Bhutan, the third largest Bitcoin sovereign holder: A look at the cryptocurrency tax and regulatory regime

# In Sharp Contrast to Bhutan’s Rapidly Booming Cryptocurrency Industry: Its Crude, Nascent Cryptocurrency Taxation and Regulatory Regime  

By: Gao Xian, FinTax  

## 1. Introduction  

In recent years, leveraging its geographical advantage in hydropower energy and a state-driven strategic development model, Bhutan has continuously built Bitcoin mining facilities, sparking a "green mining revolution". According to data released by Arkham Intel on June 27, 2025, the country has accumulated 12,062 Bitcoins since 2020, making it the world’s third-largest sovereign holder of Bitcoin. This reserve accounts for approximately 40% of Bhutan’s gross domestic product (GDP), ranking it among the countries with the highest exposure to cryptocurrency assets globally. In July 2025, Bhutan launched a nationwide crypto payment system, allowing tourists to use cryptocurrencies to pay for visas, flights, and local goods—joining the first group of countries to adopt crypto payments across their entire tourism ecosystem. Richard Tang, CEO of Binance, sent a letter to Bhutan, stating that the country has blazed a trail for cryptocurrency innovation and built its national vision on trust. However, in sharp contrast to Bhutan’s rapidly booming cryptocurrency industry is its somewhat crude, still nascent cryptocurrency taxation and regulatory regime.  

## 2. Bhutan’s Categorization of Cryptocurrencies and Basic Tax Policies  

### 2.1 Categorization of Cryptocurrencies  

Bhutan adopts a prudent stance toward cryptocurrencies: it does not recognize them as legal tender, but classifies them as regulated assets. This, however, has not hindered Bhutan from taking an increasingly open attitude toward crypto assets. Notably, in January 2025, Gelephu Mindfulness City (GMC)—a special administrative region of Bhutan—announced plans to include Bitcoin (BTC), Ethereum (ETH), and Binance Coin (BNB) in its regional strategic reserve framework. This pioneering initiative is still in the process of finalizing supporting laws and implementation details. It signifies that Bhutan’s categorization of cryptocurrencies has transcended the scope of ordinary goods or property, elevating them to the level of national strategic reserve assets.  

### 2.2 Basic Tax Policies and International Comparison  

#### 2.2.1 Overview of Bhutan’s Tax System  

Bhutan’s modernization of its tax system started relatively late. The government gradually introduced monetized taxation in the 1960s; the 2001 *Income Tax Act of the Kingdom of Bhutan* established a modern comprehensive income tax system covering both personal and corporate taxation; and the 2000 *Sales Tax, Customs and Excise Act* standardized the collection of indirect taxes. Currently, Bhutan’s tax system mainly includes personal income tax, corporate income tax, sales tax, and customs & excise duties. Recently, it has passed new legislation—including the *Income Tax Bill of Bhutan 2025* (hereafter referred to as the "Income Tax Act") and the *Goods and Services Tax Bill of Bhutan 2025* (hereafter referred to as the "GST Act")—to further modernize its tax regime. At present, sales tax, customs, and excise duties are enforced in accordance with the 2000 *Sales Tax, Customs and Excise Act*, with specific tax rates announced by the Ministry of Finance (the current sales tax rate is 7%). However, Bhutan plans to replace the existing sales tax with a 5% Goods and Services Tax (GST) starting from January 2026. Since the new laws will take effect on January 1, 2026, this article will focus on introducing the new legislation.  

#### 2.2.2 Personal Income Tax  

Bhutan’s personal income tax is based on a progressive marginal tax rate system, with rates ranging from 0% to 30%, applicable to citizens, residents, and other individuals with income in Bhutan whose annual income exceeds 300,000 Ngultrums (Bhutan’s currency). The 2025 Income Tax Act merged the former Personal Income Tax (PIT) and Business Income Tax (BIT) under the umbrella of personal income tax to simplify the tax structure. The specific progressive tax brackets and rates under the new law are as follows:  

*(Note: The original text did not provide specific tax bracket details. If supplementary data is available, it should be added here in a tabular or list format.)*  

#### 2.2.3 Corporate Income Tax  

Bhutan’s corporate income tax applies to companies, associations, and entities with a "Significant Economic Presence". Under the new Income Tax Act, the tax rate is 22%, a reduction from the previous 30%, aiming to attract investment and support business development.  

