In Europe, Web3 is a quieter revolution.
Written by: Ada, Deep Tide TechFlow
A Feng, who has been an entrepreneur in the European Web3 industry for five years, recently returned to Beijing. Over the years, he has traveled between Germany and France, organizing numerous industry exchange meetings and meeting a group of Web3 practitioners who are also starting businesses in Europe.
When discussing the Web3 market in Europe, A Feng's judgment is straightforward: this is a land of idealists. Pure ideals have not given Europe an absolute advantage in the global crypto landscape, but they have not shaken their faith in Web3 idealism.
From the "Crypto Valley" in Zug, Switzerland, to the Station F incubator in Paris; from Berlin Blockchain Week to Amsterdam's DeFi innovation community, this ancient continent has been writing a narrative of crypto that is distinctly different from that of the United States and Asia.
As we shift our focus from the crypto frenzy in the U.S., Japan, South Korea, and the Middle East to this relatively quiet world, a question arises: What kind of special existence does Europe have in the crypto world?
A Decentralized Continent
If one were to describe the crypto industry in Europe in one sentence, A Feng would unhesitatingly say four words: "Decentralized."
This decentralization refers, on one hand, to not being overly reliant on a single central figure.
In the U.S., many people are drawn into the space by certain star entrepreneurs and opinion leaders, while in Europe, more people enter Web3 out of their beliefs in privacy, open protocols, and free markets. Their motivations are relatively pure; for many entrepreneurs, the primary goal is not to make money, but to "feel that this is worth doing."
On the other hand, Europe does not have a single absolute center geographically. Each country and city has its own character, collectively forming a fragmented yet layered Web3 map.
First is Germany.
Germany is a country without super cities, and its industries are very dispersed. Many world-class companies are hidden in ordinary small towns, and the largest city, Berlin, has a population of just over three million, equivalent to an ordinary prefecture-level city in China.
The long winters and relatively introverted social atmosphere make it feel more like a paradise for engineers. Germans prefer to stay indoors to study technology, and their research and development capabilities are strong. If you attend a conference in Berlin, you will easily find that there are always more technical personnel than business personnel.
"Very few Germans choose to do business; most are engaged in research or development," said Mike, who is working on a wallet project in Germany.
France, on the other hand, has a completely different style.
In France, a significant portion of those in the crypto industry come from traditional fast-moving consumer goods, fashion, and luxury goods sectors. During the peak years of NFTs, many elites from companies like L'Oréal and LV in marketing, branding, and business lines were attracted to the space. Their social skills and market expansion abilities are strong, so in Web3, they naturally lean towards business roles, responsible for partnerships, project promotion, community building, and market operations.
The third country is Switzerland, with the keyword "neutrality."
Switzerland has a clear and friendly compliance framework, and its tax policies are relatively lenient towards crypto, making it very suitable for non-profit organizations or research institutions to operate. The Ethereum Foundation, Solana Foundation, and other Web3 foundations choose to gather in Switzerland because they value the stable and predictable institutional environment it offers.
Finally, there is Lisbon, Portugal.
Lisbon is famous in the Web3 circle largely because of people.
Portugal offers digital nomad visas and golden visas, combined with a comfortable climate and lower living costs, attracting many Americans who have already made money in the Web3 industry to relocate.
Many of them no longer have projects that require daily operational concerns, but having made enough money, they settle in Lisbon for a laid-back retirement, while also participating in some investments, gatherings, and community activities.
Germany's technical temperament, France's business talent, Switzerland's compliance advantages, and Lisbon's digital nomads together form the fragmented puzzle of Europe's Web3 industry.
The Old Money Wind of Crypto
When discussing Web3, many people's first reaction is the U.S., Hong Kong, or Singapore, but in A Feng's view, Europeans' sensitivity and demand for decentralization and privacy are not lower than those in these regions, and may even be stronger.
Half of the top ten projects by Total Value Locked (TVL) come from Europe. Behind this, on one hand, is the extension of engineer culture, and on the other hand, it relates to Europeans' willingness to support new things and new tracks, even if they do not see particularly large returns in the short term.
