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Andorra

Retail_Trading_Status

Allowed-Regulated Unknown
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Analysis ID
#78
Version
Archived
Created
2025-04-12 06:43
Workflow Stage
Live

Executive Summary

In Andorra, retail cryptocurrency trading is legally permitted and regulated under Law 24/2022, the Digital Assets Act. The Autoritat Financera Andorrana (AFA) oversees the digital asset sector, including licensing and compliance. Intermediaries must adhere to stringent AML/KYC requirements based on Law 14/2017 (amended by Law 37/2021), while individuals trading crypto are subject to capital gains tax with certain exemptions. Andorra aims to align with European standards like MiCA through laws such as Law 7/2024.

Key Pillars

  • The Autoritat Financera Andorrana (AFA) is the primary regulator, responsible for overseeing the digital asset sector and granting licenses.
  • Core compliance requirements include stringent Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations based on Law 14/2017 (amended by Law 37/2021).
  • Licensing is required for businesses offering crypto-related services, such as exchanges and wallet providers, as stipulated in the Digital Assets Act.

Landmark Laws

  • Law 24/2022, of 30 June 2022, on the digital representation of assets using cryptography and distributed ledger and blockchain technology (the "Digital Assets Act"):
  • Date of Issue: June 30, 2022
  • Summary: Provides a comprehensive framework for the issuance, exchange, custody, and intermediation of digital assets, including cryptocurrencies.
  • Law 14/2017 (amended by Law 37/2021) on the prevention and fight against money laundering and terrorism financing:
  • Summary: Enforces stringent Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations.
  • Law 7/2024 on the organization and functioning of financial system operating entities and market abuse:
  • Summary: Aims to align with European standards (like MiCA) and enhance investor protection and market transparency.

Considerations

  • Cryptocurrency trading gains are treated as capital gains, subject to a maximum 10% personal income tax (IRPF), with the first €3,000 potentially exempt.
  • Stringent AML/KYC requirements are enforced, requiring proof of funds and clear record-keeping for tax compliance.
  • The Andorran government and AFA maintain a cautious approach due to risks of money laundering, terrorist financing, and market volatility.
  • Cryptocurrencies are not legal tender; the Euro remains the sole legal tender.

Notes

  • Andorra has actively worked to establish a specific legal and regulatory framework for digital assets, moving away from a previously unregulated or ambiguous environment.
  • Established international cryptocurrency exchanges like Binance and Bitfinex comply with Andorran legislation.
  • Andorran banks are beginning to offer crypto-related services, such as custody wallets; however, as of early 2024, none had reportedly applied for AFA approval to register crypto transactions, though they accept clients with crypto assets provided traceability is proven.

Detailed Explanation

Andorra permits individual citizens and residents to buy, sell, and hold cryptocurrencies, treating it as legal wealth management or investment. The regulatory landscape has evolved from an unregulated environment with the introduction of Law 24/2022, the "Digital Assets Act," enacted on June 30, 2022, which comprehensively addresses the issuance, exchange, custody, and intermediation of digital assets. This law seeks to provide legal certainty and transparency for individuals and businesses in the crypto space. Future alignment with European standards, specifically MiCA, is anticipated through laws such as Law 7/2024 on the organization and functioning of financial system operating entities and market abuse.

While the Digital Assets Act primarily focuses on licensing requirements for crypto-related service providers like exchanges and wallet providers, it implicitly allows individuals to engage with cryptocurrencies, focusing regulatory efforts on intermediaries rather than personal ownership. Key aspects of the regulatory environment include stringent AML/KYC requirements based on Law 14/2017 (amended by Law 37/2021) on the prevention and fight against money laundering and terrorism financing. Individuals trading cryptocurrencies, especially with regulated platforms or Andorran banks, must provide proof of funds source. Banks require clear evidence of the origin of digital assets before allowing conversion to fiat currency or facilitating transactions. VASPs are considered reporting entities under AML law and must implement robust compliance measures. The Autoritat Financera Andorrana (AFA) is the primary regulatory body responsible for overseeing the digital asset sector, granting licenses, and monitoring compliance. The AFA actively monitors the crypto market and its interactions with the traditional financial system.

Gains from cryptocurrency trading are treated as capital gains and are subject to a personal income tax (IRPF) at a maximum rate of 10%, with the first €3,000 potentially exempt. Clear record-keeping is essential for tax compliance. The regulatory framework, including the Digital Assets Act and MiFID II implementation (via Law 7/2024), aims to enhance investor protection and market transparency. Individuals can use established international exchanges like Binance and Bitfinex, which are noted as complying with Andorran legislation. Andorran banks are also beginning to offer crypto-related services, such as custody wallets; however, banks require AFA approval to register crypto transactions, and as of early 2024, none had reportedly applied for this specific approval, though they accept clients with crypto assets provided traceability is proven.

