Iceland
Retail_Trading_Status
- Analysis ID
- #687
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- Latest
- Created
- 2025-12-12 04:23
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- bbf0a3a0...
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Executive Summary
Retail cryptocurrency trading is legal and regulated in Iceland, primarily under the anti-money laundering framework overseen by the Central Bank of Iceland (Seðlabanki Íslands). Virtual Asset Service Providers (VASPs) are required to register with the Financial Supervisory Authority (FSA) and comply with strict AML/KYC obligations. While historical capital controls previously acted as an indirect barrier, these were lifted in 2017, allowing for cross-border crypto transactions subject to standard reporting requirements.
Key Pillars
Central Bank of Iceland (Financial Supervisory Authority) as the primary regulator
Mandatory registration for all Virtual Asset Service Providers (VASPs)
Compliance with Act No. 140/2018 on Measures against Money Laundering and Terrorist Financing
Reporting requirements for large cross-border capital movements
Upcoming alignment with the EU Markets in Crypto-Assets (MiCA) regulation via EEA agreement
Landmark Laws
Act on Measures against Money Laundering and Terrorist Financing (Act No. 140/2018) - Enacted: 2018-01-01
- The primary legislation governing crypto assets, defining 'virtual currency' and 'virtual asset service providers' (VASPs). It mandates that VASPs register with the Central Bank, conduct customer due diligence (KYC), and report suspicious transactions.
- Source
Rules on Registration of Virtual Asset Service Providers (Rules No. 151/2023) - Enacted: 2023-01-01
- Specific rules detailing the registration process, fit and proper requirements for management, and operational standards for entities providing crypto services.
Act on Foreign Exchange (Amendments) (Act No. 87/1992 (Amended 2017)) - Enacted: 2017-03-01
- Crucial amendments that lifted capital controls, effectively removing the 'indirect ban' on buying cryptocurrency from foreign exchanges, though reporting obligations for capital outflows remain.
- Source
Considerations
Capital Gains Tax: Crypto gains are generally taxed as capital income (approx. 22%) for individuals.
Mining Taxation: Mining is often treated as a business activity subject to general income tax rather than capital gains.
Capital Controls Legacy: While controls are lifted, large cross-border transfers may still trigger reporting requirements to the Central Bank.
EEA Alignment: As an EEA member, Iceland is expected to implement the EU's MiCA regulation, likely following a similar timeline to EU member states.
Notes
Iceland is a significant hub for crypto mining due to cheap geothermal energy, but this industrial activity is regulated distinctly from retail trading. The 'Allowed-Regulated' status refers specifically to the ability of individuals to trade and the existence of a VASP registration regime.
Remaining Uncertainties
- The exact timeline for the full transposition of the EU MiCA regulation into Icelandic law via the EEA Joint Committee decision process.
- Specifics of how the Central Bank enforces the 'travel rule' for transfers to self-hosted wallets under the newest rules.
Detailed Explanation
Detailed Explanation
Retail cryptocurrency trading is legal and regulated in Iceland under a framework primarily focused on anti-money laundering (AML) and counter-terrorist financing (CFT). The regulatory landscape is anchored by the Act on Measures against Money Laundering and Terrorist Financing (Act No. 140/2018), which defines 'virtual currency' and 'virtual asset service providers' (VASPs) and mandates that all such service providers must register with the Financial Supervisory Authority (FSA), a department of the Central Bank of Iceland (Seðlabanki Íslands). The primary requirement for operation is this mandatory registration, detailed further in the Rules on Registration of Virtual Asset Service Providers (Rules No. 151/2023), which sets fit and proper standards for management and operational rules. VASPs must comply with stringent AML/KYC obligations, including customer due diligence and reporting of suspicious transactions, as stipulated by the 2018 Act. Historically, capital controls acted as a significant indirect barrier to cryptocurrency transactions, particularly cross-border purchases from foreign exchanges. However, crucial amendments to the Act on Foreign Exchange (Act No. 87/1992) in March 2017 lifted these controls, thereby removing that de facto restriction. While capital controls are lifted, large cross-border capital movements may still trigger standard reporting requirements to the Central Bank. Looking forward, as a member of the European Economic Area (EEA), Iceland is expected to align its regulatory framework with the European Union's comprehensive Markets in Crypto-Assets (MiCA) regulation, which will likely supersede or supplement the current national AML-focused regime. For individuals, cryptocurrency gains are generally subject to capital gains tax at approximately 22%, while mining is often treated as a business activity subject to general income tax, reflecting the country's status as a significant hub for industrial-scale crypto mining due to its cheap geothermal energy.
