Current Crypto Adoption Status in Finland
Source: Freepik
Cryptocurrency adoption in Finland is steadily growing, with 300,000 Finns, which is about 7% of the adult population owning some form of crypto. Notably, most crypto holders are young, with two-thirds under the age of 40.
The interest in digital currencies surged during the latter half of 2020 and into 2021, coinciding with a rapid rise in crypto prices. A majority of Finnish crypto owners over 60% entered the market after 2019, reflecting the increasing popularity of digital assets in recent years.
Projections suggest that by 2025, the number of users in the cryptocurrency market could reach 2.49 million. Moreover, surveys indicate that within the next decade, over one million Finns are likely to own cryptocurrency. With this growth comes heightened regulatory oversight.
In 2023, the Finnish Tax Administration found €30 million in unreported cryptocurrency gains, resulting in tax bills and late payment fees for investors. Additionally, Finland's Tax Administration reported that approximately 150,000 people declared income from cryptocurrencies in 2022, a staggering increase from just 3,400 declarations in 2020.
Lots of people have realized gains in the last year. Now it is finally time to pay taxes on trading and mining [these currencies
With the rise of crypto adoption in Finland, the country is also engaged in preparations for the potential launch of a digital euro. Although the decision to issue a digital euro has not yet been made, its primary aim would be to complement physical cash. Additionally, it aims to enhance the payment options available to consumers and businesses across the eurozone.
The European Central Bank (ECB) concluded the investigation phase of the digital euro project in October 2023 and has now entered a two-year preparation phase. The goal is to ensure that central bank money remains a stable monetary anchor, promoting both competition and efficiency in payments.
Interestingly, Finland has a historical connection to the concept of central bank digital currencies (CBDCs). In the 1990s, the Bank of Finland introduced the Avant smart card system, a pioneering attempt at what would now be termed a ‘token-based retail CBDC.’
The system launched in 1993, was initially intended to replace coins and small-denomination banknotes, offering users an easy and anonymous payment option similar to cash.
However, Avant faced challenges, including fees for reloading cards and limited adoption by merchants, which ultimately led to its discontinuation in 2006. Although the initiative did not succeed as expected, it provided valuable insights into the future development of digital payment systems.
Factors Driving Crypto Adoption in Finland
Finland is witnessing a notable rise in crypto adoption, driven by several key factors that make digital currencies increasingly attractive to its citizens. These include:
Technological Infrastructure
One of the key factors driving crypto adoption in Finland is its robust technological infrastructure that supports digital innovation. The country has a high level of internet penetration and a population that is generally tech-savvy.
This environment fosters the development and use of cryptocurrencies, making it easier for individuals and businesses to engage with digital assets.
Government Support and Regulation
The Finnish government has adopted a proactive approach towards cryptocurrencies. Instead of outright bans, authorities are creating regulations that promote transparency and security in the crypto space.
For example, the Virtual Currency Act which regulates crypto exchanges and wallet providers ensures that they comply with the Anti-Money Laundering and Know-Your-Customer rules.
This regulatory clarity encourages people to invest in and use cryptocurrencies without the fear of sudden legal repercussions.
Financial Education and Awareness
The Finnish population is growing aware of cryptocurrencies. Many educational institutions and online platforms offer courses and resources that explain blockchain technology and digital currencies.
For example, Unichrone offers an interactive course on blockchain technology for people in the IT space or those interested in Blockchain. Likewise, the University of Oulu Graduate School also offered a blockchain management course to graduate students interested in blockchain technology for five days.
As people become more informed, they are more likely to consider cryptocurrencies viable investment options and means of transaction.
Investment Opportunities
With traditional investment avenues offering lower returns, many Finns are turning to cryptocurrencies as an alternative investment option.
The potential for high returns attracts both individual investors and institutional players. As the market matures, more people see cryptocurrencies as a legitimate way to diversify their portfolios.
Emergence of Blockchain and Crypto Startups
The growth of blockchain and crypto startups plays a crucial role in driving crypto adoption in Finland. These innovative companies are making it easier for individuals and businesses to engage with digital currencies.
Additionally, these companies foster local adoption by developing user-friendly applications that simplify crypto transactions, investments, and payments.
