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Iceland
6.30 Rather Enabling Environment
At the moment, Iceland remains an unfavorable location for cryptocurrencies-related businesses. The use of blockchain technologies outside the financial sphere and mining are not regulated in any way so far.

Mining of cryptocurrencies on the basis of Icelandic data centers has been underway approximately since 2013. Currently Iceland accounts for 3% of the world's mining. The scope of the mining sector can be identified on the basis of the fact that at the end of 2017, it accounted for 90% of the total amount of electricity consumed by Icelandic data centers. The popularity of Iceland as the location of mining farms is determined by several factors: relatively low cost of electricity, favorable climatic conditions, lack of special regulation for mining cryptocurrencies, in particular, taxation of incomes from the mining of cryptocurrencies.
The main factor that produced an adverse impact on the capacity of cryptocurrencies-related activities in the period from 2008 to 2017 is the extremely rigid general regulation of the financial sector. During that timeframe, the status of cryptocurrencies was uncertain. According to the Central Bank, transactions with Bitcoins were subject to the restrictions set forth in the Foreign Exchange Act, it was not allowed to buy foreign currency at financial institutions of Iceland, as well as make cross-border transfers based on virtual currency transactions. Sales of cryptocurrencies for the Icelandic króna within the country was legal, payments for services and goods were allowed (i.e. the ban was imposed on cross-border transactions).

During 2017-2018 period the main restrictions on cross-border capital movement were removed, and the first legislative act that directly affected cryptocurrencies was adopted. The Act amending the Act on Money Laundering and Terrorist Financing came into effect on June 29, 2018. The law, inter alia, introduces a mandatory registration procedure and control by the Financial Supervisory Authority of Iceland (FME) for suppliers of exchange services for virtual currencies, electronic money and (fiat) currencies, as well as "digital wallet" service suppliers.

The Icelandic authorities take an overall cautious stance on cryptocurrencies, and the applicable legislation is rather restrictive.
Neutral Political Environment
5.0 points
Blockchain technologies and regulation of cryptocurrencies have no political significance in Iceland. Although various agencies (the Financial Supervisory Authority, the Central Bank) declare – in various contexts – that global trends associated with the circulation of cryptocurrencies are the subject of their close attention, cryptocurrencies are not yet on the national agenda. The possible use of blockchain technologies that are not related to cryptocurrencies hardly ever appears in the official discourse.

However, in the official discourse, cryptocurrencies are rather associated with threats and risks for transaction participants, as well as in connection with new possibilities for criminal financial activities.
Neutral Legal Environment
4.81 points
Regulatory Convergence
In Iceland, there is no comprehensive special legislation regulating legal relations related to blockchain and cryptocurrencies. Regulation of relations is not within the jurisdiction of a single authority. The main regulators are the FME (Financial Supervisory Authority of Iceland), the Central Bank and ministries. No principal discrepancies between regulators regarding cryptocurrencies are observed.

Definiteness of Legal Regulation
In Iceland, the legal regulation related to blockchain and cryptocurrencies is rather indefinite. Special regulation applies to the aspects of crypto business related to the possibility of money laundering and financing of terrorism (Act on Money Laundering and Terrorist Financing). The document has the definition of cryptocurrency (virtual currency). The law envisages that all providers of exchange services for virtual currencies, electronic money, and fiat currencies, as well as "digital wallets" suppliers must apply for registration with the Financial Supervisory Authority. In the tax return, "electronic coins, such as Bitcoin" inscribed as "other assets". Cryptocurrency mining is currently not subject to any taxes. Special regulation of certain activities, in particular utility-tokens, ICOs, smart contracts, etc. has not yet been developed.

Stability of Legal Regulation
As for further amendments to the Icelandic legislation regarding cryptocurrencies, regulators send contradictory signals. On the one hand, most of them see no need for regulating cryptocurrencies and do not announce plans to start developing such regulation simply by following trends in the European Union. On the other hand, new AML rules are expected quite soon, which, however, will not bring about significant changes in the existing regulation in this area. It also seems obvious that the need for regulation (primarily of tax issues) of cryptocurrency mining is long overdue in Iceland.

Adequacy of Legal Regulation
Overall, state bodies do not consider the development of the crypto industry to be a priority, therefore the existing legislation concerns only the most necessary aspects for regulation: AML and, partially, taxation. The idea of creating regulatory sandboxes has not been voiced by officials. Regulation has rather neutral character.
Situation with the Rule of Law *
Iceland has high indicators of the rule of law. The conditions of the legal regulation of blockchain and cryptocurrencies are neutral, and since the values of the sub-criterion of the rule of law are high (0.77), the amount of the difference between weighted (multiplied by Rule of Law Index score) and unweighted assessments are not significant. This indicates low risks associated with the general conditions of compliance with legal safeguards in Iceland.

* Iceland is not covered by the World Justice Project. The calculation of the Rule of Law Index is based on the average for the group of countries with similar environment for the promotion of democracy and rule of law in the Freedom in the World index (Freedom House). The Country Aggregate Score for Iceland is 95 in the Freedom in the World index, therefore, countries with similar scores (Country Aggregate Score: 94-97). Average Rule of Law Index (World Justice Project) for this group is 0.77.


Enabling Infrastructure Environment
9.08 points
There is a well-developed telecommunications infrastructure and online services in Iceland. Iceland ranks 9th among 193 countries in the UN Global E-Government Development Index.

Iceland is the 23rd country globally by the ease of doing business in the WB's Doing Business rankings.