The Current State of Crypto Adoption in Sweden
Source: Freepik
Sweden has seen a growing interest in cryptocurrency, with a significant portion of the population, particularly younger demographics, showing curiosity and engagement in the space.
The crypto market’s strong performance in late 2020 and throughout 2021 played a key role in driving this new interest. During this time, stories of significant profits encouraged many to enter the market. The number of first-time buyers was noticeably higher between 2020 and 2022 compared to other years.
Approximately 16% of crypto owners in Sweden purchased their first digital assets in 2023 or 2024. This means nearly 90,000 Swedes joined the market for the first time during this period.
Although Sweden has a strong technological infrastructure and a population open to innovation, their overall adoption rate remains relatively low compared to some other European countries.
According to K33 Research and EY "550,000 Swedes own cryptocurrency, equating to 7% of the adult population."
Swedish institutions have played a pivotal role in advancing cryptocurrency adoption. The Riksbank has been at the forefront with its e-krona pilot, which is now in its fourth testing phase. Other financial institutions have also shown a willingness to engage with the sector. This is seen in the AP7 pension fund’s indirect investments in Bitcoin through its portfolio companies.
However, not all institutional feedback has been positive. Agencies such as the Swedish Financial Supervisory Authority and the Swedish Environmental Protection Agency have expressed concerns about the environmental impact of crypto mining.
Cryptocurrency is appealing primarily to younger generations, who are more open to digital innovation and alternative investment options.
"Most crypto owners are young. Almost half of the Swedish crypto owners are under 30 years old, and another 40% are aged between 30 and 50 years."
Many Swedes also value the autonomy and decentralization offered by blockchain technology. Swedish individuals see cryptocurrencies as tools for financial independence and asset control. This sentiment aligns with Sweden’s broader cultural emphasis on self-reliance and innovation.
Sweden's commitment to digital innovation could impact the future of cryptocurrency adoption.
"The user penetration rate is projected to be 32.91% in 2024 and is expected to increase to 32.86% by 2025."
Crypto Law in Sweden
Source: Freepik
Sweden does not have specific legislation regulating cryptocurrencies or crypto assets but applies existing financial and anti-money laundering laws to certain crypto-related activities. Swedish authorities also implement EU directives.
While there are no laws specifically targeting cryptocurrencies, some rules apply depending on the nature of the activity.
Cryptocurrency as Currency
The Swedish Central Bank, Riksbank, has declared that cryptocurrencies like Bitcoin are not considered legal tender. Despite this, cryptocurrencies are used as a means of payment.
Financial Services and Securities Regulation
Cryptocurrency exchanges and related services fall under the Financial Supervisory Authority's (Finansinspektionen) oversight. These activities are classified as financial services and require registration and compliance with financial regulations.
If the sale of crypto assets qualifies as a financial service, the operator must register with the Financial Authority, submit relevant information, and maintain transaction records.
The operator is also required to implement anti-money laundering measures. Failure to register as required can result in the Financial Authority imposing penalties or ordering the cessation of the activity.
Cryptocurrencies such as Bitcoin and Ether are traded on the Nasdaq Exchange as exchange-traded notes (ETNs). These are considered securities instruments and are subject to Swedish securities legislation. However, the classification of cryptocurrencies themselves as financial instruments remains unclear.
Consumer Protection
Sweden’s general consumer protection laws may not apply to purchases made with cryptocurrencies. Minister for Financial Markets Per Bolund has urged caution when using cryptocurrencies, highlighting their unregulated nature and associated risks. Similarly, ICOs lack consumer protection under Swedish law.
Anti-Money Laundering (AML)
Providers of crypto assets must comply with the Swedish Money Laundering Act if their activities fall under the scope of Finansinspektionen. This law enforces the EU’s Fourth Anti-Money Laundering Directive. Sweden has yet to integrate the Fifth Anti-Money Laundering Directive, which would impose stricter rules on virtual currencies.
