Entrepreneurs Are Flocking to Europe to Open Cryptocurrency BusinessesSome smaller European nations are becoming jurisdictions of choice for cryptocurrency entrepreneurs

Blockchain and cryptocurrencies have been among the most polarizing words of the financial sector over the past few years. A prospective future, few competitors and little regulations are motivatingentrepreneursaround the globe to open businesses that are related to this new promisingtechnology.

Related:Switzerland's 'Crypto Valley' Presents Real Opportunities for Blockchain Entrepreneurs

In spite of the ongoing market downtrend, where some digital assets have lostup to 98 percent of their value, institutional investors are now starting to get their feet wet and are showing interest in getting involved in this market, asGoldman Sachs-backed Circle reported two months ago.

As new applications for Bitcoin's underlying technology are found on a daily basis and the enthusiasm of entrepreneurs rises, the search for favorable jurisdictions to open cryptocurrency businesses is becoming a main area of focus. Here is where Europe comes into play.

Death and taxes

Due to its significance for all kinds of companies and business people, the debate aroundtaxesis possibly doomed to last for at least another century. Especially in highly industrialized countries like the U.S., Japan and China, financial regulations may appear imperious to startups and high net worth individuals.According to theGuardian, many American cryptocurrency investors are facing immense tax bills that they never expected and may not even be able to pay, given the recent market downturn.

As a consequence, many entrepreneurs are considering moving their business to a jurisdiction that offers a beneficial tax plan. While offshore locations like the Cayman Islands may seem like a good place to settle at first, many fear being excluded from global business by financial regulators.

In this case, some smaller European nations like Cyprus, Malta and Switzerland may provide a more suitable solution because of their very generous tax regulations. These cryptocurrency-friendly governments have already attracted a notable number of blockchain businesses and organizations -- including big names like the Ethereum Foundation -- and are respected members of worldwide trade actions.

Related:Thanks to Blockchain Technology, the Entrepreneurial Spirit in France Has Never Been Stronger

Funding the future

Initial coin offerings prevailed as the favorite company funding method of blockchain businesses in 2017. In fact, ICOs brought inmore than three timesthe funding to the space than venture capitalists in the previous year.

As more companies join this seemingly endless gold rush, regulatory entities like the U.S. Securities and Exchange Commission (SEC) are starting to take steps to regulate the ICO Wild West.Recent reportsoutline that subpoenas have been sent to dozens of ICO companies in the past months and that a few more, likeMuncheeandProtostarr, were directly shut down with the claim that the projects were selling illegal securities.

Some of these cases can be traced back to the fact that the U.S. has strict financial asset regulations, like exclusions of sophisticated investors or the obligation to register a security, that can be applied to the cryptocurrency space. In SEC Chairman Jay Claytonown words: "I believe every ICO I've seen is a security."

In order to avoid possible issues with the authorities, blockchain companies are often incorporated outside of the regulatory melting pots. Triggered by very welcoming legislations, Switzerland's canton Zug -- also known asCrypto Valley-- attracted blockchain enthusiasts from all over the world and became home to the likes of Ethereum, IOTA and other leading cryptocurrency foundations. Furthermore, due to recent regulatory clarification it looks like the tiny Mediterranean island of Malta is also about to becomea major European epicenter for cryptocurrency projects.

Related:Which European Countries Are Best for Cryptocurrency Startups?

Hide and seek

In April this year, the 1-year-old cryptocurrency exchange Binance, founded in Hong Kong, impressed the finance world byrecording quarterly profits that exceeded those of Germany's biggest investment bank Deutsche Bank. However, the exact same exchange also justannounced it is moving its headquarters to Malta, due to aggressive Chinese cryptocurrency regulations.

In addition to "traditional" cryptocurrency exchanges, tokenized security exchanges are also causing global regulators sleepless nights. Since running monetary exchanges requires supplementary licenses, many operators encounter concerning obstacles. In an attempt to bypass national limitations, another Chinese based crypto exchange called OKEx recently disclosed its plan to open a security token exchangein collaboration with Malta's biggest stock exchange.

Just like China is causing a lot of trouble for cryptocurrency exchanges, the United States is fairly tough on this subject as well. Andy Singleton, a security token expert, whose company Aboveboard just became the first corporation to issue its stock on the blockchain, told me in an interview that "U.S. regulators are completely blocking domestic security token exchanges." This is an unfortunate realization that many U.S. entrepreneurs come to, since security tokens could be a brilliant improvement to the current system.As Patrick Byrne, CEO of Overstock, puts it in referenceto security token offerings (STOs): "It is a very clever offering, and could represent a whole new model for American entrepreneurship."

Way of life

The incentives of the blockchain industry could very likely lead to a progressing trend of international specialists joining the movement. Still, a dynamic terrain like this probably requires tolerant and thoughtful decision-makers.

As long as major economic powers, like the United States and China, continue to crack down on entrepreneurs in the space, small and flexible jurisdictions in Europe, such as Malta and Switzerland, will be among the main beneficiaries of the cryptocurrency revolution.