Skip to main content
Practical manual for Income Tax 2021.

Subject

The term "virtual currencies" (also known as "cryptocurrencies") encompasses several categories, including:

From bitcoins (the most well-known and popular) and other alternative currencies outside of these (which are generically called "altcoins"), all of them under the common denominator of being created with a "cryptographic" base (a system that protects information and communications through algorithms that make them secure and immutable) and operating independently in their own DLT networks (distributed ledger technology or blockchain) which allows a public record of all transactions carried out with the corresponding virtual currency.

Even the most recent ones, such as:

- stablecoins are virtual currencies designed to reduce the volatility that occurs in bitcoin or other cryptocurrencies, by being linked to the value of one or more legal currencies such as the dollar or the euro, to material assets such as gold or real estate, or to another cryptocurrency or being controlled by algorithms that allow a stable price to be maintained.

- and, in general, payment "tokens" that, unlike the previous ones (bitcoins or altcoins), do not have their own DLT or blockchain and therefore require another DLT platform (not their own) to function. For example, Ethereum is one of the platforms that allows people or entities to create their own virtual currencies to finance projects.

Project financing through platforms currently occurs mainly through so-called "initial cryptocurrency offerings" or ICOs (Initial Coin Offering, an acronym that evokes the expression IPO or Initial Public Offering, used in relation to stock market processes).

However, the term ICO can refer to both the actual issuance of cryptocurrencies and the issuance of rights of various kinds generally called "tokens".

The term token is broader than cryptocurrency, as it can be used not only as a means of payment but also for other diverse uses by converting any right into a fungible and negotiable digital asset. A token can digitally represent values (such as a virtual currency), but also rights (a property, a share, a financial asset, etc.). That is why we are currently talking about cryptoassets.

The uses and characteristics of these "tokens" (tokens or cryptoassets) vary, the most common classification of these "tokens" being the one that allows us to differentiate between three types or categories:

  • "Payment tokens" are cryptocurrencies or virtual currencies, which are used as a means of payment and as a store of value and unit of measurement, operating more similarly to legal tender. They are traded and can be exchanged for traditional or virtual currencies on specialized currency platforms, after their issuance.

  • "Security tokens" are designed as tradable assets that are held for investment purposes and generally provide participation in future earnings or increases in value of the issuing entity or a business and

  • "Utility tokens" ("Utility tokens"), currently translated into Spanish as "service tokens", which give the right to access a service or receive a product, without prejudice to which, on the occasion of the offer, mention is usually made of expectations of revaluation and liquidity or the possibility of trading them in specific markets.

Regarding the definition in our legal system of "virtual currencies", article 3 of Royal Decree-Law 7/2021, of April 27, has transposed into our legislation the definition contained in the Directive ( EU )2018/843 of the European Parliament and of the Council of 30 May 2018 amending Directive ( EU ) 2015/849 on prevention of the use of the financial system for money laundering or the financing of terrorism. To this end, with effect from 29 April 2019, a new section 5 is added to article 1 of Law 10/2010, of 28 April, on the prevention of money laundering and the financing of terrorism.

The new section 5 of article 1 of Law 10/2010 defines "virtual currency" as "that digital representation of value not issued or guaranteed by a central bank or public authority, not necessarily associated with a legally established currency and which does not have the legal status of currency or money, but which is accepted as a medium of exchange and can be transferred, stored or negotiated electronically ."

Taking into account this definition, virtual currencies ("cryptocurrencies" or "payment tokens") are considered, for tax purposes, as intangible assets , computable in units or fractions of units, which are not legal tender, which can be exchanged for other assets, including other virtual currencies, rights or services, if accepted by the person or entity that transmits the asset or right or provides the service, and which can generally be acquired or transmitted in exchange for legal tender.

Since each virtual currency has its origin in a specific computer protocol, different scope of acceptance, different liquidity, value and denomination, the different virtual currencies are different goods.