For example, crypto wallets and payment processors developed by Finnish startups make it seamless to buy, store, and spend digital assets. As these solutions become more accessible, more people begin using cryptocurrencies in their daily lives.
Regulatory Stance on Crypto Adoption in Finland
Source: Freepik
Finland has established a clear legal framework for the regulation of cryptocurrency activities, ensuring transparency and stability in the sector. Buying, selling, and using cryptocurrency is legal in the country. However, operating within this space comes with regulatory obligations.
On May 1, 2019, Finland enacted the Act on Virtual Currency Providers to regulate crypto service providers, including exchanges, wallet providers, and virtual currency issuers.
The Finnish Financial Supervisory Authority (FIN-FSA) serves as the registration and supervisory body for these activities. This regulatory framework requires providers to register with FIN-FSA to legally operate and mandates strict adherence to anti-money laundering (AML) laws.
The Virtual Currency Act reflects Finland’s commitment to combating financial crime by aligning with the European Union’s Fifth Anti-Money Laundering Directive (5AMLD). The law ensures that providers safeguard customer funds, store documents properly, and segregate client assets from operational funds.
Additionally, crypto businesses must conduct thorough customer due diligence and report suspicious transactions to the Financial Intelligence Unit. Some activities, such as operating within a closed network or offering services on a limited, incidental basis, are exempt from registration requirements.
In 2018, the Finnish government outlined additional measures to ensure transparency with the release of Government Proposal 167/2018. This led to the inclusion of virtual currency providers under the oversight of customs authorities through the Account Monitoring Act.
Providers are now required to submit specific customer data to the bank and payment accounts register to further enhance oversight. Looking to the future, Finland is actively preparing for the European Union’s Markets in Crypto-Assets Regulation (MiCA), which introduces a harmonized regulatory framework across member states.
MiCA will take effect in two phases: regulations governing stablecoins will come into force on June 30, 2024, followed by full implementation for all crypto-asset services on December 30, 2024. Once MiCA takes effect, Finland’s existing Virtual Currency Act will be repealed.
As MiCA is implemented, certain jurisdictions may change the regulators that will supervise crypto-asset service providers in their respective countries.
Until then, Finland will allow Virtual Asset Service Providers (VASPs) already active in the market to continue operating under a transitional regime.
This regime enables VASPs to provide services until June 2025 or until they obtain a new CASP (Crypto-Asset Service Provider) license under MiCA.
To benefit from this transitional period, service providers must apply for a CASP license by October 30, 2024, and must have been operational before December 30, 2024.
This approach ensures a smooth transition by prioritizing compliance and operational continuity. Finland’s decision to grant this transitional grace period reflects its strategic aim of fostering a stable and transparent crypto market.
It provides room for compliant providers to adapt to new requirements without disrupting services, reinforcing the reliability of the financial system.
As mentioned earlier, crypto adoption in Finland is also steadily growing. This surge reflects increasing public interest and participation in the crypto space. It further highlights the importance of a robust regulatory framework to manage the crypto scene there.
Taxation of Cryptocurrency in Finland
Source: Freepik
In Finland, the tax system for cryptocurrency is designed to fit within the country’s broader financial regulations, making it straightforward to understand once you know the basics.
Essentially, Finland treats cryptocurrency as a form of property under the Income Tax Act, meaning that gains made from selling, trading, or spending crypto are subject to capital gains tax, just like other assets.
The Finnish Tax Administration, known as Vero, requires individuals to report any gains from crypto transactions, which are taxed if they exceed €1,000 within a tax year. If you’re holding crypto without selling it, transferring it between your own wallets, or buying it with euros or another currency, these actions are tax-free.
But once you sell, trade, or spend crypto and earn a profit, it becomes capital income, and you’ll pay tax on it. Vero applies a rate of 30% on gains up to €30,000, and if your total capital income is over €30,000, the rate increases slightly to 34%.
Income from crypto mining and staking is a little different. It’s considered earned income and is taxed at your regular income tax rate. This can be as high as 44% depending on your total income and where you live.
This means that if you’re earning crypto through mining or staking, Vero views this as similar to a salary and taxes it accordingly. One unique aspect of Finland’s tax approach to crypto is its “First In, First Out” (FIFO) rule.
