Introduction to the authorized and regulatory framework
In Spain, there isn’t a laws particular to digital currencies, apart from the piece of laws accepted in April 2021 implementing the Fifth Anti-Cash Laundering Directive (see Part IV), the legislation accepted in July 2021 on stopping and combating tax evasion, and a legislation accepted in November 2020, which not directly pertains to digital currencies; the latter consists of measures for the digital transformation of the monetary system, together with the authorized framework for a regulatory sandbox.2
In 2018 the Spanish securities regulator (CNMV) and the Financial institution of Spain issued joint recommendation on the dangers related to buying digital currencies or investing in merchandise tied to them,3 and the CNMV has issued two different paperwork setting out its opinion and place on a number of issues associated to digital currencies. Nonetheless, solely the CNMV has issued an announcement to make clear that it has not authorised any prospectus, nor has it exercised any authorisation for, or energy to confirm, any transaction in reference to cryptocurrencies and it nonetheless stands immediately.4
In 2021, the CNMV and Financial institution of Spain issued a brand new press assertion on cryptocurrency funding dangers.5
The Spanish tax authorities have additionally issued a number of binding rulings on the tax features of actions involving digital currencies.
Securities and funding legal guidelines
i Classification and commercialisation of digital currencies
The CNMV has unofficially said that digital currencies per se shouldn’t be thought-about securities. Nonetheless, a draft legislation was printed in April 2021 that additionally consists of among the many monetary devices set out within the Spanish securities market legislation the devices issued via distributed ledger expertise (DLT).6
On this respect, following experiences from the European Securities and Markets Authority and the European Banking Authority (EBA) (each printed in January 2019), cryptoassets may be categorised into 4 classes: (1) foreign money tokens (cryptocurrencies with no rights or funding functions); (2) safety tokens, which normally present property rights, curiosity rights or dividends hooked up to a enterprise; (3) utility tokens, which facilitate entry to a product or a service, however don’t function a fee technique for different services or products; and (4) hybrids, which might fall below greater than one of many first three classes.
With out prejudice to the above, the CNMV has acknowledged that the providing and commercialisation of digital currencies can have funding legislation implications as follows.7
The place digital currencies are acquired by platforms working on the web (exchanges) and thru cryptocurrency automated teller machines (ATMs), the CNMV considers that traders don’t really instantly personal the digital currencies, and as an alternative solely have rights in relation to an unsupervised change or middleman. As a consequence, purchasers are uncovered to the chance of an middleman changing into bancrupt or not complying with primary guidelines on correct record-keeping, diligent custody and recording of belongings, and the right administration of conflicts of curiosity.
Contracts for variations
Entities providing these merchandise needs to be authorised by the CNMV to supply funding providers and meet all reporting obligations and different relevant guidelines of conduct.
Futures, choices and different derivatives
If these kind of merchandise have been authorised by a regulated supervisor, their energetic advertising below a public providing by market professionals to retail traders may require a prospectus accepted by the CNMV or one other EU authority below the passporting preparations.
Collective funding autos that spend money on cryptocurrencies
The CNMV has acknowledged that UCITS can spend money on cryptocurrencies by monetary devices whose profitability is linked to these currencies and that don’t incorporate an implicit by-product instrument, offered that their value is printed in a market each day.8 Moreover, Spanish hedge funds may spend money on cryptocurrencies by derivatives, offered that the settlement of the by-product doesn’t suggest the supply of the related currencies, though these kind of funds can solely be marketed to skilled traders. In any occasion, the prospectus and key investor info doc of any Spanish collective funding scheme has to incorporate an categorical and outstanding point out of the investments in cryptocurrencies and the dangers thereof.
Buying structured bonds the place the underlying asset is a digital foreign money
Beneath a public providing regime, the advertising of exchange-traded merchandise and exchange-traded notes require approval by the supervisory authority of an explanatory prospectus that has additionally been topic to the related EU passporting process.
ii Preliminary coin choices
The CNMV9 understands that transactions structured as preliminary coin choices (ICOs) in lots of instances needs to be handled as points or public choices of transferable securities given the broad definition of transferable safety below Spanish legislation.10
The CNMV units out the next elements as being related in assessing whether or not transferable securities are being supplied by an ICO:
- tokens that assign rights or expectations of a share within the potential enhance in worth or profitability of companies or tasks or, generally, that they represent or assign rights equal or just like these of shares, bonds or different monetary devices ruled by Spanish securities legislation; or
- tokens that entitle entry to providers or to obtain items or merchandise, that they’re supplied referring explicitly or implicitly to the expectation that the purchaser or investor will get hold of a revenue because of their enhance in worth or some type of remuneration related to the instrument, or reference is made to its liquidity or tradability on equal or allegedly related markets to regulated securities markets.
Nonetheless, with regard to level (b) above, if it can’t be moderately established that there’s a correlation between the expectations of a revenue or a rise of worth and the evolution of the underlying enterprise or undertaking, then the token shouldn’t be thought-about a monetary instrument.11
If ICOs qualify as monetary devices, then the regulation contained in, regarding or arising from the Markets in Monetary Devices Directive II, the Prospectus Directive and the Various Funding Fund Managers Directive ought to apply to them.
Even when an ICO doesn’t qualify as a public provide (as a result of it’s both geared toward fewer than 150 traders, or entails a minimal funding of €100,000 or a complete quantity of lower than €5 million), if the location is made utilizing in any way type of promoting (together with web sites in Spanish providing the tokens), an entity authorised to supply funding providers ought to intervene in relation to its advertising.12 The CNMV understands that this requirement is fulfilled if the entity authorised to supply funding providers intervenes:
- on the event of every particular person subscription or acquisition of the securities or monetary devices as a placement agent, dealer or adviser, topic to the principles relevant in every case; or
- by validating and supervising the provide generally and, particularly, the knowledge offered to traders, and the location or advertising process used (with out an authorised entity having to intervene on the event of every subscription or acquisition). With regard to the validation of knowledge, the authorised entity should be certain that the knowledge is evident, neutral and never deceptive, and that it refers back to the traits and dangers of the securities issued, in addition to the corporate’s authorized, financial and monetary state of affairs, in a sufficiently detailed method to permit the investor to make a well-informed funding determination. Likewise, the knowledge for traders shall embody a warning on the novel nature of the registry expertise and on the truth that the custody of the tokens shouldn’t be carried out by an authorised entity.
To this point, the CNMV has not authorised any ICOs, though it has analysed a number of potential ICO buildings. The motion of the CNMV in reference to these tasks on the difficulty of tokens (which may very well be equal to transferable securities) has been restricted to confirming that the transaction wouldn’t require the approval of a prospectus offered that it complied with the necessities set out within the Spanish laws to not be thought-about a public provide; nor would it not be topic to verification or prior intervention by the CNMV, though the participation of an funding agency can be obligatory.
As well as, the above-mentioned draft legislation offers that the CNMV might topic the promoting of cryptoassets for funding functions to authorisation, together with the introduction of warnings on dangers and traits, though they don’t seem to be merchandise lined by the Spanish securities market legislation. For this objective, in June 2021 the CNMV printed a draft round for public session.13 The aim of this round is to develop the requirements, ideas and standards to which promoting exercise associated to cryptoassets will likely be topic and, particularly, to outline the target and subjective scope, in addition to the powers of the CNMV on the supervision and management of promoting of cryptoassets.