Is the country’s crypto-friendly status at stake?

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Voting opened for the Portugal general elections on the morning of March 10, 2024, just one month ahead of the 50th anniversary of the Carnation Revolution — which marked the end of the Salazar dictatorship.

The elections represent a significant shift in Portugal’s political landscape.

In 2022, former Prime Minister Antonio Costa won a historic victory, gaining an outright majority in the parliament with 41.37% of the votes. The center-left Socialist Party (PS) had a green light to rule the country without the need to form coalitions.

However, the socialist administration has been marked by corruption and scandals, which led to several resignations, including Prime Minister Costa. The events forced the President of the Republic to call for new elections and has shaken the PS’ hegemony in Portuguese politics.

The latest poll from Consulmark2 shows the election to be neck-and-neck.

Most respondents — nearly 30% — favored the new center-left coalition Democratic Alliance (AD) led by candidate Luis Montenegro. But while AD may be leading the polls, it is barely ahead of the PS’ Pedro Nuno Santos at 27%.

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This tied position is uniquely powerful to the newly founded right-wing political party Chega with 18.2% of the votes. Founder André Ventura has been quick to capitalize on the dissatisfaction with the ruling PS and has marketed itself as the party for the Portuguese people.

In the lower range, the center-right Liberal Initiative (IL) (6%), left-wing Left Block (BE) (5.2%), ecosocialist Livre (4.6%) and communist Unitary Democratic Coalition (CDU) (2.5%) may have the chance to influence government as part of a coalition.

Portugal has been known worldwide to be crypto-friendly since 2016. Its unique tax regime and regulations have converted the country into a global hub for crypto users and blockchain companies.

How could a new government with different policies affect Portugal’s status as a digital asset hub — one of Europe’s few crypto hotspots?

Portuguese elections may alter crypto-friendly policies

Portuguese political parties are unique in that all national parties have included cryptocurrency positions in their electoral programs.

The crypto Portuguese association New Economy Institute, formed by prominent members of the Portuguese crypto community, has highlighted the major differences within each political party.

Crypto issues comparison of major Portuguese political parties. Source: New Economy Institute

The most crypto-friendly group is the novel political party Chega, which in its updated program for 2024, expressed its intention to solidify Portugal’s status as a global crypto hub. The party says it wants to expand the adoption of blockchain technology with real use cases at the institutional level.

Their proposal claims they will “invest in technology education starting in primary education with introductory courses on the digital economy, specifically cybersecurity, artificial intelligence, programming and blockchain.” They also want to include coding and blockchain in school curriculums.

The center-right AD has a similar stance, but they only wish to introduce coding in the national education program to position Portugal within the top 10 countries in digitalization in Europe by 2030; there is no mention of blockchain.

Chega also intends to “study the possibility of the state using blockchain technology to drastically reduce bureaucracy and administrative complexity and ensure greater transparency.”

The right-wing party mentioned blockchain would be useful in different fields, from administrative improvements such as property and land registration to a digital identity managed by blockchain technology.

Additionally, Chega advocates for using blockchain technology for administrative procedures such as licenses and certifications as a way of addressing Portugal’s complex bureaucratic system, which, in their opinion, is deliberately generated to hide corruption.

Socialist PS has already enabled crypto-friendly policies and wants to resume its Web3 national strategy initiated by former Secretary of State, who joined the government after leaving Microsoft in 2019 — The project was halted in December 2023 after the resignation of Prime Minster Costa.

The principal political parties have a neutral or friendly policy for cryptocurrency and blockchain regulation, which should be good news for crypto advocates living in Portugal.

But some of the smaller players, with whom the winning party may have to form a coalition in order to make a government, feel differently.

The New Economy Institute highlights how an alliance between PS, BE, and CDU may push the socialist party to ditch its existing crypto-friendly regime, as the latter parties are more hostile to digital assets.

As the New Economy Institute noted, the BE’s program specifies how they would like to tax “all crypto asset-related gains currently exempt” under Portugal’s Personal Income Taxation regime. The left-wing party also wants to create a “mandatory reporting system for the value of one’s cryptocurrency holdings and all crypto transactions,” including crypto-to-crypto, fiat and acquiring goods and services.

But this hinges on whether BE would have sufficient power to force socialist PS to remove the crypto-friendly policies in Portugal. This outcome may not be as probable as PS candidate Nuno Santos declared in a televised debate that they would let AD govern in minority to ensure that ultra-right Chega doesn’t get a seat in government.

AD’s Montenegro has neither confirmed nor denied if they would ally with Chega to form a government. If the possibility of a government with Chega and AD emerges, PS may feel forced to search for a broader coalition with the left, which could potentially harm crypto-friendly policies.

Effects on the Portuguese crypto community

Continuity in crypto legislation would have a positive outcome for the Portuguese crypto community, Henrique Corrêa, the president of New Economy Institute, told Cointelegraph.

The only result that could be detrimental to the crypto community would be if BE entered the government. As polls have demonstrated, there is a small probability this could occur.

However, what would happen to Portugal if the crypto-friendly policies were modified to a more restrictive approach?

For Portuguese-based crypto influencer Sebastian Montgomery, the sudden removal of the special fiscal regime for digital nomads would drastically increase his tax rate. While the tax regime wasn’t the sole motivator for his move to Portugal, it played a strong role.

If crypto-related policies change drastically, he said he would consider leaving.

But the crypto industry is very location-agnostic and can move easily, as Mitchell Loureiro, CEO of Immunefi, explained to Cointelegraph:

“The crypto industry is very mobile and can leave easily if the terms turn unfavorable. Many other countries will welcome them in a heartbeat. They can easily leave and take away the economy they created here, along with the jobs they created.”

The Portuguese Web3 ecosystem has thrived in the last years with over 650 companies in Portugal, as per the Portuguese Web3 association Quo Vadis records. Despite Portugal having one of the most attractive crypto-friendly legislations in the world, it ranks 58th worldwide for crypto adoption, according to a 2023 Chainalysis study.

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Corrêa da Silva said that Portugal has a unique chance to create sustainable generational wealth through crypto adoption. He compared the current moment to Portugal’s golden age some 500 years ago when the king and the elites realized that the only way to grow was by adopting technological innovation and knowledge. 

This realization enhanced the Portuguese navy’s ability to explore the world thanks to its innovative weaponry and superiority in mathematical sciences, astronomy, navigation, geography and the study of the tides.

Corrêa da Silva said that the new oceans to be explored are now in the digital world. He believes Portugal can become a major international actor once again by exporting cutting-edge technology and expertise, and even convince Portuguese talent living abroad to return to Portugal. However, he said that in order for any of this to happen, the industry needs to settle and mature.

In this election, the future of Portuguese political society is at stake, as well as the possibility of building and solidifying a hub for digital assets.