Notwithstanding attempts made by some to include blockchain-based currencies into the scope of the forthcoming PSD2,[1] bitcoins and similar cryptocurrencies are quite sensibly not generally seen as e-money or payment services regulated under the EMD[2] and (the existing and forthcoming) legislative PSD framework.[3] The main reasons are because there is no (responsible) issuer behind cryptocurrencies (which excludes their qualification as e-money) and the object of a service (cryptocurrencies) should not be mistaken for the service itself (a payment service consisting in “placing, transferring or withdrawing funds” within the meaning of PSD1[4]).
However, not all courts in Europe have yet become familiar and at ease with the quite complex scope of application of the harmonised payment legislative framework.[5] In addition, certain jurisdictions within the EEA have shown themselves, at least via their governments, regulators or courts, rather conservative in their approach to cryptocurrencies. France is unsurprisingly one example of such a jurisdiction.
Consequently, it is not that surprising that “pro-regulation” court decisions may pop up within the EEA[6] from time to time, in the wake of the Paris court of appeal decision held at the end of 2013[7] and followed by its regulatory backing in 2014.[8] In substance, the court of appeal of Paris held that trading in bitcoins, to the extent that it entails receiving euros from buyers and transferring them to sellers, amounted to providing a payment service requiring authorisation pursuant to (the French law provisions faithfully implementing) PSD1.
Unfortunately, the risk of inconsistency across the EEA has yet to be monitored by the ECJ,[9] notwithstanding the decision held in October this year[10] on the very subject of bitcoins and their trading within the EEA. Indeed, the VAT angle from which the subject was addressed,[11] as well as the reasoning behind the pragmatic conclusion reached by the ECJ should prevent one from drawing any non-VAT conclusion out of the ECJ court decision. As part of its reasoning, the ECJ arguably took the view that the trading in bitcoins should be seen as a service subject to same VAT exemption as currencies having legal tender status, even if bitcoins do not meet the explicit exemption condition of having legal tender status. Also, the ECJ supported the idea that bitcoins have “no purpose other than to be a means of payment”, which is questionable having regard to the fact that holding bitcoins may be seen as a purpose in itself, e.g. to make a speculative gain.
Faced with the real and often criminally sanctioned risk of on-boarding customers based in “pro-regulation” jurisdictions, businesses whose object is to provide services in connection with bitcoins and other cryptocurrencies should perhaps start considering the other side of the regulatory coin. Indeed, being authorised in one jurisdiction as a PSP[12] allows one to provide one’s services across the EEA (including the UK even after 2017, unless the BREXIT scenario comes true …) without having to worry about authorisation in all the other EEA host jurisdictions, thanks to the EU freedom to provide cross-border services and the EU right of establishment. Customers and regulators would feel more comfortable if a regulated entity was to remain responsible, given that the currencies in question are not real currencies. There is indeed no issuer or intermediary in the middle to provide a guarantee. One may argue that there is no need for a guarantee but one may also object that a guarantee provides at least some peace of mind and might perhaps come in useful, e.g. in a catastrophic scenario where regulators, investors and cryptocurrency holders will be desperate to find someone liable in the blockchain, other than an anonymous mining geek based on the other side of the world.
[1] Proposal for a directive of the European Parliament and of the Council on payment services in the internal market and amending Directives 2002/65/EC, 2013/36/EU and 2009/110/EC and repealing Directive 2007/64/EC.
[2] The so-called Electronic Money Directive 2009/110/EC of the European Parliament and of the Council dated 16 September 2009 (repealing the first electronic money directive adopted in 2000).
[3] The so-called Payment Service Directive (otherwise referred to as “PSD1”) 2007/64/EC dated 13th November 2007.
[4] Article 4.5 of PSD1.
[5] Which also includes the issuance or administration of “means of payment” falling within the scope of Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013.
[6] European Economic Area.
[7] Court of Appeal of Paris, 26 September 2013, SAS Macaraja versus SA Crédit Industriel et Commercial.
[8] Position issued on 29th January 2014 by the French Autorité de Contrôle Prudentiel et de Résolution.
[9] European Court of Justice.
[10] HEDQVIST ruling issued on 22nd October 2015.
[11] The request for a preliminary ruling made to the ECJ related to the interpretation of Articles 2(1) and 135(1) of Council Directive 2006/112/EC of 28th November 2006.
[12] Payment Service Provider, as defined by the PSD.
