The Legislative Landscape for Cryptocurrencies in Norway Prior to 2024

Norway’s approach to cryptocurrency regulation prior to 2024 was marked by a progressive yet cautious stance, aligning with broader European trends in financial regulation. While not recognizing cryptocurrencies as legal tender, Norway established a regulatory framework primarily focused on anti-money laundering (AML) compliance and taxation, demonstrating its commitment to ensuring a secure and responsible environment for cryptocurrency transactions.

In 2018, Norway declared that cryptocurrencies were not considered financial instruments, signaling a non-recognition of these assets as conventional money. However, recognizing the need for regulation, Norway mandated that crypto-related activities, particularly those by registered crypto companies, comply with its AML laws. This change was part of a broader trend, as the country had already implemented the Anti Money Laundering Act and other legislations concerning exchange service providers and custodian wallet providers​​.

A significant development occurred on July 1, 2021, when Norway amended the existing Anti Money Laundering Regulation of 2018. This amendment focused on customer due diligence measures, especially for customers established in high-risk countries, and included discontinuation and blocking of customer relationships, among other requirements. The Norwegian Financial Supervisory Authority (FSA) emphasized the importance of a general regulatory and legal framework for crypto stakeholders, highlighting the associated risks and potential losses in the absence of regulations​​.

The most crucial legal framework for cryptocurrencies in Norway was the Anti-Money Laundering Act, which was aligned with the European Union’s directives. The 2021 AML Directive expanded its scope to include service providers engaged in exchange services between virtual and fiat currencies, as well as Custodian wallet providers (CWPs). This legislation mandated all crypto exchange service providers and CWPs to comply with anti-money laundering obligations, including customer due diligence measures. Providers conducting such activities were required to register with the FSA and provide comprehensive information about their operations​​.

Regarding taxation, the Norwegian Tax Authorities treated virtual currencies and digital tokens as financial assets subject to general tax rules. These transactions were not subjected to value-added tax (VAT), but capital gains from virtual currencies were taxable, and losses were deductible. Notably, not all cryptocurrency trading was considered a business activity and subject to corporate tax. However, consistent trading at a significant volume could fall under corporate tax regulations. Additionally, cryptocurrency mining was exempt from VAT under financial services, but businesses converting data power for miners and engaging in cryptocurrency mining were subject to tax​​.

In summary, prior to 2024, Norway’s legislative approach to cryptocurrencies was characterized by a focus on AML compliance and taxation, reflecting a careful balance between fostering innovation in the crypto sector and ensuring financial security and compliance with international standards.