The high rise of crypto currencies in the USA and Europe is a fact that must not be ignored. It is a freight train running and continuously growing in all senses and directions despite the lack of a more reliable regulatory landscape. BITCOIN as you know it is here to stay and governments and businesses alike shall begin a dialogue to define a broad legal framework, starting with its three major concerns: defining its nature, adjusting to  anti-money laundering provisions and balancing consumers privacy and e-commerce,

Thinking that everyone is familiar with its nature – encrypted software that has a value – the discussion is its consideration; which is either as an asset or as a method/way of payment. Both the American and the British tax authorities have defined it as an asset, consequently implying tax issues. With such approaches, the leading ICT markets are leaving behind the idea of considering Bitcoin as a method of payment, a standpoint that, for example, the Spanish government declared to embrace. The Spanish Tax Authority recently stated that Bitcoin is a payment system and that it falls within the scope of the gambling act, which makes its tax issues even greater, or higher. If that is the case, Spanish bitcoiners need to lobby immediately to change this opinion and align it with the one of the US and the UK.

BITCOIN is something subject to value, thus its taxable and that’s the way we should look at it.

In terms of transmission of an asset, which happens virtually and under an encrypted format, it is clear that the Anglo-American legal approach is far better than the Spanish one. Providing Bitcoin with a value that is taxable, automatically allows every transaction bound to comply with the anti-money laundering act (AML). This is considered a great move. For those Seller-Buyer dealings or E-shops performing Bitcoin transactions, they  must be obliged to inform the authorities if there are cases where there is a hint of “dirty money” being traded by means of Bitcoin. On the other hand, authorities can swiftly use an existing legislation to tackle any attempt of money laundering and tax evasion.

The third and, under our view, most thorny issue is how to balance consumer privacy and the development of e-commerce as such under the light of existing laws. There is no shadow of doubt that personal data on the web – what we buy and what we see – is, and shall remain, as a never-ending issue. Before companies were interested on that kind data, later re-coined as big data, but nowadays we have governments that are becoming very intrusive about our communications due to the growing spur of terrorism across the world, giving particular importance to its financing on a sort of p2p basis. However, this issue per se, should not be the only reason for them to probe into our emails and online credit card transactions, be them with Euros, dollars or Bitcoins.

The question is how governments will request information of Bitcoin transactions; whether it is based on personal, quantitative or territorial criteria, this is an issue that needs to be discussed in depth. We could consider the option of making a black list that would include certain people, companies and countries, which would control or ban Bitcoin transactions in their origin or destination, in the same manner as tax havens lists. At this moment, it may stand out as the best solution. Such mechanisms would allow us to have knowledge of suspicious actions in advance.. Legally speaking, the complexities are immense given the fact that many jurisdictions have not fully developed regulations to protect users and online merchants, needless to mention Bitcoin exchangers. The jurisdiction in where to place a Bitcoin exchanger becomes of fundamental concern. Western countries shall adhere to one common universal spectrum of laws, not into its details, which should be left out for each country to rule. 

And if tax havens end up becoming Bitcoin havens as well, one can only imagine the drama that will follow for Bitcoin’s mainstream adoption and use.

The next article in our blog will address a current and very crucial dilemma: fitting Bitcoin within the existing European legislation.