Portugal’s Progressive Policies Fuel Fintech Growth
The recently launched Portugal Fintech Report reveals a vibrant and dynamic fintech ecosystem in a country with a population of around 10 million. Unpacking the report, one thing is clear: the clusters and innovation in the Portuguese fintech scene present a case study in how Portugal’s unique governmental approach, particularly in its handling of cryptocurrency and freelancer regulations, stands apart from the norm in the EU and successfully fosters innovation and growth in the fintech sector. The alignment of the country’s fintech sector with these distinctive regulations has led to a robust and rapidly growing fintech landscape. Portugal’s approach, combining regulatory flexibility, attractive tax incentives, and lifestyle benefits, positions it as an enticing hub for digital asset and freelancer-centric fintechs startups.
A Varied Mix of Value Propositions
A handful of fintechs featured in the Portugal Fintech Report contributed by sharing their motivations for choosing Portugal and the benefits the fintech ecosystem offers. These are largely born out of the favorable government policies and regulations, but also take advantage of the country’s unique position geographically and the high quality of living. These fintechs include:
ivendPay, which provides comprehensive solutions for using cryptocurrency in everyday life. With their innovative technology, people can easily spend their cryptocurrency through bank terminals, APIs, plugins for e-commerce, mobile apps for iOS and Android, and even vending machines. ivendPay covers almost all the needs of users who want to spend and accept cryptocurrency in their daily activities. It also looks to cater to those customers who are weary of the volatility of Bitcoin by offering an instant cryptocurrency-to-fiat exchange.
Wallid offers a toolkit of ID solutions that can traverse both Web2 and Web3. It offers an express checkout tied to an individual’s bank account that allows individuals to identify themselves, pay, and checkout just with their bank account in one transaction. Wallid facilitates control over individual’s ID data, deciding what and with whom they share it. Their mission is to simplify and streamline the way customers buy online and prove their identity safely and securely.
Coinscrap Finance, operating in Portugal and Spain, was founded in 2016. Its mission is to be the Financial Health AI Platform of the future using transactional data & behavioral economics. As a B2B fintech, Coinscrape Finance helps banks and insurers to understand the financial situation of their clients and to sell the product that better fits, a win-win for both financial entities & their retail customers.
Uphold, a Web3 financial platform committed to making Web3 easy, serving over 10 million customers in more than 140 countries. It provides businesses and consumers with easy access to digital assets and services. Uphold’s unique “Anything to Anything” interface gives end users seamless access to and between digital assets, national currencies, and precious metals. Uniquely, Uphold smart routes orders across 30 trading venues, delivering optimal execution and superior liquidity to customers. Uphold never loans out customer assets and is always 100% reserved. The company has pioneered radical transparency and uniquely publishes its assets and liabilities every 30 seconds on a public website.
Jupiter app, built by Certified Accountant Vânia Fortes, is a platform that caters to the growing freelancer and digital nomad micro-economy. It streamlines the extremely heavy tax management and submission process that freelancers encounter. Its mission is to empower individuals, drive innovation, and position Portugal as a leader in supporting the future of work in the digital age. At the heart of Jupiter app sits a user-friendly interface coupled with automation to help freelancers comply with tax regulations.
The European Crypto Hub
Portugal, particularly Lisbon, has long been considered the European crypto hub. The regulation of cryptocurrency companies started in late 2020 via the VASP Act, and until recently, Portugal offered a favorable tax stance on cryptocurrency, exempting transactions from capital gains tax and VAT. However, in 2022, Portugal revised this stance, introducing a 28% tax on capital gains from crypto assets held for less than a year. The government also introduced the Digital Transitional Action Plan to complement innovation in the digital economy, which included creating “Free Zones” for testing innovative technology, demonstrating the country’s commitment to fostering technological growth. The above factors contributed to Portugal’s appeal as a crypto-friendly destination.