Cryptocurrency Taxes in Sweden
Source: Freepik
Sweden treats cryptocurrency in a way similar to other assets. Cryptocurrency is subject to three primary types of taxes: Capital Gains Tax (CGT), Income Tax, and Interest Income Tax. Below is a detailed explanation of how each tax applies to various cryptocurrency activities.
Capital Gains Tax
Cryptocurrency transactions that involve selling, exchanging, or using crypto to purchase goods or services are subject to Capital Gains Tax. This tax also applies if you lend your cryptocurrency out. The taxable amount is calculated based on the difference between what you paid for the cryptocurrency and what you received in return. The value is converted into local currency at the time of the transaction.
If you paid any trading fees, you can add them to the cost basis, which reduces the taxable amount when you sell or trade the cryptocurrency. For example, if you buy crypto and pay a trading fee, the fee is added to the purchase price. When you sell, you subtract the trading fee from the sale price, lowering your taxable gain.
Income Tax
If you earn cryptocurrency as payment for work, this is classified as regular income and is subject to Income Tax, just as salary would be. The amount you earn in crypto is taxed based on its value at the time you receive it. Later, when you sell or exchange the cryptocurrency, any profit is subject to Capital Gains Tax. The cost basis for this crypto is the amount you reported on your income tax return.
Interest Income Tax
If you receive crypto as staking rewards or loan interest, it is subject to Interest Income Tax, which is taxed at a rate of 30%. These earnings are taxed similarly to interest from traditional financial instruments. The tax applies to the amount of crypto you earn through these means, and if you make any payments related to these earnings, such as interest paid on a loan, those payments are fully deductible.
Key Scenarios
- Buying Crypto: No taxes are involved when you buy cryptocurrency, but you must track the purchase price for future tax calculations.
- Selling Crypto: You must declare and pay Capital Gain Tax (CGT) on the proceeds, even if you sell at a loss. Trading fees can reduce the taxable amount.
- Crypto-to-Crypto Trades: These are considered taxable events and are subject to CGT.
- Initial Coin Offerings (ICOs): If you invest in an ICO, it's treated as a crypto-to-crypto trade. This triggers CGT on the initial crypto used for the investment.
- Airdrops and Hard Forks: If you receive crypto via an airdrop or hard fork, you don’t pay taxes until you sell it. However, if received as compensation (like referring people), it may be taxed as income.
- Mining: Mining proceeds are taxed as income, but when the mined coins are later sold, CGT applies.
- Lending Crypto: Lending crypto is a taxable event. If you receive interest, it is subject to Interest Income Tax, and the original loan is treated as a sale with capital gains tax.
- Transfers: Transferring crypto between your own wallets is not taxable, but you should track any associated fees.
- Gifts: Crypto gifts are tax-free, both for the giver and the receiver, though you may owe taxes when you sell the gifted crypto.
Factors Driving Crypto Adoption in Sweden
Several factors contribute to the increasing adoption of cryptocurrency in Sweden:
- Tech-Savvy Population: Sweden has a high level of digital literacy and widespread internet usage, making its population more likely to adopt new technologies like blockchain and cryptocurrency.
- Government Initiatives: Projects like the e-krona, a digital version of the Swedish krona, demonstrate governmental support for exploring blockchain technology and digital finance, boosting public trust in cryptocurrencies.
- Favorable Regulatory Environment: Sweden's alignment with the EU's MiCA regulation provides clarity and security for crypto users. Clear taxation rules and legal frameworks encourage compliance and participation in the crypto market.
- Trust in Decentralization: Swedes value autonomy and decentralization, principles aligned with blockchain technology. This cultural aspect helps drive adoption, particularly among those seeking alternatives to traditional banking.
- Startup and Innovation Ecosystem: Sweden is home to several crypto-related startups, like Safello. This makes it easier for people to access and trade cryptocurrencies securely and locally.
Crypto Regulations in Sweden 
Source: Freepik
Sweden’s regulatory framework for cryptocurrencies is evolving as these technologies continue to grow. Currently, the legal system does not have specific regulations dedicated solely to blockchain or cryptocurrencies. These technologies fall under existing sector-specific regulations. As cryptocurrencies are recognized as a means of payment, they must comply with traditional financial regulations, particularly those addressing Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF).
