Cryptocurrencies as a means of contractual payment

The Spanish Government has recently presented a Draft Bill on measures to prevent and combat tax fraud, for the transposition of Directive (EU) 2016/1164, of the Council, of July 12, which establishes standards against the practices of tax avoidance that directly affect the functioning of the EU internal market, and Directive 2017/1852, of the Council, of October 10, 2017, regarding the mechanisms for resolving tax disputes in the European Union, and modification of various tax rules. This Draft Bill, to prosper, would acknowledge virtual currencies or cryptocurrencies in Spain. Despite the fact that on February 8, 2018, the Central Bank of Spain and the CNMV published a Joint Statement to warn of the risks that currently hover over the acquirers of cryptocurrencies, among which are the lack of regulation and legal supervision, the difficulty of knowing their characteristics and the lack of a guarantee fund, the Draft Bill, recognizes that cryptocurrencies -whilst not been legal tender- may be acquired, transmitted, exchanged, transferred or used to make payments in Spain. 

This initiative is clearly aligned with the position of the European Union, to recognize virtual currencies as a means of payment (see Dir.
2018/843, of 30 May 2018 *) and also discards the fact that they could be considered tangible assets. The Judgment of the Court of Justice of the European Union dated October 22, 2015, in the case Skatteverket vs David Hedqvist, already declared that the virtual currency cannot be described as “tangible property” within the meaning of article 14 of the VAT Directive, since it has no purpose other than being a means of payment, as is the case with traditional currencies that are legal means of payment (citing the First National Bank of Chicago case, C-172/96). The Court stresses that since the virtual currency “bitcoin” is a “means of contractual payment”, on the one hand, it is not possible to consider it as a current account or a deposit of funds, a payment or a draft and it constitutes a means of direct payment between the operators that accept it.

It is worth to mention that in Germany, last October 27, the Ministry of Economy issued a Document which states that the acquisition of goods or services with cryptocurrencies is possible and can be used as means of payment provided that both parties to the transaction accept them as an alternative means of payment.

The Spanish Draft Bill neither describes the legal nature of these virtual currencies nor mentions their function, but it proceeds to introduce certain fiscal obligations:

a) On the one hand, an obligation, by those who provide services on behalf of third parties to safeguard private cryptographic keys that enable the possession and use of such currencies, and by the service providers of exchange of the mentioned currencies if they also lend the aforementioned tenure service, to provide information on the balances held by the holders of virtual currencies.

b) And on the other, the obligation, for these same persons or entities, and also to those who make initial offers of new virtual currencies, to provide information about the operations on virtual currencies (acquisition, transmission, exchange, transfer, collections and payments) in which they intervene.

In addition to this, the Draft Bill stablishes the obligation to the owners  to inform on virtual currencies located abroad, or in respect of which one has the status of beneficiary or authorized or in any other way is held power of disposal, guarded by persons or entities that provide services to safeguard private cryptographic keys on behalf of third parties, to maintain, store and transfer virtual currencies. In the event of non-compliance with such obligation to report on virtual currencies located abroad, the sanction would consist of a fixed pecuniary fine with a minimum of 10,000 euros. 

(*) See European Union Anti -Money Laundering Directive (D. 2018/843, of 30 May 2018 providing a definition of virtual currency: “a digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily attached to a legally established currency and does not possess a legal status of currency or money, but is accepted by natural or legal persons as a means of exchange and which can be transferred, stored and traded electronically”. It also states that “they could also be used for other purposes and find broader applications such as means of exchange, investment, store-of-value products or use in online casinos. The objective of this Directive is to cover all the potential uses of virtual currencies”.

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