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Iceland

Retail_Trading_Status

Allowed-Regulated Unknown
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Analysis ID
#261
Version
Archived
Created
2025-06-26 09:15
Workflow Stage
Initial Research

Executive Summary

In Iceland, individuals are legally permitted to buy, sell, and hold cryptocurrencies, though they are not recognized as legal tender. The Financial Supervisory Authority of the Central Bank of Iceland (FSA, now part of the Central Bank of Iceland) oversees crypto-asset service providers, primarily focusing on AML/CFT compliance. Key legislation includes Act no. 140/2018 and the anticipated implementation of the EU's MiCA regulation. The government cautions citizens regarding the risks associated with cryptocurrency trading due to the lack of specific consumer protection and inherent volatility.

Key Pillars

The regulatory framework in Iceland is built upon the supervision of crypto-asset service providers by the Financial Supervisory Authority (now part of the Central Bank of Iceland), primarily focused on Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) measures. Virtual Asset Service Providers (VASPs) such as exchanges and wallet providers are required to register to operate. Compliance with AML laws, including the European Union's 4th Anti-Money Laundering Directive, is mandatory. There is no specific consumer protection framework for crypto-asset trading supervised by the Central Bank.

Landmark Laws

  • Act no. 140/2018: Mandates compliance with AML and Know-Your-Customer (KYC) regulations for crypto-asset service providers. Focuses supervision by the Central Bank of Iceland on measures against money laundering and terrorist financing.
  • Act no. 56/2024: Legislation on infrastructure for financial instruments based on distributed ledger technology.
  • EU's Markets in Crypto-Assets (MiCA) Regulation: Expected to be implemented in Iceland, leading to a more comprehensive regulatory framework. Came into full effect on December 30, 2024.

Considerations

Cryptocurrencies are not recognized as legal tender in Iceland. Gains from cryptocurrency trading are taxed as part of general income. The Icelandic government and the Central Bank have issued warnings regarding the risks associated with cryptocurrency trading due to the lack of specific consumer protection and the inherent volatility of these assets. Iceland adheres to the European Union's 4th Anti-Money Laundering Directive.

Notes

Historically, Iceland's stance was shaped by capital controls implemented after the 2008 financial crisis, which indirectly impacted cryptocurrency transactions until largely lifted in 2017. There is no supervision of consumer protection for crypto-asset trading supervised by the Central Bank. The Central Bank of Iceland's Financial Supervisory Authority stated in 2021 that cryptocurrencies are not subject to legislation on payment services or electronic currency in the same way as fiat currencies.

Detailed Explanation

Individual citizens and residents in Iceland are legally permitted to buy, sell, and hold cryptocurrencies, although they are not recognized as legal tender. The government advises caution due to the inherent risks and volatility. Historically, Iceland's approach was influenced by capital controls implemented after the 2008 financial crisis. These controls were largely lifted in 2017, effectively removing the indirect ban on crypto transactions across national borders.

In 2018, Iceland enacted a law requiring cryptocurrency exchanges and other digital currency businesses to register with the country's financial regulator, the Financial Supervisory Authority (FSA), which is now part of the Central Bank of Iceland. This legislation also mandates compliance with Anti-Money Laundering (AML) and Know-Your-Customer (KYC) regulations, as specified by Act no. 140/2018. The Central Bank of Iceland's supervision of crypto-asset service providers is specifically focused on measures against money laundering and terrorist financing. However, the Central Bank provides no specific consumer protection framework for crypto-asset trading.

The Icelandic government and the Central Bank have issued warnings to citizens regarding the risks associated with cryptocurrency trading, citing the lack of specific consumer protection and the volatility of these assets. According to the Financial Supervisory Authority, cryptocurrencies are not legal tender and are not subject to the same regulations as fiat currencies regarding payment services or electronic currency.

As a member of the European Economic Area (EEA), Iceland is expected to implement the EU's Markets in Crypto-Assets (MiCA) Regulation, which came into full effect on December 30, 2024. This is anticipated to lead to a more comprehensive regulatory framework for crypto-assets in the country, aligning with broader European standards. Act no. 56/2024 on infrastructure for financial instruments based on distributed ledger technology has also been noted by the Central Bank.