Regulatory Bodies
The Swedish Financial Supervisory Authority (FSA) serves as the primary regulatory body overseeing compliance with MiCA and the DLT Regulation in Sweden. Its responsibilities include:
- Supervising crypto-asset operations.
- Processing applications for authorizations and approvals required under MiCA and the DLT Regulation.
Cryptocurrency exchanges and custodial wallet providers must register with the Swedish Financial Supervisory Authority (FSA). These businesses are required to implement measures to prevent money laundering and financing of terrorism.
Regulatory Warnings
Sweden’s financial regulator, Finansinspektionen (FI), has raised concerns about cryptocurrency investments. It describes these investments as highly risky, with minimal consumer protection. FI highlights that cryptocurrencies are difficult to value due to their lack of intrinsic value and regulation, making them unsuitable for most investors.
The Swedish Financial Supervisory Authority (FSA) has echoed similar concerns. It points out that initial coin offerings (ICOs) often lack oversight, exposing investors to scams and fraudulent schemes. A notable example is Starflow, which misled investors through false white papers and fake social media followers.
The FSA has also emphasized the lack of legal protections for cryptocurrency trading and warned about misleading ICO advertisements, reinforcing its position that such investments pose significant risks to Swedish investors.
AML/CTF Requirements in Sweden
The Swedish Anti-Money Laundering Act (AML Act) imposes strict requirements on entities involved in financial services, including those operating with digital assets. Obliged entities must:
- Risk Assessments: Evaluate risks at both operational and customer levels.
- Customer Due Diligence (KYC): Collect and verify customer information.
- Transaction Monitoring: Continuously monitor transactions for unusual activity.
- Suspicious Activity Reporting: Report suspicious transactions or activities to the Swedish Police Authority.
These requirements currently apply to custodian wallet providers and virtual currency exchanges. As part of the regulatory changes under MiCA, the scope will expand to include all crypto-asset service providers, such as brokers, traders, custodians, and portfolio managers, starting December 30, 2024.
MiCA Regulation
The Markets in Crypto-Assets (MiCA) regulation is a significant framework for regulating crypto-assets within the EU, including Sweden. MiCA aims to create a clear and consistent regulatory environment across EU member states. It focuses on the issuance, trading, and custody of crypto-assets, including stablecoins and utility tokens. MiCA will provide a legal framework for issuers and service providers, ensuring market integrity, consumer protection, and financial stability.
Under MiCA, there are three types of crypto-assets:
- E-money Tokens: Digital representations of fiat currencies.
- Asset Referenced Tokens: Digital representations of assets like commodities or real estate.
- Other Crypto-assets: A broad category that includes utility tokens.
The regulation mandates disclosure requirements for issuers and provides guidelines for the security of underlying assets. It also imposes obligations on service providers such as crypto exchanges to ensure the safety of consumer funds and market integrity. Notably, stablecoins are subject to additional requirements like holding reserves in secure and liquid assets.
For Swedish businesses, MiCA will bring significant changes. Cryptocurrency exchanges and custodial wallet services will need to be authorized by the FSA. Issuers of crypto-assets will have to meet new disclosure standards, including the publication of whitepapers. The introduction of MiCA will require companies to balance regulatory compliance with innovation, ensuring that they continue to offer competitive services while adhering to new rules.
Crypto Usage in Sweden
Cryptocurrency is widely used in Sweden for investments, payments
Investments
Swedish investors actively participate in cryptocurrency markets.
- Exchanges: Platforms like Coinbase and Binance are widely used for buying, selling, and holding cryptocurrencies. These platforms provide access to global markets, allowing users to invest in Bitcoin, Ethereum, and other cryptocurrencies.
- Exchange-Traded Products (ETPs): ETPs, similar to stocks or ETFs, enable investors to gain exposure to cryptocurrencies without directly holding them. They are regulated and listed on traditional stock exchanges, making them accessible to institutional and retail investors.
Payments
Cryptocurrencies are increasingly accepted as a form of payment in Sweden.
