By: Andrés Martínez – Zurita (guest author)
As I discussed in a post in April 2022 on my LinkedIn profile, I was involved in advising on the incorporation of an investment vehicle, which would invest in cryptocurrencies, NFTs, DeFi (decentralized finance), in various Liquidity Pools, etc.
Does a crypto-investment company need authorization or registration?
As a central part of the analysis, the key difficulty was to know if a Spanish trading company could invest in cryptocurrencies, NFTs, DeFi, without any prior authorization or if, on the contrary, it was necessary to proceed to registration or apply for any authorization.
This initial analysis played an important role, the registry of service providers related to cryptocurrencies, which by virtue of the Second Additional Provision of Law 10/2010, of April 28, 2010, on the prevention of money laundering and terrorist financing, enables the Bank of Spain within its functions.
The services in question are the following: exchange of cryptocurrencies for legal tender and custodians of digital wallets, to be even clearer, for the purposes of what we will analyze below, services provided to third parties (i.e. those providers who perform these actions for their own account and benefit are not subject to this registry).
This being so, the General Directorate of Legal Security and Public Faith, categorized in its resolution of December 16, 2021 (https://www.boe.es/boe/dias/2021/12/29/pdfs/BOE-A-2021-21753.pdf), on the need or not for registration as a crypto services provider by a cryptocurrency mining company, which served as the basis for the criterion that was followed.
Well, here, the key is whether the object of the company, as it was in the above mentioned case, that of investment, in which at last you are constantly exchanging cryptocurrencies, if therefore, it could fall within the objective scope of the regulation of the regulation in question, and you should join the registry enabled in the Bank of Spain.
Answer to the question
The key is resolved by the General Directorate of Legal Security and Public Faith as follows:
“The appeal must be upheld in relation to the activity of buying and selling securities, currencies and cryptocurrencies as the acquisition for own account is not a regulated activity, and there is no indication that the activity is carried out under the regime of services to third parties as it results from the initial clause of the second additional provision of Law 10/2010, of April 28. of prevention of money laundering and financing of terrorism, as well as its number two, letter b), and, as regards securities and currencies, as a result of the regulation, such as Article 144 of Royal Legislative Decree 4/2015, of October 23, which approves the revised text of the Securities Market Law. In addition, there is an express exclusion of application of the regime for investment companies.”
Indicating that it excludes from its corporate purpose the performance of activities subject to special regulation etc., as is usually done by many lawyers and law firms, is not enough.
Here the key, as already pointed out both in the publication of April 7, 2022, and in this article, is whether the activity in question, which is part of the company’s corporate purpose, is carried out on its own account or not.
Providing an example for clarity, in the case in question, a company that invests the capital contributed by its partners, does so for its own account, and therefore, if so, it is established in the corporate purpose, which, on the other hand is obvious, and therefore it is not necessary, as of today, to be registered in the registry for crypto service providers of the Bank of Spain.
We will see how all this will change with the entry into force, presumably in 2024, of the European Regulation MICA (Market in Crypto Assets), which is on the verge of its final approval by the European Parliament (after having passed all the previous steps of the legislative process).