Slovenia, though small, is one of the fastest-growing countries in Europe, particularly in the business and economic contexts. After its successful economic succession from Yugoslavia, it was the first to join the European Union in 2004 and is the wealthiest Slavic nation, as measured by per capita GDP.
Slovenia’s geostrategic location at the crossroads of transport routes, advanced ICT and physical infrastructure, technological networks and platforms, high-level innovation activities and open and foreign-trade oriented economy, make it an excellent base for business development and growth.
Today, the two main pillars of the Slovenian economy are exports and development-oriented small and medium-sized businesses. However, based on recent developments, blockchain technology might soon become the third.
Over the past several years, we have witnessed blockchain technology’s blossoming and its offspring, cryptocurrency across various countries worldwide, Slovenia including. In April 2018 European Commission established European Blockchain Partnership (EBP) and Slovenia was one of the 21 founding European member states. The purpose of the European Blockchain Partnership is to develop and coordinate European Blockchain Services (EBSI) to support cross-border digital public services, with the highest security and privacy standards. The Ministry of Economics leads the participation of Slovenia in the European Blockchain Partnership.
The awareness of blockchain technology among the citizens of Slovenia is relatively high. Most of the Slovenes have heard about bitcoin and several other cryptocurrencies. They utilize blockchain-based products available to them on numerous locations for several different purposes (e.g. spending, storage, exchange and trading of bitcoin, litecoin, ether and many other popular cryptocurrencies). But Slovenes are also aware of other use cases of blockchain technology, and they will soon have an opportunity to use it. Therefore, Slovenia should be on the radar of investors and business developers interested in these emerging technologies and their corresponding commercial opportunities.
Blockchain Developments in Slovenia
In recent times, Slovenia has projected itself as a hotspot for blockchain and cryptocurrency-related activities. Today, Slovenia, which has an estimated population of 2 million, contains more physical locations accepting cryptocurrency payments than the entire United States. According to credible sources, more than 1,000 locations in the country now allow cryptocurrency payments, including cafes, restaurants, dentists, hair salons, and hotels. At the beginning of 2019, Slovenia was also the only country in the world where you could survive solely of cryptocurrencies.
In Slovenia, a blockchain and crypto community started forming soon after Satoshi Nakamoto published its whitepaper in 2009. The enthusiast gathered weekly and discussed the importance and development of Bitcoin that was the only blockchain use-case at that time. These gatherings resulted in forming the Slovenian Bitcoin Association that is still very active today.
The other significant step in the field of blockchain development was made when the crowdfunding of blockchain projects was possible on the Ethereum platform. Because of our socialistic Yugoslavian heritage, Slovenia does not have a long tradition of venture capital firms and angel investors. If a Slovenian startup required funds, they usually had to find the necessary funding abroad, which was extremely hard. The opportunity opened with crypto-crowdfunding, and some blockchain startups seized that possibility.
The first startup was successfully funded in 2016, and most of them at the end of 2017 and the beginning of 2018. Since Slovenia is a small county where anybody knows everybody, and because Slovenia has a very educated blockchain community, many of those crypto-crowdfunded startups are still operational in 2020.
In Slovenia, the professional and lay public found out that we have a lot of talent in blockchain technology and business ideas that they want to bring to life. It was no coincidence that in that time the first Bitcoin monument emerged in Slovenia in the city of Kranj and that Bitcoin City was established in the most popular shopping area to become a living lab and testing ground for blockchain technology.
With these efforts, it is clear that the Slovenian Government started to promote Slovenia as fertile terrain for blockchain and cryptocurrency startups. Former Prime Minister Miro Cerar, who led the Government between 2014 and 2018, was the first to champion cryptocurrency adoption. Cerar’s administration was eager to transform Slovenia into a green and circular economy. He made this clear in a 2017 speech that he gave during the Digital Slovenia 2020 conference. He empathized with his desire to position Slovenia as a leading blockchain destination in the European Union.
In 2018, the Slovenian Government also published a call for tenders “DEMO PILOTI II” where blockchain technology was also included as one of the desired emerging technologies. Thirty-two applications were approved for co-financing, concerning 184 companies, in the total value of EUR 73,139,827.92. This tender was a significant push for blockchain technologies, and some of the use-cases will be ready soon for the citizens to use in everyday life.
Even after Cerar stepped down for his successor Marjan Šarec in 2018 and later when Janez Janša was selected as prime minister-designate in March 2020, Slovenia is still active in European Blockchain Partnership, and still shows interest in blockchain technology.
