Spain is starting an awakening in terms of Bitcoin and compliance by means of decisions that can be crucial for its future. In a recent ruling issued by the Provincial Court of Asturias (February 6 2015), the court has established the imperative value of antimony laundering regulations for transactions involving cryptocurrencies, highlighting its importance for those cases when bank institutions are participating in such matters. It raises the ever controversial issue of Bitcoin compliance, and how can anonymity and verification of identity may coexist in such businesses. Ultimately, we believe that AML and KYC policies will be imperative not only for Bitcoin’s mere subsistence in the global market but for its mainstream adoption as well. Analyzing the court ruling will help us to determine what the future of Bitcoin in Spain can look like.
The origin of such dispute arises over the breach of contract that was signed beforehand by the two parties: MEETPAYS, a Bitcoin purchase and sale service provider and the bank institution CAJA LABORAL. Initially, both parties signed an agreement by which CAJA POPULAR would install a virtual a Point of Sale terminal in MEETPAYS website. It is important to highlight that Caja Popular agreed under the idea that Meetpays’ activity was to provide software to be used for individual Bitcoin purchases. However, MEETPAYS activity would ultimately devote to the direct commercialization of Bitcoins.
As the service was activated, the bank institution had serious objections to MEETPAYS activity as it differed from what was initially established. MEETPAYS offered a service that could be used to make payments around the world in an anonymous and free manner by means of a computer or a mobile phone. Caja Laboral considered that such activity would make it impossible to verify the legitimacy and source of funds. Spain’s antimony laundering law (Ley 10/2010) indicates that bank institutions must comply with the regulation and proceedings of transactions of this nature, with special emphasis on the verification of identity of those parties involved. In addition, the AML law states that if those that are obligated to comply may not apply the appropriate due diligence measures, they shall not establish or execute any business operations or terminate those that are considered to create risk. It is a legal imperative matter, by which Caja Laboral abided to in their decision to terminate business operations with MEETPAYS.
In Spain, court rulings are not considered to have the same binding effect of a law, however, this is an initial but important approach of how Bitcoin could be regulated in the future. It is not surprising, as the issues of AML and KYC have also been fundamental in other jurisdictions when it comes to treating cryptocurrencies from a legal viewpoint. For example, the recent BitLicense document strongly emphasizes on security of transactions by means of AML and KYC policies, with the objective of increasing consumer protection and avoid illegal or fraudulent activities. We can observe that most jurisdictions are aligned when it comes to regulating AML laws, and this court ruling indicates that preventive measures and risk assessment must be previously studied in order to operate a Bitcoin business (for this matter, an exchange service).
Although Bitcoin’s philosophy may eulogize its decentralized and anonymous manner of exchanging assets, we believe that those are characteristics that may avoid Bitcoin from evolving into the mainstream adoption that is desired. Legal authorities will want to assure the stability of public safety and consumer rights in the same way that other traditional financial services are protected. We understand the court’s deliberation, as it clearly states that bank institutions must comply with AML procedures in order to conduct business and MEETPAYS was not considering such policies. Notwithstanding that they were unclear with their statements when it came to defining their ultimate activity.
It is interesting to call attention to the fact that MEETPAYS stated that before signing an agreement with Caja Laboral, they requested other bank institutions to provide such services but denied them the opportunity to do so. This clearly indicates that bank institutions in Spain have a conservative attitude towards something as unknown and as unclear as Bitcoin business operations. However, the precedent that this court ruling provides is important for the future of those wanting to establish Bitcoin exchange services and for bank institutions as well. It is indispensable to previously analyze and study all the risks and procedures that are dictated by law before establishing or conducting exchange operation services in Spain in the same manner that they are doing in other jurisdictions. Although it is not expressly written in a legal document, self regulation is a key factor to avoid any ultimate litigation controversies.