- Businesses: Several Swedish companies accept Bitcoin and other cryptocurrencies for goods and services. This aligns with the growing trend of integrating crypto into everyday transactions.
- Cross-Border Transactions: Cryptocurrencies are used for international payments. This is because crypto offers faster transaction speeds and lower fees compared to traditional banking systems.
Challenges of Crypto Adoption in Sweden
Source: Freepik
Cryptocurrency adoption in Sweden faces several challenges, such as:
Regulatory Uncertainty
Although the country adheres to EU regulations like MiCA, ongoing developments in international standards create confusion for businesses and individual investors. For example, companies that want to issue tokens or operate exchanges face hurdles in understanding whether their activities align with evolving compliance requirements. This ambiguity slows down innovation and adoption in the crypto sector.
Taxation Complexity
The Swedish tax system requires every crypto transaction, whether it involves trading, staking, or payments, to be meticulously documented for taxation purposes. Gains are taxed at a flat 30%, while losses only partially offset gains, creating a challenging environment for high-frequency traders or DeFi enthusiasts. For instance, an investor engaging in multiple transactions across various wallets may struggle to maintain the detailed records needed for compliance.
Limited Merchant Adoption
Despite growing awareness, only a small fraction of Swedish businesses accept Bitcoin or other digital currencies for payment. While companies in urban areas like Stockholm and Malmö may experiment with crypto payment systems, this trend is far from widespread. This reduces the practical utility of cryptocurrencies for everyday use.
Volatility and Risk
The extreme price fluctuations of assets like Bitcoin discourage risk-averse investors and businesses from integrating crypto into their operations. A small retailer, for example, may fear accepting Bitcoin due to the possibility of its value plummeting overnight, turning profits into losses.
Knowledge Gap
While Sweden is a technologically advanced society, many individuals lack a fundamental understanding of blockchain and cryptocurrency. This lack of education extends to business owners and policymakers, creating hesitation around using or supporting crypto technologies. Without accessible and widespread educational resources, cryptocurrency adoption will struggle to reach its full potential.
Potential Benefits of Crypto Adoption in Sweden
Sweden has the potential to gain several benefits from increased crypto adoption, despite the challenges.
Support for Innovation
Cryptocurrency adoption supports Sweden’s startup ecosystem and technological innovation. The country’s thriving tech environment, home to companies like Klarna and Spotify, creates opportunities for crypto-related businesses to flourish. Swedish crypto startups like Safello, a platform for buying and selling Bitcoin, exemplify how the industry can drive growth and attract investment. These businesses also generate high-paying tech jobs, contributing to economic expansion.
Financial inclusion
Cryptocurrencies allow individuals to access financial systems without needing a traditional bank account. For instance, marginalized communities or immigrants sending remittances abroad can bypass costly banking fees and slow processing times by using cryptocurrencies like Stellar or Ripple for fast, affordable transactions.
Reduced transaction costs and improved efficiency
Blockchain-based transactions offer faster and cheaper payments compared to traditional banking systems. Cross-border payments, in particular, stand to benefit. Businesses that engage in international trade, such as export-oriented companies in Sweden, can use cryptocurrencies to bypass traditional banking fees and achieve faster settlement times.
Diversification of Investment Options
Cryptocurrencies offer new opportunities for diversification in investment portfolios. Swedish investors could turn to crypto as a store of value, diversifying their portfolios. For example, Bitcoin, with its capped supply of 21 million coins, offers an alternative asset class for investors looking to safeguard their wealth.
Conclusion
Sweden’s approach to cryptocurrency adoption reflects its commitment to innovation. The country's increasing crypto adoption is backed by a tech-savvy population and progressive government initiatives.
Although the country is faced with the complexities of integrating a new financial system. The increasing appetite for decentralized finance among younger generations is a drive to their crypto adoption.
Challenges such as regulatory ambiguity, environmental concerns, and limited merchant adoption hinder broader acceptance.
The ongoing development of the e-krona and other blockchain initiatives suggests a promising future for digital currencies in the country. Sweden has the potential to redefine financial systems while ensuring that the benefits of crypto extend to a larger portion of the population.
