Written by: Ada, Deep Tide TechFlow
After five years of building businesses in the European Web3 industry, Afeng recently returned to Beijing. Over the years, he has traveled between Germany and France, organizing numerous industry networking events and meeting a group of Web3 professionals also building businesses in Europe.
When talking about the European Web3 market, Afeng’s assessment is straightforward: this is a land of idealists. Pure ideals have not given Europe an absolute advantage on the global crypto map, but they have not shaken their belief in Web3 idealism either.
From Zug’s “Crypto Valley” in Switzerland, to the Station F incubator in Paris; from Berlin Blockchain Week to Amsterdam’s DeFi innovation community, this ancient continent has always been writing its own crypto narrative, distinct from the United States and Asia.
When we shift our focus away from the crypto frenzy in the US, Japan and Korea, and the Middle East, and turn to this relatively calm region, a question emerges: what kind of special place is Europe on the map of the crypto world?
A Decentralized Continent
If one had to describe Europe’s crypto industry in a single phrase, Afeng gives it without hesitation: “decentralized.”
This decentralization, on the one hand, means not worshiping a single central figure.
In the US, many people enter the space because of celebrity entrepreneurs or influencers, while in Europe, more people enter Web3 out of their own beliefs in privacy, open protocols, and free markets. Their motivations are relatively pure; for many founders, their primary goal isn’t even to make money, but because “they think this is worth doing.”
On the other hand, geographically, Europe does not have an absolute center either. Each country and city has its own character, coming together to form a fragmented, yet multi-layered Web3 map.
First is Germany.
Germany is a country without a super metropolis, with a highly decentralized industrial distribution. Many world-class companies are hidden in small towns, and its largest city, Berlin, has a population of just over three million—about the size of an average prefecture-level city in China.
The long winters and somewhat introverted social atmosphere make it more like an engineer’s paradise. Germans prefer to stay indoors to work on technology, and they have strong R&D capabilities. If you attend a conference in Berlin, you’ll easily notice: tech people always outnumber business people.
“Very few Germans choose to go into business; most are doing research or development,” said Mike, who works on a wallet project in Germany.
France, on the other hand, has a completely different style.
In France, a large portion of those in the crypto industry come from traditional consumer goods, fashion, and luxury sectors. During the NFT boom, many marketing, branding, and business elites from companies like L’Oréal and LV were drawn in. They already have strong networking and market development skills, so naturally, in Web3 they also lean toward business roles—negotiating partnerships, promoting projects, building communities, and running markets.
The third country is Switzerland, whose keyword is “neutral.”
Switzerland has a clear and friendly compliance framework, with relatively relaxed crypto tax policies, making it very suitable for nonprofit organizations or research institutions. The Ethereum Foundation, Solana Foundation, and other Web3 foundations chose to gather in Switzerland precisely because of the stable and predictable institutional environment it provides.
Finally, there is Lisbon, Portugal.
Lisbon became famous in the Web3 circle largely because of its people.
Portugal offers digital nomad and golden visas, and combined with a comfortable climate and low cost of living, it has attracted many Americans who have already made their money in Web3 to settle there.
Many of them no longer have projects requiring their daily attention. Having made enough money, they simply settle in Lisbon to “lie flat” and enjoy retirement, while participating in some investing, meetups, and community activities.
Germany’s technical character, France’s business acumen, Switzerland’s compliance advantages, and Lisbon’s digital nomads together form the fragmented puzzle of the European Web3 industry.
Old Money Crypto Style
When talking about Web3, many people first think of the US, Hong Kong, or Singapore, but in Afeng’s view, Europeans’ sensitivity to and demand for decentralization and privacy is just as strong, if not stronger.
Among the top ten projects by TVL (Total Value Locked), half are from Europe. Behind this is, on one hand, the extension of engineer culture, and on the other, Europeans’ willingness to support new things and new tracks—even if they don’t see especially large returns in the short term.
“In the past, whether a project was good was judged by whether it could be listed on Binance. But now, things have changed: people look at whether the project has positive cash flow and actual users. In Europe, if a project finds its target audience, the competition isn’t as fierce as in the US or Asia. Europeans will treat it as a good business and won’t just ‘grab a quick profit and run.’”
Afeng says, “Also, although Europeans might not have the strongest math skills, they’re very willing to spend time on research, so many small but excellent teams emerge—and they make quite a bit of money.”
Overall, Web3 remains a niche industry in Europe. Here, the industry penetration is about 6%—meaning that out of every 100 people, only 6 use cryptocurrencies, a rate noticeably lower than in the US and Asia. The main user age group is 25 to 40.
Unlike the high-frequency, high-leverage trading habits of Korea and some Asian markets, most Europeans don’t bet their entire net worth on crypto. For them, cryptocurrency is more like an asset allocation option than a high-stakes gamble.
This is related to Europe’s historical experience and wealth structure. Many Europeans have lived through different eras of speculation and are not as hungry for overnight wealth.
Among wealthy people, more wealth comes from long-term family accumulation. They are more likely to accept the story of “saving a bitcoin for the next generation,” rather than believing in getting rich quick with 100x or 1000x coins and achieving class leapfrogging.
There’s also a practical constraint: most compliant exchanges in Europe do not offer high leverage, and contract/leverage-related businesses are very limited. This institutional design inherently reduces the likelihood of all-in bets.
Of course, this doesn’t mean Europeans lack a desire to trade. On the contrary, during market cycles, some interesting behavioral patterns emerge: when the market is bad, they work local jobs in Europe; when the market improves, they move to countries with lower living costs to trade crypto full-time.
