FCMC opinion on the legal framework for Bitcoin and similar instruments

18.02.2014
  • Section:

(updated 21.09.2017.)* 

Commission’s opinion on the legal framework for Bitcoin and similar instruments 

The Financial and Capital Market Commission (hereinafter – the Commission) emphasizes that the so-called virtual currencies (such as Bitcoin and similar instruments) are not subject to the laws and regulations within the competence of the Commission (for example, Law on Payment Services and Electronic Money, Law on the Financial Instruments Market, etc.). Therefore business activities related to purchasing and distributing Bitcoin and similar instruments cannot be recognized as the activities associated with the issue of financial instruments or electronic money or carrying out payment services. Consequently, the Commission does not grant licences to the natural and legal persons that are dealing with Bitcoin purchase and distribution, as well as they are not registered with the Commission as financial and capital market operators.

At the same time, the Commission stresses that Bitcoin and similar instruments cannot be recognized as official currency or legal tender, because the issue and use of such-like instruments are neither regulated nor pegged to any of national currencies. The official currencies are the legal medium of payment recognized by the national and payment systems, they have been accepted and are in circulation. However, Bitcoin is not an equivalent of the national currency of any country, as it is not allowed under law and it is not issued by any of competent authorities, such as the Bank of Latvia or the European Central Bank. Having regard of above and in accordance with the opinion of the Court of Justice of the European Union, the Commission points out that at the moment Bitcoin by its nature can be rather regarded as a contractual medium of payment that may be used as a means of exchange by parties provided that there is a mutual agreement between both parties and they are prepared to take risks associated with the use of Bitcoin.

Moreover, the Commission reminds that in December 2013 the European Banking Authority (hereinafter – EBA) issued a warning on the risks related to the use of virtual currency, e.g., Bitcoin in conducting various transactions. According to the EBA, currently the consumer rights are not protected because of the lack of any specific rules regulating the transactions that are performed using virtual currency as a means of payment, thus the consumers may be at risk of losing their money. Besides, the EBA points out that there is no guarantee that the value of the currency remains unchanged in the future as well, EBA points out. Further information on the publication is available at: http://www.eba.europa.eu/-/eba-warns-consumers-on-virtual-currencies.

The Commission indicates that companies that have intended to carry out their commercial activities related to Bitcoin may encounter problems with opening their current accounts with credit institutions, because the provision of services to such companies may pose a threat to the reputation of credit institutions. Also, the European Central Bank admits that participation in the virtual currency schemes (for example, Bitcoin and such-like instrument schemes) exposes users to liquidity, credit, legal and operational risks (publication available at: 

http://www.ecb.europa.eu/pub/pdf/other/virtualcurrencyschemes201210en.pdf)

(* Updated on 31.03.2017, according to the CJEU, judgment of 22 October 2015 in case C-264/14) 

Contacts


Address:
Kungu iela 1, Riga, LV-1050
Phone:
6 7774800
E-mail:
Previous sign-in to the secretary:
67 774 801
Data protection:

Follow the news


Subscribe to the news and receive important industry-related information in your e-mail