#### 2.2.4 Sales Tax and the Upcoming Goods and Services Tax (GST)  

Currently, Bhutan levies a 7% sales tax on most goods and services. However, it plans to implement a 5% GST in 2026 to replace the existing sales tax, thereby unifying the tax system, simplifying tax compliance, and aligning with international standards.  

### 2.3 Cryptocurrency Tax Policies and Latest Developments  

Bhutan has not enacted specific tax provisions targeting Bitcoin or other cryptocurrencies. Although the country engages in cryptocurrency mining and supports digital infrastructure, it does not recognize cryptocurrencies as legal tender nor offer specific tax exemptions. Under Bhutan’s current tax legislative framework, potential taxable events related to cryptocurrencies—such as generating income from crypto mining, investment, or trading (sale or exchange), accepting cryptocurrencies as payment for goods or services, or even merely holding digital assets—may trigger the application of existing tax types.  

During the revision of the 2024 Income Tax Act, major domestic media in Bhutan reported that, according to officials from the Department of Revenue and Customs (the competent authority), the revision would consider classifying digital assets such as cryptocurrencies as a source of personal income tax. However, the new Income Tax Act does not explicitly identify cryptocurrency as "Taxable Income" under personal income tax. Instead, it specifies four categories of taxable income: Income from Employment, Income from Business, Income from Investment, and Income from Other Sources; cryptocurrencies are only categorized as a form of "Supplies of Digital Assets", which in turn constitute "Digital Services". This indicates that Bhutan remains cautious in cryptocurrency taxation, with relatively vague specific provisions. What is certain, however, is that enterprises providing crypto asset-related services will pay income tax at a rate of 22%. Additionally, it is worth noting that when cryptocurrencies are treated as "property" for tax purposes, a Capital Gains Tax is usually levied. By interpreting and applying the current Income Tax Act, Bhutan may still tax gains from crypto assets as "Income from Investment" or "Income from Other Sources", depending on the holding period of the crypto assets and the nature of the transaction. As for GST, the new law does not explicitly stipulate whether cryptocurrency transactions are taxable.  

## 3. Bhutan’s Regulatory Framework for Cryptocurrencies  

### 3.1 Basic Framework of the Cryptocurrency Regulatory Regime  

Bhutan’s regulatory regime has evolved from a pilot phase to full-scale promotion. Cryptocurrency regulation in Bhutan is primarily overseen by the Royal Monetary Authority (RMA) and implemented through the *Cryptocurrency Mining Regulatory Sandbox Framework* issued by the RMA in 2019, which emphasizes strict compliance supervision of crypto-related businesses. The framework aims to ensure that mining activities comply with national laws, protect investors and consumers, and support the application of innovative technologies. More specifically, it requires cryptocurrency mining enterprises to adhere to KYC (Know Your Customer) and AML (Anti-Money Laundering) norms and obtain various forms of approval from the RMA to prevent the abuse of cryptocurrencies for illegal activities and avoid financial risks. In 2024, Bhutan further refined its regulations, requiring crypto enterprises operating in the country to obtain licenses and conduct comprehensive risk disclosure to protect cryptocurrency investors. This framework, with its focus on anti-money laundering and investor protection, is not only aligned with FATF (Financial Action Task Force) standards but also consistent with global concerns about the security and integrity of financial transactions in the cryptocurrency sector.  

### 3.2 Latest Developments in the Cryptocurrency Regulatory Regime  

Bhutan maintains a positive and open attitude toward cryptocurrencies: it not only accepts cryptocurrencies but also integrates them into its national development strategy—particularly by building a sovereign Bitcoin reserve, leveraging its hydropower resources for green mining, and using cryptocurrencies as a tool for economic diversification. In this process, Bhutan continuously updates its cryptocurrency regulatory regime.  