“Last year, I met an Italian in Switzerland who works at a restaurant in Switzerland for four months each year, then spends the remaining eight months in Thailand and the Philippines—living four months in each country and trading crypto full-time,” Afeng says.
Stablecoin Boom
As in other parts of the world, stablecoins are widely seen as one of the most promising directions in Europe, with almost all European banks researching related solutions. But the logic behind their popularity is different from that in Asia and emerging markets.
First and foremost, it’s about payment infrastructure.
The EU still does not have a truly unified, autonomous payment and settlement system, and daily life relies heavily on US systems like Visa and Mastercard. For many Europeans, this means their economic lifeline is long connected to networks built by other countries. As a result, both policymakers and the banking industry hope to explore a European-owned settlement system, making stablecoins and their underlying on-chain settlement networks a frequently discussed option.
The second driver comes from geopolitics and industrial migration.
After the Russia-Ukraine war broke out, energy prices and overall manufacturing costs soared, putting immense pressure on traditional European manufacturing and causing many factories to relocate to the Asia-Pacific region. With the globalization of production, cross-border trade settlements have become more frequent and complex. Efficient settlement across different currencies and regulatory regimes has become a real issue.
Compared to traditional cross-border remittance, stablecoin-based on-chain settlements have clear advantages in both speed and cost.
The third change comes from long-term shifts in consumer behavior.
After the pandemic, many Europeans formed the habit of shopping online. Sellers on e-commerce platforms often come from all over the world. To ensure such a cross-border, cross-time-zone, and cross-currency system operates smoothly, lighter, lower-fee, and more efficient payment methods are naturally favored, giving stablecoins more legitimacy in practical use.
However, progress is not easy in practice.
Europe’s banking system is very traditional, with many banks having histories of over a century. Whether in internal governance or risk appetite, they’re not adept at quickly adopting new technologies. Before Trump took office, the entire European financial system was generally hostile or indifferent to crypto.
The real change began when they realized that US capital and large institutions had already invested heavily in crypto.
The problem is, many traditional finance professionals have never participated in crypto. They know almost nothing about wallets, on-chain interaction, or DeFi protocols. So, when they start learning, they first turn to consulting firms for advice—many of which are themselves just as traditional.
“Although I see a huge market, I think these traditional Europeans might need quite a long time to figure things out. It depends on whether there will be external forces to push things forward,” says Vanessa, a Web3 practitioner who has lived in Europe for many years.
According to Vanessa, previously popular concepts in Europe like metaverse and NFTs have now faded away. Europeans once loved BTCFi, spending a lot of time and money supporting BTCFi projects, but later realized these projects couldn’t generate good cash flow. Collateralizing bitcoin for a few percentage points of annualized return could cause many problems, and it was safer to just hold bitcoin. So, most BTCFi projects have also lost their heat.
When asked where the real opportunity for European Web3 lies, Afeng’s answer is simple: “I think Europe has two major advantages: first, it has nearly 600 million people; second, most of these people live in developed countries.”
In developing countries, people may earn only a few hundred dollars a month, while European users’ income levels are five to eight times higher. For the same project, the higher the net worth of target customers, the more likely they are to pay for products and services, and the higher the 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 digital asset regulatory frameworks to date, covering 27 EU member states as well as Norway, Iceland, and Liechtenstein in the European Economic Area (EEA).
MiCA Article 98, together with the EU’s eighth version of the Directive on Administrative Cooperation in tax matters (DAC8), plus each country’s own characteristics, collectively form a relatively complex but increasingly clear tax system. One general principle: crypto transactions themselves are exempt from value-added tax (VAT).
Within this unified principle, each country still retains its own tax characteristics. Germany and France are both representative in the process of crypto compliance and are thus the most discussed cases in the industry.
Germany was the world’s first country to officially recognize bitcoin and other crypto transactions as legal, with the number of Bitcoin and Ethereum nodes second only to the US.
In Germany, cryptocurrencies are regarded as “private property,” and taxation mainly involves income tax, VAT, and specific activity taxes.
If you hold crypto for more than a year before selling, the profit is exempt from income tax; if sold within a year, up to 45% income tax is due.
When using crypto to pay for goods or services, if the price has increased since acquisition, the gain is considered income and is taxable; but if held over a year, such gains are tax-exempt.
For staking, lending, airdrops, etc., German tax authorities require reporting and income tax payment; mining is defined as a commercial activity and is subject to business tax.
In France, cryptocurrencies are regarded as movable property, and the tax burden is higher; long-term holding is not tax-exempt.
France’s VAT rules are the same as Germany’s, but profits from trading are subject to a 30% capital gains tax. If trading crypto is considered a professional activity, industrial and commercial profit tax applies, with possibly higher rates. However, tax liability is only triggered when crypto is sold for fiat currency, and profits below 305 euros are tax-exempt.
French crypto mining companies are taxed under BNC (non-commercial profits) at a rate of 45%. Non-commercial miners with annual income below 70,000 euros may qualify for some BNC tax breaks, but individuals or companies deemed engaged in commercial activities cannot enjoy these reductions.
Besides tax policy, other relevant policies are gradually being implemented. In Vanessa’s words, this is the best era: as compliance advances, more people are thinking about long-term business and building companies with stable income, rather than primarily launching tokens.
In many people’s eyes, Europe’s Web3 world always seems less lively—there are rarely stories of 100x coins, and less emotional price drama.
But from another perspective, on this land where idealism and institutionalism intertwine, a different kind of crypto company and participant is being nurtured. They care more about whether products have users, whether projects can survive long term, and whether they can find sustainable business models in a strictly compliant environment.
We may have good reason to believe that on this land of idealism, more unique new crypto species will emerge in the future.