Virtual Asset Service Providers (VASPs), including exchanges and wallet providers, are required to register to operate and must adhere to AML laws, including the European Union's 4th Anti-Money Laundering Directive. Gains from cryptocurrency trading are taxed as part of general income.

While the direct trading of cryptocurrencies by individuals is permitted, the regulatory emphasis is on compliance with AML/CFT obligations for service providers. Authorities are actively monitoring the space, and further regulatory developments are expected, particularly in line with MiCA.

Summary Points

Iceland: Retail Cryptocurrency Trading Regulatory Status (June 2025)

I. Overall Regulatory Status:

  • Allowed-Regulated: Individual citizens and residents are legally permitted to buy, sell, and hold cryptocurrencies.
  • Cryptocurrencies are not legal tender.
  • Government advises caution due to volatility and lack of specific consumer protection.

II. Key Regulatory Bodies:

  • Central Bank of Iceland:
    • Supervises crypto-asset service providers (VASPs).
    • Focuses on Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) compliance.
    • Financial Supervisory Authority (FSA) is now part of the Central Bank of Iceland.
  • Role: Enforces AML/CFT regulations for VASPs. No specific consumer protection framework for crypto-asset trading is supervised by the Central Bank.

III. Important Legislation and Regulations:

  • Act no. 140/2018: Measures against Money Laundering and Terrorist Financing.
    • Requires cryptocurrency exchanges and other digital currency businesses to register.
    • Mandates compliance with AML and Know-Your-Customer (KYC) regulations.
  • Act no. 56/2024: Infrastructure for financial instruments based on distributed ledger technology.
  • EU's Markets in Crypto-Assets (MiCA) Regulation:
    • Came into full effect on December 30, 2024.
    • Iceland, as an EEA member, is expected to implement MiCA, leading to a more comprehensive regulatory framework.

IV. Requirements for Compliance:

  • Registration: Virtual Asset Service Providers (VASPs) (e.g., exchanges, wallet providers) must register to operate.
  • AML/KYC: VASPs must adhere to AML laws, including the European Union's 4th Anti-Money Laundering Directive.
  • Taxation: Gains from cryptocurrency trading are taxed as part of general income.

V. Notable Restrictions or Limitations:

  • No Legal Tender Status: Cryptocurrencies are not recognized as legal tender.
  • Limited Consumer Protection: Lack of specific consumer protection framework for crypto-asset trading supervised by the Central Bank.
  • Government Warnings: The government and Central Bank have issued warnings regarding the risks associated with cryptocurrency trading.

VI. Recent Developments or Changes:

  • Lifting of Capital Controls (2017): Effectively removed the indirect ban on crypto transactions related to cross-national currency transfers.
  • Implementation of MiCA: Expected to lead to a more comprehensive regulatory framework in line with broader European standards.
  • Act no. 56/2024: On infrastructure for financial instruments based on distributed ledger technology.

Full Analysis Report

Report on Retail Trading Status of Cryptocurrencies in Iceland

Date of Report: 2025-06-26

Topic: Retail_Trading_Status

Description: Assess whether individual citizens and residents in the country are legally permitted to buy, sell, and hold cryptocurrencies. Detail the regulatory environment surrounding this activity (e.g., KYC/AML requirements imposed on platforms, general warnings issued).

Retail_Trading_Status: Allowed-Regulated

1. Identified Current Status: Allowed-Regulated

2. Detailed Narrative Explanation:

Individual citizens and residents in Iceland are legally permitted to buy, sell, and hold cryptocurrencies. While cryptocurrencies are not recognized as legal tender, and the government advises caution, trading in them is not illegal. The regulatory environment has been evolving, with a key focus on Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) measures.

Historically, Iceland's stance was shaped by the capital controls implemented after the 2008 financial crisis, which indirectly impacted cryptocurrency transactions. However, these controls were largely lifted in 2017, which effectively canceled the indirect ban on crypto as cross-national currency transfers became legal.

In 2018, Iceland introduced a law requiring cryptocurrency exchanges and other digital currency businesses to register with the country's financial regulator, the Financial Supervisory Authority of the Central Bank of Iceland (FSA, now part of the Central Bank of Iceland). This law also mandates compliance with AML and Know-Your-Customer (KYC) regulations. The Central Bank of Iceland's supervision of crypto-asset service providers is specifically focused on measures against money laundering and terrorist financing, as stipulated by Act no. 140/2018. There is no specific consumer protection framework for crypto-asset trading supervised by the Central Bank.

