Sweden’s Plan To Create Its Own Digital Currency – A Guide To Crypto Taxes

Cryptocurrencies have become a popular topic in 2021 with Bitcoin reaching a high of $64,686 and Elon Musk tweeting about Dogecoin.

Sweden is no stranger to cryptocurrencies and has plans to create its own digital currency.

How Sweden Taxes Cryptocurrencies

First, let’s discuss how cryptocurrencies are taxed. People are currently taxed in three general ways.

  • Capital Gains Tax from an investment.
  • Income tax from employment or self-employment.
  • Interest Income Tax from savings (Ränteinkomst).

Sweden does not have tax legislation that outlines the taxation of Bitcoin and cryptocurrencies. Crypto assets are taxed under the Swedish Income Tax Act.

The Swedish Supreme Administrative Court stated that Bitcoin could not be treated as a foreign currency since it was not issued by a national bank and an approved means of payment.

Capital Gains Tax

Sweden currently taxes Bitcoin and Cryptocurrencies when a person sells the asset. Any cryptocurrency you sell for profit is considered a sale and is considered taxable. Gains from cryptocurrency are treated as capital gains.

A sale is considered when you sell a cryptocurrency, exchange a cryptocurrency for another cryptocurrency, exchange a cryptocurrency for fiat, buy a product for cryptocurrency, or lend cryptocurrency.

How You Calculate Capital Gains Tax

In Sweden, you calculate capital gains tax using the Average Cost Basis (Genomsnittsmetoden). To figure out capital gains, you need to figure out the cost basis of your cryptocurrency transaction (Omkostnadsbelopp).

First, you need to calculate the cost basis. The price you purchased the cryptocurrency in the local currency (SEK) is your cost basis.

If you receive or mine cryptocurrencies, the cost basis is the price of the cryptocurrency when you receive them in the local currency. It is important to record this information, so you have a record and do not forget. You then pay any taxes on gains you made from your cryptocurrency investment.

Cryptocurrency Price Sold = Profit or Loss

You pay 30% taxes on the profit you made.

If you had a loss, you deduct 70%.

If you transfer cryptocurrencies such as Bitcoin from one wallet to another, there is no taxable gain.

Record Keeping

Individuals need to keep a record of their cryptocurrency purchases and sales.

Sweden’s government will start exploring the feasibility of the country’s move to a digital currency, marking another step into the unknown for the world’s most cashless society.

Per Bolund, the former financial markets minister said a review launched on Friday is expected to be completed by the end of November in 2022. Anna Kinberg Batra, a former chairwoman of the parliament’s finance committee, will lead the inquiry.

Why May Sweden Change its Crypto Tax Laws?

After the 2020 crisis, Sweden spent more money to help cover costs related to the coronavirus. One idea the Social Democratic Green Coalition plans is making banks pay a little more for operations outside of the country.

They feel banks are doing well and should take part in supporting the country.

Sweden’s Financial Supervisory Authority Director General Erik Thedéen said the country’s Bitcoin exchange-traded products were not suitable for most consumers.

He said that most investors would not be able to handle the investment and that it was

“difficult, if not impossible, to value on a credible basis.”

Sweden’s Top Central Bank Stefan Ingves was also not a fan of cryptocurrencies. He said Bitcoin trading was similar to dealing with stamps and that the price could crash.

“Private money usually collapses sooner or later,” Riksbank Governor Stefan Ingves said at a Swedish banking conference. “And sure, you can get rich by trading in Bitcoin, but it’s comparable to trading in stamps.”

Many officials in Sweden do not understand cryptocurrencies. It has even caused them to release suspected criminals back on the street over their lack of understanding of the cryptocurrency market.

Sweden Plans to Introduce its own Digital Currency

The country plans to develop its own cryptocurrency called e-krona. Be aware of fraudulent sellers of e-krona on behalf of Riksbank.

Sweden plans to test a pilot version of the digital currency similar to how China has done with its own currency. The intent of Sweden is to have their cryptocurrency in place since they see the strong presence of cryptocurrencies growing. They also recognize that more people are using digital currencies such as credit cards and other forms of online payment with Apple Pay and PayPal.

The European Central Bank Digital Currency

The need for their banking system is declining and this is a chance for the government to save this system. This also keeps a presence for their currency. The timeline for the rollout of the digital currency is awaiting a decision from the Swedish government.

Banks will play a vital part in Sweden’s digital currency. They will have to implement an educational system for citizens to Know Your Transaction (KYT), custodian services, and structured regulatory compliance. Banks can ease the process for people with the Know Your Customer (KYC) verification.

Large institutions have used KYC verification to help prevent fraud. When moving on to the KYT, this helps to ease the education process which can be confusing for new cryptocurrency users.

Sweden’s way ahead

Future initiatives by the government and its Central Banking system may change the tax law concerning Bitcoin and Cryptocurrencies in the future. In addition to the public understanding more on cryptocurrencies, the Swedish administration needs to go through a similar education process.

This article is for informational purposes only. It should not be considered Financial or Legal Advice. Consult a financial professional before making any significant financial decisions.

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