Fintech Market Overview

This article does not constitute legal advice.

Cryptocurrencies in Spain

Fintech Software

In January 2022, Spain established rules regulating how cryptoassets are to be publicised. Among other things, these rules force providers of cryptoasset services and certain other legal and natural persons to inform the CNMV of cryptoasset publicity campaigns that target more than 100,000 investors 10 days in advance and to include warning disclaimers about the risks assets pose. In addition, this regulation provides the principles and rules applicable to marketing materials regarding cryptoassets. Other than this, no specific regulatory framework governs the marketing of fintech products and services (except for Law 5/2015) so these entities must observe the marketing legislation applicable to any other company. Apart from the Spanish Consumers Law, which establishes certain principles on marketing, and the general law on publicity, other applicable publicity provisions are included in the Spanish laws on electronic commerce and distance marketing of financial services.1

Spain has no specific regulation on blockchain technology, cryptocurrencies or the issuance of tokens. However, the European and Spanish regulators have been assessing these products for some years and have taken some steps towards their regulation.1

On 24 September 2020, the European Commission published its proposed regulation on markets in cryptoassets (MiCA), which forms part of a wider set of publications on Europe's Digital Finance Strategy. MiCA will apply to any person who provides cryptoasset services or issues cryptoassets in or into Europe. It will also apply to any cryptoasset that is not already subject to EU regulation. This will include utility tokens, payment tokens, stablecoins (or asset-referenced tokens) and a newly defined e-money token (a token that is not e-money in the traditional sense, but has all the hallmarks of traditional e-money). It will not apply to security tokens that are already subject to existing EU regulations. Neither will it apply to central bank digital currencies, but it imposes substantial requirements on significant stablecoins (global stablecoins (GSCs)). This appears to be another regulatory step to ensure central banks retain control of monetary policy and to safeguard against perceived risks with GSCs.1

MiCA defines a cryptoasset issuer as any 'person who offers cryptoassets to third parties', which is an intentionally broad definition. All issuers will have to comply with a number of general requirements, with issuers of stablecoins (or asset-referenced tokens) and e-money tokens (payment tokens) being subject to more stringent requirements.1

Nevertheless, MiCA is still at the proposal stage and needs to undergo the EU legislative process. During 2021, several European institutions, such as the ECB, the European Economic and Social Committee and the European Data Protection Supervisor, published their opinions on the proposal. On 24 November 2021, the European Council adopted its position on the proposal. The latest draft has delayed MiCA's effective entry into force until 2024.1

ESMA has published two statements on ICOs. Also, the CNMV and the BoS have warned firms and investors about the regulations and risks inherent to ICOs, cryptocurrencies and tokens. Their last joint press statement on cryptocurrency investment risks was published in February 2021. Along the same lines, and as mentioned above, the CNMV has regulated on the advertising of cryptoassets for investment purposes (through Circular 1/2022).1

The BoS has created a register of providers engaged in exchange services between virtual currencies and fiat currencies and custodian wallet providers, pursuant to the transposition into Spanish legislation of the Fifth Anti-Money Laundering (AML) Directive. These providers, which were required to register with the BoS before 29 January 2022, are now subject to the requirements set forth in the Spanish AML legal regime.1

As concerns the tax treatment of cryptocurrencies and tokens in Spain, the matter is not a clear-cut issue, although the European Court of Justice (ECJ) and the Spanish tax authorities have provided specific guidelines.1

Regarding Spanish VAT, the ECJ judgment of 22 October 2015 (C-264/14) ruled that transactions involving non-traditional currencies, such as cryptocurrencies, are exempt from VAT pursuant to Article 135(1)(e) of Council Directive 2006/112/EC. Therefore, according to the ECJ, sale and purchase transactions with cryptocurrencies carried out by VAT-taxable persons should be exempt from Spanish VAT. On the contrary, 'mining' activities to generate cryptocurrencies should not be subject to VAT. Both criteria have also been shared by the Spanish tax authorities in specific binding tax rulings, in which it has also been confirmed that staking activities are subject to, but exempt from, VAT if carried out by VAT-taxable persons.1

For Spanish tax-resident individuals holding cryptocurrencies, and pursuant to specific binding rulings issued by the Tax Agency in 2018, income triggered on the sale or transfer of cryptocurrencies (including that resulting from the exchange of one type of cryptocurrency for another) should be deemed as capital gains from a Spanish tax standpoint, and should be taxed accordingly. Specific activities concerning cryptocurrencies (e.g., mining) may have a different tax treatment and, potentially, be deemed as business activities for Spanish tax purposes (income tax, business tax, etc.). The Spanish tax authorities are currently issuing binding rulings with regard to tax treatment associated with cryptocurrency activities in relation to other taxes, such as wealth or gift tax.1

There are some measures in Spain to prevent tax fraud related to cryptocurrencies. In this regard, companies that manage cryptocurrencies, as well as exchange platforms, are obliged to provide certain information about holders' identity and transactions. Spanish residents with cryptocurrencies located abroad are obliged to file Form 721; this requirement is expected to be approved shortly.1

In addition, recent regulatory changes have entered into force in the past months, such as a new regulation on certain aspects of digital trust services (Law 6/2020) or cybersecurity regulations (Royal Decree 43/2021). Also, the recognition in Spain of specific digital rights is currently being reinforced through certain initiatives, such as the proposal for approval of a Spanish Charter of Digital Rights, all of which should be taken into consideration owing to their impact on the fintech legal framework. Finally, the main disruption in the global financial sector is still expected to result from ledger technologies such as blockchain. Although this type of technology is not yet commonly used, it is expected to emerge in Spain in many areas beyond just cybersecurity and cryptocurrencies.1

Virtual currencies in Spain

Fintech in Spain

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Viacheslav Losev

Viacheslav Losev

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  1. https://thelawreviews.co.uk/title/the-financial-technology-law-review/spain
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