"In the past, the test of whether a project was good was whether it could get listed on Binance. But now, some changes have occurred, and we assess whether the project will have positive cash flow and whether the product will be used. In Europe, once a project finds its target audience, the competition is not as fierce as in the U.S. and Asia; Europeans treat it as a good business opportunity and do not engage in 'quick cash grabs.'"
A Feng said, "Moreover, although Europeans may not have a strong mathematical foundation, they are very willing to spend time researching, which leads to the emergence of many small but beautiful teams that earn quite a bit."
From an overall penetration rate perspective, Web3 remains a niche industry in Europe. Here, the industry market share is only about 6%, meaning that out of 100 people, only 6 use cryptocurrencies, a figure that is significantly lower than in the U.S. and Asia, with users primarily aged between 25 and 40.
Unlike the high-frequency, high-leverage trading habits in South Korea and some Asian markets, most Europeans do not bet their entire wealth on the crypto market. For them, cryptocurrency is more like an option in asset allocation rather than a gamble.
This is related to Europe's historical experiences and wealth structure. Many Europeans have experienced different forms of speculative eras and are not as eager for overnight wealth.
Among the wealthy, much of the wealth comes from long-term family accumulation, making them more receptive to stories like "saving one Bitcoin for future generations" rather than believing in achieving class mobility through betting on a hundredfold or thousandfold coin.
Another objective constraint is that in Europe, most compliant exchanges do not offer high leverage, and contract and leverage-related businesses are also very limited. This institutional design itself reduces the possibility of high-stakes gambling.
Of course, this does not mean that Europeans lack a desire to trade. Instead, during cyclical rotations, some interesting behavioral patterns emerge: when the market is bad, they work locally to earn money; when the market improves, they move to countries with lower living costs to trade cryptocurrencies full-time.
"Last year, I met an Italian in Switzerland who works in a restaurant for four months each year, and for the remaining eight months, he flies to Thailand and the Philippines, spending four months in each country, trading cryptocurrencies full-time," A Feng said.
The Stablecoin Boom
Like other regions of the world, in Europe, stablecoins are widely regarded as one of the most promising directions, and almost all European banks are researching related solutions. However, the logic behind their popularity is different from that in Asia and emerging markets.
The primary reason lies in payment infrastructure.
The European Union still lacks a truly unified and autonomous payment settlement system, heavily relying on American systems like Visa and Mastercard for daily transactions. For many Europeans, this means that their economic lifeline is long-term connected to networks built in other countries. Therefore, both policymakers and the banking sector hope to explore a settlement system that belongs to Europe, and stablecoins and their underlying on-chain settlement networks naturally become a frequently discussed option.
The second push comes from geopolitical factors and industrial migration.
After the outbreak of the Russia-Ukraine war, energy prices and overall manufacturing costs soared, putting immense pressure on Europe's traditional manufacturing sector, leading many factories to choose to relocate to the Asia-Pacific region. In the process of globalized production, cross-border trade settlements have become more frequent and complex, making efficient settlement between different currencies and regulatory systems a real issue.
Compared to traditional cross-border remittances, on-chain settlements using stablecoins have clear advantages in both speed and cost.
The third change stems from long-term behavioral changes on the consumer side.
After the pandemic, many Europeans have become accustomed to online shopping, and sellers on e-commerce platforms often come from all over the world. To ensure smooth operation across a cross-border, cross-time-zone, and cross-currency system, lighter, lower-cost, and more timely payment methods are naturally more popular, giving stablecoins an additional layer of practical legitimacy.
However, the reality of implementation is not easy.
Europe's banking system is very traditional, with many banks having been around for over a hundred years. Whether in internal governance or risk appetite, they are not adept at quickly embracing new technologies. Before Trump took office, the entire European financial system held a relatively hostile or indifferent attitude towards crypto.
The real shift began when they realized that American capital and large institutions had already invested significant resources in the crypto space.
The problem is that many traditional finance professionals have not personally participated in the crypto space and know almost nothing about wallets, on-chain interactions, or DeFi protocols. Therefore, when they start to learn, they can only turn to consulting firms for guidance, many of which are also quite traditional.