Summary Points
I. Regulatory Status
* Retail cryptocurrency trading is Allowed-Regulated.
* The primary regulatory focus is on anti-money laundering (AML) and counter-terrorist financing (CFT).
II. Key Regulatory Bodies
* Central Bank of Iceland (Seðlabanki Íslands): The primary regulator, with its Financial Supervisory Authority (FSA) overseeing VASP registration and AML compliance.
III. Important Legislation
* Act on Measures against Money Laundering and Terrorist Financing (Act No. 140/2018):
* Enacted on 2018-01-01.
* The primary legislation governing crypto assets, defining key terms like 'virtual currency' and 'virtual asset service providers' (VASPs).
* Mandates VASP registration, customer due diligence (KYC), and suspicious transaction reporting.
* Rules on Registration of Virtual Asset Service Providers (Rules No. 151/2023):
* Enacted on 2023-01-01.
* Details the registration process, fit and proper requirements for management, and operational standards for VASPs.
* Act on Foreign Exchange (Act No. 87/1992):
* Crucial amendments enacted on 2017-03-01.
* Lifted historical capital controls, effectively removing the 'indirect ban' on buying cryptocurrency from foreign exchanges.
IV. Compliance Requirements
* Mandatory registration for all Virtual Asset Service Providers (VASPs) with the Financial Supervisory Authority.
* Strict AML/KYC obligations under Act No. 140/2018, including customer due diligence and reporting of suspicious transactions.
* Reporting requirements for large cross-border capital movements to the Central Bank.
* For individuals, cryptocurrency gains are generally taxed as capital income (approx. 22%).
* Crypto mining is often treated as a business activity subject to general income tax.
V. Notable Restrictions or Limitations
* The legacy of capital controls, lifted in 2017, means that while free movement is allowed, large cross-border transfers may still trigger reporting requirements.
VI. Recent Developments or Notes
* Upcoming alignment with the EU Markets in Crypto-Assets (MiCA) regulation via Iceland's EEA agreement.
* Iceland is a significant hub for crypto mining, but this industrial activity is regulated distinctly from retail trading.
* The 'Allowed-Regulated' status specifically refers to retail trading and the VASP registration regime.
Full Analysis Report
Full Analysis Report
Iceland has transitioned from a restrictive environment defined by post-2008 capital controls to a regulated, open market for cryptocurrency. The turning point occurred in 2017 when the Central Bank of Iceland lifted the capital controls that had effectively prohibited residents from purchasing crypto assets from foreign exchanges. Today, retail trading is fully legal, and the sector is governed by a clear registration regime focused on anti-money laundering (AML) compliance.
The primary regulatory framework is established by Act No. 140/2018 on Measures against Money Laundering and Terrorist Financing. This Act explicitly brings 'virtual asset service providers' (VASPs) under the supervision of the Financial Supervisory Authority (FME), which is now part of the Central Bank. Entities exchanging virtual currencies for fiat, or providing custodial wallets, must register with the regulator. The Central Bank maintains a public list of supervised entities, which includes registered crypto companies such as IsMynt ehf and Monerium ehf, confirming the 'Allowed-Regulated' status.
For retail investors, the environment is relatively straightforward but comes with strict tax and reporting obligations. Gains from trading are typically subject to capital gains tax, while mining income is treated as general business income. Although the strict ban on capital outflows is gone, the Central Bank still monitors cross-border capital movements for statistical and stability purposes, meaning large transfers to foreign crypto exchanges may be flagged or require reporting by financial intermediaries.
