing.
- FFFS 2017:11 - these regulations contain provisions controlling the procedures that a company must take to prevent its operations from being used for money laundering or terrorist financing. The regulations address issues such as risk assessment and procedures, measures for verifying identity, monitoring and reporting, and internal control.
- SCEA 2020 - this act requires all financial institutions to prevent any action that contributes to or is related to money laundering.
- the Fifth AML Directive - this Directive establishes an effective and comprehensive legal framework for dealing with the collection of money or property for terrorist objectives by requiring Member States to identify, comprehend, and reduce the risks associated with money laundering and terrorist financing.
- MiCA - when making a public offer of crypto-assets or when seeking admission of crypto-assets to trading on a trading platform for crypto-assets, issuers of crypto-assets should produce, notify to their competent authority and publish an information document (‘a crypto-asset white paper’) containing general information on the issuer, on the project to be carried out with the capital raised, on the public offer of crypto-assets or on their admission to trading on a trading platform for crypto-assets, on the rights and obligations attached to the crypto-assets, on the underlying technology used for such assets and on the related risks.
To become registered with FI, an institution must demonstrate that there are reasonable grounds to believe that operations will be conducted in accordance with applicable anti-money laundering legislation, and the organization's owners must pass an ownership assessment procedure.
Virtual currency providers must consequently comply with the rules which include requirements:
- prepare a risk assessment;
- conduct customer due diligence;
- monitor and report suspicious transactions.
The requirement to appoint AML-officer
FFFS 2017:11 sets a rule to appoint an independent officer for controlling and reporting of suspected violations.
The appointed officer shall:
- monitor and regularly control that the undertaking is complying with the Act, these regulations and the undertaking’s procedures and guidelines;
- provide advice and support to the undertaking’s employees and other persons involved in its activities on rules concerning money laundering and terrorist financing;
- inform and train the relevant persons on rules;
- control and regularly assess whether common internal procedures and guidelines to prevent the business being used for money laundering or terrorist financing.
TaxCrypto-assets are treated as per the provisions on “Other Assets” in Chapter 52 of the Income Tax Act (Inkomstskattelagan), meaning that any income received from such assets must be declared, and is subject to capital gains tax. Each year, while declaring cryptocurrency taxes in Sweden, three types of taxes must be considered:
- Capital Gains Tax - 30%
- Income tax - 32%
- Interest Income Tax (Ränteinkomst) - 30%
ConclusionTo sum up, we can see that despite the fact that there is no cryptocurrency-specific regulation in Sweden and contradictory thoughts of its nature, the governments fairly treats this emerging area of fintech. Cryptocurrency in Sweden are in a favorable environment since the cashless Swedish population has accepted cryptocurrencies as a viable innovation and a technology with long-term value.
The content of this article is intended to provide a general guide to the subject matter, not to be considered as a legal consultation.