"While I see a huge market, I think these traditional Europeans may take a long time to figure it out; it depends on whether some external forces will push them," said Vanessa, a Web3 practitioner who has lived in Europe for many years.
According to Vanessa, the previously popular metaverse and NFTs in Europe have also faded away. Additionally, Europeans were once very fond of BTCFi, spending a lot of time and money supporting BTCFi projects, but later found that these projects did not generate good cash flow. To earn a few percentage points of annualized returns by collateralizing Bitcoin could lead to many problems, so it was safer to simply hold Bitcoin directly, which is why most BTCFi projects have lost their popularity.
When asked where the real opportunities in European Web3 lie, A Feng's answer is simple: "I think Europe has two major advantages: one is its population of nearly 600 million, and the other is that most of these people live in developed countries."
In developing countries, people's average monthly income may only be a few hundred dollars, while European users' income levels are often 5 to 8 times that. When working on projects, the higher the net worth of the target customers, the more likely they are to pay for products and services, leading to higher potential returns.
How to Tax?
On April 20, 2023, the European Parliament passed the EU's Markets in Crypto-Assets Regulation (MiCA) with 517 votes in favor. This is one of the most comprehensive regulatory frameworks for digital assets to date, covering 27 EU member states, as well as Norway, Iceland, and Liechtenstein in the European Economic Area (EEA).
Article 98 of MiCA, combined with the EU's eighth directive on administrative cooperation in taxation (DAC8), along with the unique characteristics of each country, forms a relatively complex but increasingly clear tax system. One common principle is: cryptocurrency transactions are exempt from value-added tax.
Under this unified principle, countries still retain their own tax characteristics. Germany and France are both representative in the compliance process for cryptocurrencies, and thus have become the two most discussed cases in the industry.
Germany is the first country in the world to officially recognize the legality of cryptocurrency transactions like Bitcoin, with the number of Bitcoin and Ethereum nodes second only to the U.S.
In Germany, cryptocurrencies are considered "private property," and taxation mainly involves income tax, value-added tax, and specific activity taxes.
If you sell cryptocurrency after holding it for more than a year, the profit portion can be exempt from income tax; selling within a year requires paying up to 45% income tax.
When using cryptocurrency to pay for goods or services, if the price of the coin has risen since it was held, this appreciation will be considered income and subject to tax; however, if the holding period exceeds one year, this portion of the profit can also be tax-exempt.
For activities such as staking, lending, and airdrops, the German tax authorities require declaration and payment of income tax; mining is classified as a commercial activity and is subject to business tax.
In France, cryptocurrencies are considered movable property, and the tax burden on cryptocurrencies is relatively high, with long-term holdings not being tax-exempt.
France's regulations on value-added tax are consistent with Germany's, but a 30% capital gains tax applies to profits from trading. If trading cryptocurrencies is deemed a professional activity, business profit tax must be paid, which may be at a higher rate. However, tax obligations are triggered only when cryptocurrencies are sold for fiat currency, with profits not exceeding 305 euros being tax-exempt.
French crypto mining companies are taxed according to BNC (non-commercial profits) at a rate of 45%. Non-commercial miners with annual income below 70,000 euros may qualify for certain BNC tax reductions, but individuals or businesses classified as commercial activities cannot enjoy these reductions.
In addition to tax policies, other corresponding policies are gradually being implemented. According to Vanessa, this is the best of times: With the advancement of compliance, more people will think about long-term operations, creating businesses with stable income rather than primarily issuing tokens.
In the eyes of many, the Web3 world in Europe seems to be less lively, lacking the stories of hundredfold coin myths and the dramatic emotional fluctuations of price movements.
However, from another perspective, on this land where idealism and institutionalism intertwine, a different type of crypto enterprise and participant is emerging. They care more about whether the product is being used, whether the project can sustain itself, and whether it can find a continuous business model in a strictly compliant environment.
We may have reason to believe that in this land of idealism, more unique crypto new species will emerge in the future.
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