Cryptocurrencies are not legal tender in Andorra; the Euro remains the sole legal tender. The Andorran government and the AFA view the sector as an area for innovation but maintain a cautious approach due to risks associated with money laundering, terrorist financing, and market volatility. In essence, Andorra permits retail cryptocurrency trading within a regulated environment focused on transparency, AML/KYC compliance, and investor protection, with the AFA playing a central oversight role.

Summary Points

Here's a bullet-point summary of the regulatory analysis report on Retail Cryptocurrency Trading in Andorra, designed for clarity and quick comprehension:

I. Overall Regulatory Status

  • Allowed-Regulated: Retail cryptocurrency trading (buying, selling, and holding) is legal in Andorra and subject to regulation.

II. Key Regulatory Bodies

  • Autoritat Financera Andorrana (AFA):
    • Primary financial regulatory body.
    • Oversees the digital asset sector.
    • Grants licenses to Virtual Asset Service Providers (VASPs).
    • Monitors compliance with regulations.
    • Tracks all aspects of cryptocurrencies.

III. Important Legislation and Regulations

  • Law 24/2022 (Digital Assets Act):
    • Cornerstone of crypto regulation in Andorra.
    • Covers issuance, exchange, custody, and intermediation of digital assets.
    • Focuses on licensing requirements for businesses offering crypto services.
    • Does not prohibit personal ownership or trading.
  • Law 14/2017 (AML/CFT Act, amended by Law 37/2021):
    • Andorran Anti-Money Laundering and Counter-Terrorism Financing Act.
    • Imposes stringent AML/KYC requirements.
    • VASPs are considered reporting entities.
  • Law 7/2024 (Organization and Functioning of Financial System Operating Entities and Market Abuse):
    • Aims to align with European standards (like MiCA).
    • Enhances investor protection and market transparency.

IV. Requirements for Compliance

  • AML/KYC Compliance:
    • Individuals must provide proof of the source of funds, especially when interacting with regulated platforms or Andorran banks.
    • Banks require clear evidence of the origin of digital assets before conversion to fiat currency.
  • Tax Compliance:
    • Gains from cryptocurrency trading are treated as capital gains.
    • Subject to personal income tax (IRPF) at a maximum rate of 10%.
    • First €3,000 may be exempt.
    • Clear record-keeping is essential.

V. Notable Restrictions or Limitations

  • Not Legal Tender: Cryptocurrencies are not legal tender in Andorra; the Euro remains the sole legal tender.
  • Bank Approval for Crypto Transactions: Banks require AFA approval to register crypto transactions, and as of early 2024, none had reportedly applied for this specific approval, though they accept clients with crypto assets provided traceability is proven.
  • Cautious Approach: The government and AFA maintain a cautious approach due to risks associated with money laundering, terrorist financing, and market volatility.

VI. Recent Developments or Changes

  • Digital Assets Act (Law 24/2022): Implementation of a specific regulatory regime for market participants using blockchain technology and cryptocurrencies.
  • Law 7/2024: Further refinements and alignment with European standards (like MiCA) are anticipated.
  • Increased Scrutiny: The AFA is actively monitoring the crypto market and its interactions with the traditional financial system.
  • Platform Usage: Individuals can use established international cryptocurrency exchanges like Binance and Bitfinex, which are noted as complying with Andorran legislation.
  • Andorran banks are also beginning to offer crypto-related services, such as custody wallets.

Full Analysis Report

Report on the Status of Retail Cryptocurrency Trading in Andorra

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).

1. Current Status: Allowed-Regulated

2. Detailed Narrative Explanation:

Individual citizens and residents in Andorra are legally permitted to buy, sell, and hold cryptocurrencies. This activity is considered legal and falls under the general category of wealth management or investment activities [21, 5]. Andorra has actively worked to establish a specific legal and regulatory framework for digital assets, including cryptocurrencies, moving away from a previously unregulated or ambiguous environment [3, 7, 10].