On December 11, 2019, Slovenia recorded a milestone achievement in its blockchain industry. It officially launched a SiChain, making it the first country in history to establish a blockchain test infrastructure. The SiChain technology is designed to facilitate blockchain technology use for companies and state agencies and will be used for document verification.
Slovenian Active Blockchain Community
We could say that the most crucial asset is a very vibrant, educated and active blockchain community in terms of blockchain development. The oldest initiative is the Slovenian Bitcoin Association formed in 2014 and is an initiative that is gathering individuals interested in crypto assets or blockchain technology. In 2017 BlockhainThink Tank Slovenia was established to take an active role in drafting policies considering crypto assets and blockchain technology use cases. Blockchain Think Tank was also a leader of the group that formed the community-driven act of self – regulation, “The ICO guidelines”, which was one of the first documents that could be used for regulation of crowdfunding on crypto platforms.
Blockchain developers in 2017 founded the Blockchain Association of Slovenia and in 2018 Blockchain Alliance Europe was established by Slovenian companies that use or develop use cases based on blockchain technology. Blockchain Alliance Europe was established with the purpose of mutual business assistance and also raising awareness about blockchain technology among the lay public and professionals.
All the initiatives are also active in Slovenian Digital Coalition in the informal group for blockchain technologies and were also co-creators of the recent call to the Government in the field of digitalization.
Regulations of Blockchain Technology and Cryptocurrency in Slovenia
At present, Slovenia treats cryptocurrencies as virtual currencies, which means that they are neither recognized as financial instruments nor monetary assets under the Slovenian Law on Payment Services and Systems. For the purposes of anti-money laundering regulations, Slovenia has a vague definition of a cryptocurrency, which represents a “digital form of a value, not being issued or backed by a central bank or any other public authority and is not necessarily linked to an officially recognized fiat currency. In the absence of legally recognized status as a currency or monetary asset, cryptocurrencies are accepted by natural or legal persons as a means of exchange, which can be transferred, stored and exchanged electronically.”
The country’s officials have deemed that it is legal to own or use bitcoin or other cryptocurrencies. Blockchain Think Tank Slovenia has established special working groups for regulatory and tax matters which helped formulate much needed ICO guidelines, later recognized and approved by the Slovenian Government and has held numerous open discussions and consultations with tax authorities and the Ministry of Finance to bring clarity with regard to taxation of profits obtained through cryptocurrency related activities. According to experts, these are some of the key factors making Slovenia extremely attractive to investors and an international cryptocurrency adoption hub.
It should be noted that mining is subject to taxation, as is conducting business using cryptocurrencies as a method of payment. Slovenia doesn’t have crypto-specific tax laws, however, crypto communities have partnered and formed an informal agreement to work closely with the regulators and taxing authorities in order to bring clarity into this field and make sure the regulations don’t stifle further development of this technological advancements.
At its last virtual meeting, Blockchain Think Tank Slovenia hosted representatives from the Ministry of Finance, Bank of Slovenia and the Agency for anti-money laundering to bring a perspective on latest legal developments. Representatives have shed some light onto the regulations which define certain crypto-exchanges and brokers engaged in cryptocurrency trade as financial institutions which have to comply with regulatory requirements. They have also explained circumstances, under which these entities are subject to the transparency rules and other compliance procedures.
As part of the EU, Slovenia and its well established crypto community are keeping an eye on the latest European regulations and are opening the space to the industry to provide feedback and guidance with regard to the drafting process and implementation of the latest regulatory framework on Markets in Crypto-assets. Apart from some other European countries which have taken a rather strict approach and solidified crypto developments early on, Slovenia listens to its crypto adopters and approaches the regulation through a set of soft rules, allowing for a regulation to emerge on a need-to basis.
Ambitions and Advantages
A decade ago, blockchain technology was an unknown academic concept; today, it is revolutionizing the world. And Slovenia is a prolific player in this transformation.
Although small, Slovenia has some of the biggest ambitions and is advantaged by its EU membership and the expertise and established interest from the professional public. Thus far, the country has made laudable achievements in the blockchain and cryptocurrency space and introduced remarkable initiatives and projects that have positioned them as one of the foremost cryptocurrency countries worldwide.
The legalization of cryptocurrency, exclusion of tax for capital income and the country’s open and innovation-oriented landscape also makes Slovenia welcoming. In light of this, the Slovenian market will continue to be of interest and demonstrate worthwhile potentials for savvy investors.
Authors: Marko Vidrih, Tanja Bivic Plankar, Anja Blaj
Images credit: Shutterstock