14. Virtual currencies

Regulations: Art. 24 Wealth Tax Law

"Virtual currency" (also called "cryptocurrency") is defined in Article 1.5 of Law 10/2010, of April 28, on the prevention of money laundering and the financing of terrorism 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 this definition into account, virtual currencies are considered, for tax purposes, as intangible assets, computable in units or fractions of units, which are not legal tender, but which are used as a means of payment as they can be exchanged for other assets, including other virtual currencies, rights or services if they are accepted by the person or entity that transfers the asset or right or provides the service. Since virtual currencies have economic content, like the rest of the assets owned by the taxpayer of the Wealth Tax, they must be declared.

Under the term "virtual currencies" ("cryptocurrencies") are included various categories such as 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 registry technology or blockchain) which allows a public record of all transactions carried out with the corresponding virtual currency, to the most recent ones such as stablecoins (which 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 goods such as gold or real estate, or to another cryptocurrency or being controlled by algorithms that allow maintaining a stable price) and, in general, the so-called payment "tokens" that, unlike the previous ones (bitcoins or altcoins), do not have their own DLT or blockchain so they 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.

The financing of projects through these platforms currently occurs mainly through the 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 IPO 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 ("ficha" could be the translation into Spanish) is broader than that of cryptocurrency since it can be used not only as a means of payment but for other diverse uses by converting any right into a fungible and negotiable digital asset. A token can represent a currency, but also 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 two types or categories:

In the case of virtual currencies (cryptocurrencies), the taxpayer must declare in the Wealth Tax the balance of each virtual currency different from the one he owns on the accrual date, that is, on December 31 of each year, valued at market price on the aforementioned date, that is, at its equivalent value in euros on that date.