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1 BITCOIN, THE BLOCKCHAIN AND THE LAW tax & legal framework impact of blockchain-based technologies on the legal space
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BITCOIN, THE BLOCKCHAIN AND THE
LAWtax & legal framework
impact of blockchain-based technologies on the legal space
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TABLE OF CONTENTS
• Introduction
• Cryptocurrencies & the law
• Impact of blockchain-based technologies on the legal space
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THOMAS SPAAS• ° 1980
• Director of Belgian Bitcoin Association
• Lawyer at Bar of Antwerp, specialising in:
• Belgian and international taxation
• cryptocurrencies
• +32 477 36 49 33
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CRYPTOCURRENCIES & THE LAW
or
?
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CRYPTOCURRENCIES & THE LAW
focus on selected problems:financial regulations & tax law
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• 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
CRYPTOCURRENCIES & THE LAW
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• EU Financial regulations
• E-money Directive
• Payments Services Directive
• Mifid-Directive
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• 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
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• 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
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• 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
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• 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)
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• 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
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• 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?
IMPACT OF BLOCKCHAIN-BASED TECHNOLOGIES ON THE LEGAL
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• Some other applications of the decentralised blockchain in the legal sphere:
• land titles
• votes
• patents
• ID documents
• professional certifications
• …
IMPACT OF BLOCKCHAIN-BASED TECHNOLOGIES ON THE LEGAL
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• 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
IMPACT OF BLOCKCHAIN-BASED TECHNOLOGIES ON THE LEGAL
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• 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
FINAL NOTE