Eugene Tkachevsky at IvendPay believes “Lisbon is rightfully the crypto capital of Europe due to its rich and diverse community, as well as countless events and initiatives in cryptocurrencies. Portugal and organizations like Fintech House actively support and promote the crypto community, providing an ideal environment for innovation and growth in this area.”
Marco Oliveira, Chief Innovation Officer at Uphold, echoed Tkachevsky and stressed the robust global talent pool for cryptocurrency and Web3 in Portugal. He said, “The influx of international entrepreneurs paired with the local technical know-how made Portugal a breeding ground for all things Web3, blockchain and crypto. The local talent is hard-working and in no way less than what you’d find elsewhere. We chose to grow in Portugal a decade ago, and this is why we keep investing in this ecosystem to build the Web3 financial platform that Uphold is. The Portuguese market is small in comparison, so Portuguese tend to have a global mindset, and it’s fantastic that you can easily bump shoulders with other local and foreign entrepreneurs with whom you can learn, partner, and grow together.”
Ilya Milkin, CEO and Founder at WallId believes that Portugal is set to stay as Europe’s crypto hub. He believes, “Regardless of what’s happening with large players in crypto space, strategic developments and projects are created by talented startup founders and blockchain developers. Portugal remains a very attractive place for this community, and they will shape the future of the crypto industry.”
Location, Location, Location
With its proximity to Spain, Portugal is often the “next” market Spanish fintechs look to, both from an operational perspective but also as a similar market to grow the product offering. David Conde, CEO of Coinscrap Finance, said, “Choosing Portugal as one of our operational bases is a strategic decision grounded in its conducive business environment. The country’s robust economic growth, financial stability, and progressive regulatory landscape make it an ideal hub for our fintech operations. Moreover, the cultural and geographical proximity to Spain streamlines adaptation, fostering seamless collaboration and a strong market presence. Portugal’s increasing demand for digital financial solutions aligns perfectly with our offerings, presenting a ripe opportunity for growth and establishing a meaningful footprint in the Portuguese market.”
A Freelancer and Digital Nomad Haven
Portugal has become an attractive destination for freelancers and digital nomads, thanks to a range of policy initiatives and tax incentives designed to encourage their relocation and work within the country. The most notable incentive is the Non-Habitual Resident (NHR) scheme. Although set to change in 2024, it offers significant tax benefits for new residents for a period of ten years. Under this regime, foreign income (including pensions, dividends, royalties, and interest income) may be exempt from Portuguese taxation. Additionally, employment and self-employment income derived from high-value-added activities of a scientific, artistic, or technical nature can be taxed at a flat rate of 20%. This focus on high-value activities makes the Portuguese freelancer micro-economy highly skilled and tech-savvy, and this market excited Vânia Fortes, Founder of Jupiter app. Fortes believes policy has played a key role in strong growth in the freelancer sector.
“We’ve seen in the last couple of years a new movement due to the rise of the gig economy and programs like NHR that brought in a new kind of freelancer, an international and tech-savvy one to Portugal. From the macro perspective, these freelancers differ from those we had just 15 years ago. Today, they’re highly qualified individuals who choose freelancing as their preferred work mode. Gen Z is also entering the workforce, and they’re not up to a 9 to 6 work schedule so that freelancing will be the answer.”
All Eyes On Portugal
Portugal stands out as a case study of how a vibrant fintech scene can develop from various government policies. This distinct policy framework has nurtured a flourishing fintech ecosystem and positioned Portugal as a hub for digital asset companies and freelancer-centric startups. The diverse array of fintechs, from ivendPay’s cryptocurrency solutions to Jupiter app’s freelancer-focused services, underscores the relationship between progressive policy and technological innovation. In this era of fast-paced financial service innovation, Portugal’s model demonstrates that the right blend of policy, innovation, and collaboration can create an environment where technology thrives and catalyzes a small country like Portugal to become a regional and potentially global hub for innovation.
Disclosure: I am a business and fintech advisor at Jupiter app.