The third largest sovereign holder of Bitcoin, Bhutan: An overview of cryptocurrency taxation and regulatory system

1 Introduction

In recent years, Bhutan has been continuously building Bitcoin mining farms, leveraging its hydropower energy advantages and a state-driven strategic development model, 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 third-largest sovereign holder of Bitcoin globally. This reserve accounts for approximately 40% of Bhutan's Gross Domestic Product (GDP), making it one of the countries with the largest exposure to cryptocurrency assets. In July 2025, Bhutan launched a national cryptocurrency payment system, allowing tourists to pay for visa fees, flights, and local goods using cryptocurrencies, becoming one of the first countries to implement cryptocurrency payments across its tourism ecosystem. Binance CEO Richard Tang wrote to Bhutan, stating that Bhutan is paving a path for cryptocurrency innovation, laying the foundation for the nation's vision with trust. However, in stark contrast to Bhutan's rapidly growing cryptocurrency industry is the country's somewhat rough and still nascent cryptocurrency tax and regulatory system.

2 Bhutan's Qualitative Assessment of Cryptocurrency and Basic Tax Policies

2.1 Qualitative Assessment of Cryptocurrency

Bhutan's attitude towards cryptocurrency is relatively cautious; it does not recognize it as legal tender but rather as a regulated asset. However, this does not hinder Bhutan's increasingly open attitude towards crypto assets. Particularly in January 2025, Bhutan's special administrative region, Gelephu Mindfulness City (GMC), announced plans to include Bitcoin (BTC), Ethereum (ETH), and Binance Coin (BNB) in its strategic reserve framework (at the regional level), marking a pioneering attempt, with legal and implementation details still in progress. This indicates that Bhutan's qualitative assessment of cryptocurrency has surpassed that of ordinary goods or property, elevating it 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 tax modernization process started relatively late. Since the 1960s, the government has gradually introduced monetized taxation. The Income Tax Act of the Kingdom of Bhutan in 2001 established a modern comprehensive income tax system covering individual and corporate taxation, while the Sales Tax, Customs, and Excise Act of 2000 regulated the collection of indirect taxes. Currently, Bhutan's tax system mainly includes personal income tax, corporate income tax, sales tax, and customs and excise tax, and has recently passed new bills, including the Income Tax Bill of Bhutan 2025 (hereinafter referred to as the "Income Tax Act") and the Goods and Services Tax Bill of Bhutan 2025 (hereinafter referred to as the "Goods and Services Tax Act") to further modernize the tax system. At present, sales tax, customs, and excise tax are executed according to the 2000 Sales Tax, Customs, and Excise Act, with specific tax rates announced by the Ministry of Finance (the sales tax is currently 7%). However, Bhutan plans to implement a 5% Goods and Services Tax (GST) starting January 2026 to replace the existing sales tax. Since the new law will come into effect on January 1, 2026, this article will primarily introduce the new law.

2.2.2 Personal Income Tax

Bhutan's personal income tax is based on a progressive tax rate, ranging from 0% to 30%, applicable to citizens, residents, and other individuals with income in Bhutan whose annual income exceeds 300,000 Ngultrum. The 2025 Income Tax Act merges the previous Personal Income Tax (PIT) and Business Income Tax (BIT) under personal income tax to simplify the tax structure. According to the new law, the specific tax rates for personal income tax at various levels are as follows:

2.2.3 Corporate Income Tax

Bhutan's corporate income tax applies to companies, groups, and Significant Economic Presence. According to the new Income Tax Act, the tax rate is 22%, reduced from the previous 30%, aimed at attracting investment and supporting business development.

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

Currently, Bhutan's sales tax rate is 7%, applicable to most goods and services. However, Bhutan plans to implement a 5% Goods and Services Tax (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 Recent Developments

Bhutan has not introduced specific tax law provisions targeting Bitcoin or other cryptocurrencies. Although the country participates in cryptocurrency mining and supports digital infrastructure, it does not recognize cryptocurrencies as legal tender and does not provide specific tax exemptions. Under Bhutan's current tax legislative framework, potential taxable events related to cryptocurrencies—such as income generated from cryptocurrency mining, investment, or trading (selling or exchanging), or receiving cryptocurrencies as payment for goods or services, or even merely holding digital assets—could trigger the application of existing taxes.

During the revision of the Income Tax Act in 2024, mainstream media in Bhutan reported that, according to officials from the Department of Revenue and Customs, the revision would consider recognizing digital assets such as cryptocurrencies as sources of personal income tax. However, the new Income Tax Act does not explicitly define cryptocurrencies as taxable income; instead, it specifies four types of taxable income: Income from Employment, Income from Business, Income from Investment, and Income from Other Sources; it only categorizes cryptocurrencies as a form of "Supplies of Digital Assets," thus constituting "Digital Services." This indicates that Bhutan remains cautious regarding cryptocurrency taxation, with specific regulations still somewhat vague. However, it is certain that businesses providing cryptocurrency-related services will pay income tax at a rate of 22%. Additionally, it is worth noting that when cryptocurrencies are considered property for tax purposes, capital gains tax may be levied. Through the interpretation and application of the current Income Tax Act, Bhutan may still tax related income based on the holding period of the crypto assets and the nature of the trading activities as "Income from Investment" or "Income from Other Sources." Regarding the Goods and Services Tax, the new law does not explicitly state whether cryptocurrency transactions should be taxed.