This means that when you sell or trade crypto, it’s assumed you’re selling the oldest units first. This is important because it affects how your gains or losses are calculated, especially for those who have made multiple purchases over time.
If you don’t know the original cost of your crypto, there’s a deemed acquisition cost method that lets you deduct a set percentage of the sale price instead of trying to estimate the purchase price.
Another factor to keep in mind is how Finland handles crypto losses. If your crypto investment results in a loss, you can use that loss to offset gains from other assets.
Therefore, if you made a profit on other capital assets like shares, a crypto loss could reduce your overall tax bill. And if your losses exceed your gains, Finland allows you to carry them forward for up to five years, offsetting any future gains within that period.
Even though cryptocurrencies are known for anonymity, Finnish authorities are keeping pace with global regulations to track and regulate crypto.
With the EU’s Sixth Anti-Money Laundering Directive, all crypto exchanges operating in Finland must comply with stricter identity verification rules, and this data can be shared across EU countries.
We're receiving more and more information from virtual currency exchanges about Finnish customers' transactions, which makes it easier to monitor this income.
There’s also an upcoming EU directive, DAC8, that would grant tax authorities like Vero more access to information on crypto assets. This would make it easier for them to monitor crypto transactions.
Vero’s guidance on crypto taxation is clear: gains from cryptocurrency are taxable. Thus, avoiding taxes can lead to penalties, interest charges, or even jail time for serious cases of evasion, with sentences that can last from four months to four years.
However, for those who follow the rules, Finland’s taxation process is relatively straightforward. The upcoming improvements to Vero’s online services will also make reporting crypto gains even easier this year.
Challenges to Crypto Adoption in Finland
Source: Freepik
As crypto adoption in Finland progresses, several challenges lie ahead, especially around regulatory uncertainties, market volatility, and cybersecurity concerns.
Regulatory Uncertainty in the EU
One key challenge is the evolving regulatory environment within the European Union. The EU’s recent introduction of the Markets in Crypto-Assets Regulation (MiCA) aims to create a standardized regulatory framework across member states.
This approach aims to make it easier to promote safer and more transparent crypto markets. It has also introduced new compliance requirements. However, some Finnish crypto businesses might find it challenging, particularly due to the high cost of regulatory adherence.
Market Volatility
Crypto’s inherent volatility also remains a hurdle, as frequent price swings create uncertainty and skepticism among potential investors in Finland.
Although a significant portion of Finns are digitally literate, many are still cautious about investing in cryptocurrencies due to the risks of losing their investments during market crashes.
Cybersecurity Concerns
With digital currencies, cybersecurity is a constant challenge. In Finland, as in other countries, crypto-related cybercrime has seen a rise, targeting both businesses and individuals.
To counteract this, Finland’s Financial Supervisory Authority (FIN-FSA) has implemented stricter AML and KYC protocols, though even these measures don’t completely eliminate risks.
Cybersecurity experts emphasize the need for continuous advancement in both security technology and user awareness to mitigate these threats.
Future Prospects on Crypto in Finland
Source: Freepik
Looking ahead, Finland is positioned to become a leader in responsible crypto adoption, balancing innovation with user protection. The Finnish government is considering expanded use cases for blockchain, signaling a long-term commitment to digital transformation.
Moreover, Finland’s taxing crypto gains as income has made it relatively easy for residents to engage in crypto investments legally. This tax transparency could set a benchmark for other EU countries looking to integrate crypto into their tax systems.
Ultimately, this will encourage more citizens to invest while ensuring that crypto profits contribute to national revenue.
Conclusion
Finland's approach to cryptocurrency adoption reflects a balanced understanding of innovation and regulation. The proactive approach of the Finnish Financial Supervisory Authority (FIN-FSA) in regulating the crypto market demonstrates the country’s commitment to fostering a safe environment for investors and users alike.
Furthermore, an increasing number of Finns are investing in digital currencies, and there is a growing interest in decentralized finance. This positions Finland as a leader in the European crypto landscape.
As crypto adoption in Finland continues to grow, the country's proactive stance is likely to create a more integrated and secure financial ecosystem. Consequently, it will benefit both consumers and the broader economy.
The future of cryptocurrency in Finland looks promising, and the country is well-prepared to harness the potential of this transformative technology.