According to the latest notice *RMA’s Regulatory Stance on Crypto Currency* announced by the Royal Monetary Authority of Bhutan on May 30, 2025, the RMA will adopt a phased, targeted regulatory strategy for cryptocurrencies, aiming to support "Responsible Innovation" while safeguarding citizens’ rights and financial stability. Guided by this principle, while continuously monitoring industry developments and strengthening national cryptocurrency capacity building, the RMA officially announced the following positions:  

1. Cryptocurrency mining and trading businesses are restricted to entities registered in Gelephu Mindfulness City (GMC) and its cooperative enterprises, and must comply with the GMC regulatory framework;  

2. Cryptocurrency transactions conducted through domestic banks supervised by the RMA will remain restricted.  

The latest regulatory provisions indicate that despite certain restrictions, Bhutan’s future policies are likely to continue supporting the development of cryptocurrencies. It is important to note that in line with Bhutan’s renowned "Gross National Happiness" philosophy, its cryptocurrency policies may remain prudent, emphasizing investor protection, sustainability, and social benefits to balance economic innovation and financial stability.  

## 4. International Comparison and Future Outlook  

### 4.1 International Comparison  

A brief comparison between Bhutan and other countries focused on cryptocurrency development reveals the following macro differences:  

First, in terms of monetary systems: El Salvador has adopted Bitcoin as legal tender for its entire economic system, promoting cryptocurrencies through more legally binding measures. In contrast, Bhutan has not declared any cryptocurrency as legal tender and has not disrupted its existing fiat currency system.  

Second, in terms of driving entities: Unlike Switzerland, which promotes blockchain through private innovation and market forces, Bhutan involves state-owned entities such as Druk Holding & Investments and DK Bank to integrate cryptocurrencies into national development plans—a approach similar to the United States’ ongoing legislative efforts to advance crypto assets.  

Third, in terms of global positioning: Countries such as the United Arab Emirates and the United States are striving to establish themselves as global crypto hubs. Bhutan’s positioning, however, is distinctly different: its crypto strategy does not aim to become a global center but focuses on empowering local development goals—specifically, improving regional connectivity, openness, and financial inclusion through the widespread adoption of crypto payment systems to support the development of the tourism industry.  

In terms of specific tax system details, Bhutan’s tax regime also has unique features. Bhutan’s tax policies are relatively lenient, allowing cost deductions and adopting progressive marginal tax rates—reflecting a friendly stance toward small and medium-sized investors. In contrast, India (also in South Asia) imposes a flat 30% tax on cryptocurrency income and does not allow losses to be offset against other income, creating a relatively stricter tax environment. However, compared with European countries like Portugal, which attract cryptocurrency users through tax incentives, Bhutan does not offer broad tax breaks. Instead, it focuses on promoting cryptocurrencies by enabling daily applications for locals through merchant payments and digital tools. Meanwhile, compared with the United States—another major sovereign holder of Bitcoin—the U.S. has more detailed and transparent legislation on cryptocurrency taxation and regulation, with a clear goal of maintaining its leading position. Bhutan, by contrast, has not established a dedicated crypto tax category; instead, it levies taxes on cryptocurrency income under existing tax types and headings, with a relatively simple regulatory framework and a prudent regulatory stance.  

### 4.2 Future Outlook  

In terms of regulation: Bhutan’s cryptocurrency regulatory system reflects a combination of prudence and openness to innovation. In particular, its regulatory regime—focused on anti-money laundering and investor protection—is aligned with international standards. However, the transparency of the regulatory system still needs to be improved, regulatory details require further refinement, and there remains a certain degree of uncertainty. Notably, according to the latest announcement from the competent authority, geographical restrictions and controls on relevant businesses will persist. In the future, Bhutan may become a global model for the green development of cryptocurrencies; its policies are likely to continue supporting cryptocurrency development, with a focus on capacity building, risk isolation, and sovereign control, while regulatory details will be further optimized.  

In terms of taxation: Bhutan’s tax system is in a period of transition. In recent years, adjustments to personal and corporate income taxes reflect the government’s efforts to balance economic development and social equity, while the implementation of GST will further simplify the tax structure. Nevertheless, due to the lack of specific laws, regulations, or guidelines, Bhutan’s stance on taxing cryptocurrencies remains somewhat ambiguous, and related tax matters are still in a "gray area". In the future, Bhutan’s tax policies may continue to move toward greater transparency and efficiency. As for cryptocurrency tax policies, the status quo may remain unchanged for some time—this provides flexibility in addressing crypto-related tax issues on the one hand, but also brings uncertainty and risks to cryptocurrency taxation on the other. We believe that Bhutan’s positive attitude toward cryptocurrencies will drive it to formulate a tax framework conducive to the development of the crypto industry soon.  

## Disclaimer  

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