Looking forward, Iceland's regulatory landscape is set to evolve further as it adopts the European Union's Markets in Crypto-Assets (MiCA) regulation through the EEA agreement. This will likely replace the current local registration regime with the standardized EU licensing framework, offering passporting rights to Icelandic firms and imposing stricter consumer protection and prudential requirements.
Iceland has transitioned from a restrictive environment defined by post-2008 capital controls to a regulated, open market for cryptocurrency. The turning point occurred in 2017 when the Central Bank of Iceland lifted the capital controls that had effectively prohibited residents from purchasing crypto assets from foreign exchanges. Today, retail trading is fully legal, and the sector is governed by a clear registration regime focused on anti-money laundering (AML) compliance. The primary regulatory framework is established by Act No. 140/2018 on Measures against Money Laundering and Terrorist Financing. This Act explicitly brings 'virtual asset service providers' (VASPs) under the supervision of the Financial Supervisory Authority (FME), which is now part of the Central Bank. Entities exchanging virtual currencies for fiat, or providing custodial wallets, must register with the regulator. The Central Bank maintains a public list of supervised entities, which includes registered crypto companies such as IsMynt ehf and Monerium ehf, confirming the 'Allowed-Regulated' status. For retail investors, the environment is relatively straightforward but comes with strict tax and reporting obligations. Gains from trading are typically subject to capital gains tax, while mining income is treated as general business income. Although the strict ban on capital outflows is gone, the Central Bank still monitors cross-border capital movements for statistical and stability purposes, meaning large transfers to foreign crypto exchanges may be flagged or require reporting by financial intermediaries. Looking forward, Iceland's regulatory landscape is set to evolve further as it adopts the European Union's Markets in Crypto-Assets (MiCA) regulation through the EEA agreement. This will likely replace the current local registration regime with the standardized EU licensing framework, offering passporting rights to Icelandic firms and imposing stricter consumer protection and prudential requirements.
Source Evidence
Primary and secondary sources cited in this analysis
"The Central Bank supervises to ensure that the activities of crypto-asset service providers... comply with Act no. 140/2018"
"Providers of services regarding virtual currencies... shall register with the Financial Supervisory Authority."
"Virtual asset service providers are required to register in accordance with Article 35 of the Act, cf. Rules No. 151/2023 and No. 152/2023."
"The Icelandic Central Bank amended the rules prohibiting the outflow of krónur... This effectively lifted the indirect ban."
"Iceland has introduced a regime for some of the activities captured in the FATF definition of a VASP."
Web Sources (12)
Sources discovered via web search grounding
Search queries used (9)
- Iceland cryptocurrency regulation Central Bank of Iceland
- buying bitcoin in Iceland legal status
- register of virtual asset service providers Iceland
- Iceland Act No 140/2018 virtual currency
- Iceland crypto tax Directorate of Internal Revenue
- "crypto-asset service providers" list
- Central Bank of Iceland supervised entities virtual currency
- "virtual asset service providers" register
- Iceland implementation of MiCA regulation status
https://www.icelandreview.com/news/economy/cryptocurrency-not-supervised-by-financial-supervisory-authority/
https://www.afm.nl/en/sector/registers/vergunningenregisters/cryptopartijen
https://cb.is/financial-supervision/regulated-activities/supervised-entities/
https://cb.is/financial-supervision/other-undertakings/crypto-asset-service-providers/
https://www.fintecharbor.com/mica-regulation-across-the-eu-country-implementation-overview-2025/
https://www.parisblockchainweek.com/post/micas-impact-on-the-crypto-industry
https://www.walkersglobal.com/en/Insights/2025/09/Are-you-looking-to-register-a-virtual-asset-service-provider
https://www.cnmv.es/portal/consultas/proveedores-servicios-criptoactivos?lang=en
https://www.aosphere.com/know-how/member-state-implementation-of-mica-updated-tracker/
https://cb.is/consumers/crypto-assets-and-crowdfunding/
https://www.bportugal.pt/en/page/registration-virtual-assets-service-providers
https://www.cssf.lu/en/registration-virtual-asset-service-provider/