The cornerstone of this regulation is Law 24/2022, of 30 June 2022, on the digital representation of assets using cryptography and distributed ledger and blockchain technology (the "Digital Assets Act") [6, 16, 18, 19, 23]. This law, which came into effect in late 2022, provides a comprehensive framework covering the issuance, exchange, custody, and intermediation of digital assets [6, 19]. It aims to create legal certainty and transparency for both individuals and businesses involved in the crypto space [2, 24]. Further refinements and alignment with European standards (like MiCA) are anticipated, potentially through laws like Law 7/2024 on the organization and functioning of financial system operating entities and market abuse [11, 13, 20, 25].

While the Digital Assets Act primarily focuses on licensing requirements for businesses offering crypto-related services (like exchanges, wallet providers, or DeFi platforms) [2, 6, 19], it implicitly allows individuals to engage with these assets. The law does not prohibit personal ownership or trading. Instead, it focuses on regulating the intermediaries and platforms that facilitate these activities [6].

Key aspects of the regulatory environment affecting retail traders include:

  • AML/KYC Requirements: Andorra enforces stringent Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations, largely based on Law 14/2017 (amended by Law 37/2021) on the prevention and fight against money laundering and terrorism financing [6, 14, 15]. Individuals trading cryptocurrencies, especially when interacting with regulated platforms or Andorran banks, must be prepared to provide proof of the source of their funds [3, 4]. Banks require clear evidence of the origin of digital assets before allowing conversion to fiat currency or facilitating transactions [4]. Virtual Asset Service Providers (VASPs) are considered reporting entities under AML law and must implement robust compliance measures [14].
  • Regulatory Body: The Autoritat Financera Andorrana (AFA) is the primary financial regulatory body responsible for overseeing the digital asset sector, including granting licenses to service providers and monitoring compliance [3, 5, 6, 19]. The AFA is actively monitoring the crypto market and its interactions with the traditional financial system [7, 11, 22].
  • Taxation: Gains from cryptocurrency trading by individuals are generally treated as capital gains and are subject to personal income tax (IRPF) at a maximum rate of 10%, with the first €3,000 potentially exempt [4, 7, 8, 14]. Clear record-keeping is essential for tax compliance [3].
  • Investor Protection: The regulatory framework, including the Digital Assets Act and MiFID II implementation (via Law 7/2024), aims to enhance investor protection and market transparency [2, 6, 20].
  • Platform Usage: Individuals can use established international cryptocurrency exchanges like Binance and Bitfinex, which are noted as complying with Andorran legislation [21]. Andorran banks are also beginning to offer crypto-related services, such as custody wallets [4, 19, 23]. However, banks require AFA approval to register crypto transactions, and as of early 2024, none had reportedly applied for this specific approval, though they accept clients with crypto assets provided traceability is proven [4, 22].

While trading is allowed and regulated, it's important to note that cryptocurrencies are not legal tender in Andorra; the Euro remains the sole legal tender [24]. The Andorran government and the AFA view the sector as an area for innovation but also maintain a cautious approach due to risks associated with money laundering, terrorist financing, and market volatility [7, 11, 17].

3. Relevant Text Excerpts:

  • On Legality and Regulation: "Andorra has followed the regulation of some European Union countries and through regulation and the creation of a new law, allows the use and trading of cryptocurrencies and digital assets in Andorra, but in case of starting business related to cryptocurrencies in Andorra (that not the simple purchase or holding of cryptoassets) you must go through prior and mandatory authorization through the Andorran Financial Authority (AFA)." [5]
  • On the Digital Assets Act: "Andorra has implemented a specific regulatory regime for market participants using blockchain technology and cryptocurrencies. The Digital Assets Act serves as the cornerstone of this framework, addressing the issuance, exchange, custody, and intermediation of digital assets, including cryptocurrencies." [6] (Referring to Act 24/2022)
  • On Retail Trading: "Cryptocurrency trading, including Bitcoin, is legal in Andorra and is considered a wealth management activity." [21]
  • On AML/KYC: "Traceability of funds is essential for trading cryptocurrencies in Andorra, requiring investors to maintain a documented record to comply with banking and European regulations." [4] and "Entities engaging in digital asset activities must adhere to anti-money laundering and counter-terrorism financing regulations, as stipulated in the Andorran AML/CFT Act." [6] (Referring to Law 14/2017 and its amendments)
  • On Taxation: "In Andorra, the taxation of cryptocurrency transactions is clear and favorable for investors. Capital gains derived from the purchase and sale of cryptocurrencies are subject to a 10% personal income tax." [4]
  • On AFA's Role: "The Autoritat Financera Andorrana (AFA), Andorra's financial regulatory body, seeks to track all aspects of cryptocurrencies while also developing these regulations with the government." [3]

4. Source Links:

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