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BITCOIN, the BLOCKCHAIN and the law

BITCOIN, the BLOCKCHAIN and the law. tax & legal framework impact of blockchain-based technologies on the legal space. Table of contents. Introduction Cryptocurrencies & the law Impact of blockchain-based technologies on the legal space. 2. Thomas Spaas. ° 1980

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BITCOIN, the BLOCKCHAIN and the law

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  1. BITCOIN, the BLOCKCHAIN and the law tax & legal framework impact of blockchain-based technologies on the legal space

  2. Table of contents • Introduction • Cryptocurrencies & the law • Impact of blockchain-based technologies on the legal space 2

  3. Thomas Spaas • ° 1980 • Director of Belgian Bitcoin Association • Lawyer at Bar of Antwerp, specialising in: • Belgian and international taxation • cryptocurrencies • thomas.spaas@taxandlegal.be • +32 477 36 49 33

  4. cryptocurrencies & the law • or • ?

  5. cryptocurrencies & the law • focus on selected problems: • financial regulations & tax law

  6. cryptocurrencies & the law • Important reminder: regulations are splintered, definitions are not consistent • Example: “Bitcoin is money” (agree or disagree) • “Money” in the economic sense • ≠ • “Money” in civil law • ≠ • “Money” in financial regulations • ≠ • “Money” in VAT legislation

  7. cryptocurrencies & the law • EU Financial regulations • E-money Directive • Payments Services Directive • Mifid-Directive

  8. cryptocurrencies & the law • E-money Directive (Directive 2009/110/EC) • Art.2.2: “electronic money” means electronically, including magnetically, stored monetary value • as represented by a claim on the issuer which is issued on receipt of funds for the purpose of making payment transactions as defined in (the Payment Services Directive), and which is accepted by a natural or legal person other than the electronic money issuer; • NO “ISSUER” -> bitcoin ≠ e-money as defined in the directive

  9. cryptocurrencies & the law • Payment Services Directive (Directive 2007/64/EC) • Execution of payment transactions ? or • Money remittance ? • Using the bitcoin network as such, w/o interaction w fiat money ≠ payment transaction ≠ money remittance • BUT… using the bitcoin network to execute a classic payment transaction or to remit classic money = payment service • -> bitcoin exchanges may qualify as payment service providers

  10. cryptocurrencies & the law • MIFID Directive (Directive 2004/39/EC) • “Financial instruments” -> broad definition, but always seems to require a right on the issuer • Bitcoin ≠ financial instrument • but bitcoin derivatives = financial instrument • NOTE: bitcoin derivatives cannot be marketed to the public in Belgium (FSMA) - selling bitcoin as such is not restricted

  11. cryptocurrencies & the law • Conclusion: bitcoin as such is currently out of scope of most (EU) financial regulations • At the edge (interaction with classic system) financial regulations may apply • E.g. bitcoin exchanges -> probably a payment service provider, with relevant AML/KYC provisions and guarantees • NOTE: watch out for other regulations, such as 3.000 EUR cash limit for merchants (relevant for bitcoin ATM operators)

  12. cryptocurrencies & the law • TAX LAW • Income taxes: income is income, regardless of whether obtained in bitcoin, fiat, gold… • VAT: buying something with bitcoin = normal VAT rules applicable • BUT: buying bitcoin with fiat money = VAT-able transaction? • EU Court of Justice to decide

  13. IMPACT OF BLOCKCHAIN-BASED TECHNOLOGIES ON THE LEGAL SPACE • SUSKIND “Embedded legal knowledge” = programs and IT systems that incorporate legal rules (laws & contracts) • What else is bitcoin than (inter alia) “possession vaut titre”? • No government or central organisation to enforce these rules • Bitcoin-rules are self-executing • Could we use the blockchain for other purposes?

  14. IMPACT OF BLOCKCHAIN-BASED TECHNOLOGIES ON THE LEGAL SPACE • Some other applications of the decentralised blockchain in the legal sphere: • land titles • votes • patents • ID documents • professional certifications • …

  15. IMPACT OF BLOCKCHAIN-BASED TECHNOLOGIES ON THE LEGAL SPACE • Smart contracts (ETHEREUM) • Contract, terms and conditions kept in blockchain-like system and automatically executed in a decentralised way • Contract is not running on single computer but “as if” on many computers at once

  16. FINAL NOTE • What we often hear from bankers • “I like the blockchain, but I don’t like bitcoin.” • OK, but… • decentralised ≠ free • parties that secure the network need an incentive • blockchain & currency go hand in hand • difficult to have one w/o the other

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