Hungary is cutting tax on cryptocurrency earnings by half as interest in the crypto market drives it to all-time highs.
Hungary’s Minister of Finance Mihály Varga announced on Tuesday that the country’s government would halve capital gains tax on cryptocurrency earnings from 30.5 per cent to 15 per cent as part of their COVID-19 relief programme.
Announced in a video posted on Facebook, the news will make the EU country a competitive jurisdiction with respect to capital gains tax on crypto assets and will likely please Hungarian crypto investors who are set to receive a 50 per cent tax cut on those earnings from 2022.
Cryptocurrencies have come a long way since Satoshi Nakamoto, the pseudonymous inventor of Bitcoin, published a white paper about a Peer to Peer Cashless system in 2008.
Nakamoto sought to design an electronic payment system that would circumvent the need for trusted third parties like banks to verify transactions.
Towards the end of 2017, the price of Bitcoin began to soar and reached almost $20,000 (€16,486) having climbed from $900 in January of that year.
However, the price plummeted again in 2018 amid fears of a regulatory crackdown on cryptocurrencies by Asian countries like China and South Korea.
In 2021, growing interest from financial institutions has helped propel the total cryptocurrency market capitalisation to over $2.5trillion (€2.06 trillion) this week - an increase of almost 930 per cent on last year.
Banks like Goldman Sachs and Morgan Stanley have already begun trading cryptocurrencies while other financial giants like Citigroup have signalled their interest in getting into the crypto market.
“There are different options from our perspective and we are considering where we can best service clients,” Itay Tuchman, Citigroup’s global head of foreign exchange told the Financial Times on Friday .
“We shouldn’t do anything that’s not safe and sound. We will jump in when we are confident that we can build something that benefits clients and that regulators can support,” he told the newspaper.
In another vote of confidence in cryptocurrencies, the European Investment Bank announced last week that they would be issuing their first digital bond offered on a public blockchain using the Ethereum network.