The Icelandic government and the Central Bank have issued warnings to citizens regarding the risks associated with cryptocurrency trading due to the lack of specific consumer protection and the inherent volatility of these assets. The Financial Supervisory Authority has stated that cryptocurrencies are not legal tender and therefore not subject to legislation on payment services or electronic currency in the same way as fiat currencies.

Iceland, as a member of the European Economic Area (EEA), is expected to implement the EU's Markets in Crypto-Assets (MiCA) Regulation, which came into full effect on December 30, 2024. This will likely lead to a more comprehensive regulatory framework for crypto-assets in the country, aligning with broader European standards. Act no. 56/2024 on infrastructure for financial instruments based on distributed ledger technology has also been noted by the Central Bank.

Virtual Asset Service Providers (VASPs), such as exchanges and wallet providers, are required to register to operate and must adhere to AML laws, including the European Union's 4th Anti-Money Laundering Directive. Taxation of cryptocurrency gains is also in place, with gains from trading taxed as part of general income.

While the direct trading of cryptocurrencies by individuals is permitted, the regulatory landscape emphasizes compliance with AML/CFT obligations for service providers. The authorities continue to monitor the space, and further regulatory developments, particularly in line with MiCA, are anticipated.

3. Specific, Relevant Text Excerpts:

  • Central Bank of Iceland (official website, last updated or reviewed information relevant to this topic): "No rules or laws apply to crypto-assets. Crypto-asset service providers must comply with Act no. 140/2018 on Measures against Money Laundering and Terrorist Financing. There are plans to implement the EU Markets in Crypto-Assets Regulation in Iceland. Act no. 56/2024 on infrastructure for financial instruments based on distributed ledger technology."
  • Central Bank of Iceland (official website, regarding supervision): "The supervision of crypto-asset service providers is limited to the supervision of measures against money laundering and terrorist financing pursuant to Act no. 140/2018. There is no supervision of consumer protection for crypto-asset trading."
  • IcoHolder (referencing 2018 law, article dated February 2025): "In 2018, the Icelandic government introduced a new law that requires cryptocurrency exchanges and other digital currency businesses to register with the country's financial regulator. The law also mandates that these businesses comply with anti-money laundering (AML) and know-your-customer (KYC) regulations."
  • Coincub (undated, accessed June 2025): "While adopting a light-touch regulation regarding crypto, Iceland does, however, have strong AML laws and adheres to the European Union's 4th Anti-Money Laundering Directive whereby Virtual Asset Service Providers (VASPs) exchanges and wallets require registration to be able to operate."
  • Swapp Agency (undated, accessed June 2025): "Cryptocurrencies may not be recognised as legal tender in Iceland, but it's not illegal to trade in them. The government has officially cautioned Icelanders against trading in cryptocurrencies, but this is expected of a nation that suffered a dramatic financial crisis in 2008. In short, trading in crypto is entirely legal; the government just wants you to be careful if you're doing it."
  • FinTax (article dated June 20, 2025): "In June 2023, the European Union officially released the Markets in Crypto-Assets (MiCA) Regulation, which came into full effect on December 30, 2024, and applies to all European Economic Area countries, including Iceland."
  • Iceland Review (article dated February 12, 2021): "When asked about cryptocurrency supervision, The Central Bank of Iceland's Financial Supervisory Authority replied that as cryptocurrencies aren't legal tender or currency in Iceland so they aren't subject to legislation on payment services or electronic currency."
  • The Reykjavik Grapevine (article dated February 11, 2021): "The Icelandic Central Bank has warned against the use of cryptocurrencies, RÚV reports, due to the lack of regulatory protection."

4. Direct, Accessible URL Links to Sources:

Web Sources (12)

Sources discovered via web search grounding

Search queries used (6)
  • Retail cryptocurrency trading Iceland regulation
  • Iceland cryptocurrency laws for individuals
  • Central Bank of Iceland cryptocurrency stance
  • Financial Supervisory Authority Iceland cryptocurrency
  • AML/KYC cryptocurrency Iceland
  • Legal status of buying and selling cryptocurrency in Iceland for residents 2024 2025
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