3 Bhutan's Regulatory Framework for Cryptocurrency

3.1 Basic Framework of Cryptocurrency Regulation

Bhutan's regulatory system has evolved from pilot programs to full-scale promotion. The regulation of cryptocurrency in Bhutan is primarily overseen by the Royal Monetary Authority (RMA), implemented through the "Cryptocurrency Mining Regulatory Sandbox Framework" released by the RMA in 2019, emphasizing strict compliance oversight for crypto-related businesses. This framework aims to ensure that mining activities comply with national laws, protect investors and consumers, and support the application of innovative technologies. More specifically, the framework requires cryptocurrency mining companies to comply with KYC and AML regulations and obtain various forms of approval from the RMA to prevent the misuse of cryptocurrencies for illegal activities and to ensure no financial risks arise. In 2024, Bhutan further improved its regulation by requiring cryptocurrency businesses operating in the country to obtain licenses and conduct comprehensive risk disclosures to protect cryptocurrency investors. This framework emphasizes anti-money laundering and investor protection, aligning not only with FATF standards but also with global concerns regarding the security and integrity of financial transactions in the cryptocurrency sector.

3.2 Recent Developments in Cryptocurrency Regulation

Bhutan maintains a proactive and open attitude towards cryptocurrency, not only accepting it but also integrating it into national development strategies, particularly in establishing Bitcoin sovereign reserves, utilizing its hydropower resources for green mining, and using it as a tool for economic diversification. In this process, Bhutan continues to update its cryptocurrency regulatory system.

According to the latest notice from the Royal Monetary Authority on May 30, 2025, titled "RMA's Regulatory Stance on Cryptocurrency," the RMA will adopt a phased and focused regulatory strategy for cryptocurrency, supporting responsible innovation while safeguarding citizens' rights and financial stability. Based on this policy, the RMA continues to monitor field dynamics and strengthen the national cryptocurrency capacity while officially announcing the following positions:

(1) Cryptocurrency mining and trading activities are limited to registered entities and partner enterprises in Gelephu Mindfulness City and must comply with the GMC regulatory framework;

(2) Cryptocurrency transactions through domestically regulated banks will continue to be restricted.

The latest regulatory provisions indicate that despite several restrictions, Bhutan's future policies may continue to support the development of cryptocurrency. It is important to note that, given Bhutan's renowned "Gross National Happiness" concept, its cryptocurrency policies may remain cautious, emphasizing investor protection, sustainability, and social benefits to balance economic innovation with financial stability.

4 International Comparison and Future Outlook

4.1 International Comparison

A brief comparison of Bhutan with 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 cryptocurrency in a more legally binding manner, while Bhutan has not declared any cryptocurrency as legal tender and has not disrupted the existing fiat currency system. Second, in terms of driving entities, unlike Switzerland, which promotes blockchain through private innovation and market forces, Bhutan participates through national entities such as Druk Holding & Investments and DK Bank, integrating cryptocurrency into national development plans, which is similar to the U.S. ongoing legislative push for crypto assets. Third, in terms of global positioning, countries like the United Arab Emirates and the United States are striving to establish themselves as global cryptocurrency hubs, while Bhutan's positioning is distinctly different; its cryptocurrency strategy does not seek a global central status but focuses on empowering local development goals—enhancing regional connectivity, openness, and financial inclusion through the widespread adoption of a cryptocurrency payment system to support the development of tourism.

In terms of tax system details, Bhutan's tax policies are relatively lenient, allowing cost deductions and adopting a progressive tax rate, reflecting its friendly attitude towards small and medium investors. In contrast, India, also in South Asia, imposes a uniform tax rate of 30% on cryptocurrency income and does not allow losses to offset other income, resulting in a relatively harsher tax environment. However, compared to European countries like Portugal, which attract cryptocurrency users with tax incentives, Bhutan does not widely offer tax benefits; it focuses on providing daily applications for locals through merchant payments and digital tools to promote cryptocurrency. Additionally, compared to the United States, which is also a significant sovereign holder of Bitcoin, the U.S. has a relatively detailed and transparent approach to cryptocurrency taxation and regulation, maintaining a clear positioning to sustain its leading status; Bhutan, on the other hand, has not established a dedicated cryptocurrency tax but rather disperses cryptocurrency income across existing tax categories, resulting in a relatively simple regulatory framework and cautious regulatory stance.

4.2 Future Outlook

In terms of regulation, Bhutan's cryptocurrency regulatory system reflects a combination of caution and open innovation, particularly focusing on anti-money laundering and investor protection regulations that align with international standards. However, the transparency of the regulatory system still needs improvement, and regulatory details require further refinement, presenting certain uncertainties. Notably, according to the latest announcements from the authorities, regional restrictions and controls on related businesses will continue. In the future, Bhutan may become a global model for green cryptocurrency development, with its policies continuing to support cryptocurrency growth while focusing on capacity building, risk isolation, and sovereign control, with regulatory details further optimized.

In terms of taxation, Bhutan's tax system is currently in a transitional period. Recent adjustments to personal income tax and corporate income tax reflect the government's balanced consideration of economic development and social equity, while the implementation of GST will further simplify the tax structure. Nevertheless, due to the lack of specific laws or guidelines, Bhutan's stance on taxing cryptocurrencies remains somewhat vague, and related tax matters are still in a gray area. In the future, Bhutan's tax policies may continue to evolve towards greater transparency and efficiency, while its cryptocurrency tax policies may maintain the status quo for some time, providing flexibility in handling cryptocurrency-related tax issues but also introducing uncertainty and risk in cryptocurrency taxation. We believe that a positive attitude towards cryptocurrency will prompt Bhutan to quickly establish a favorable tax framework for the development of the crypto industry.

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