Major collaboration between a bank and Bitcoin, Crypto Law blockchain and regulator

Law of obligations

As Bierens already established, Article 6: 112 of the Civil Code leaves room to use the Bitcoin as a means to pay sums of money. This seems to be consistent with the scope of qualification in Germany. In addition to our only legal tender, the euro there are various other payment or exchange means which are often limited by private law in functionality.

Consider, for example, Airmiles, bartering units, etc. Anyone who 'pays' Airmiles saved via the supermarket will pay a sum of money by 'debiting' his Airmilie balance as a claim against the Airmiles issuing institution, probably consisting of the consortium of participating companies.

In the Netherlands, the use of the Bitcoin is currently limited in scope. Thuisbezorgd.nl accepts it as a means of payment of a sum of money. In The Hague, Canada is the first Dutch Bitcoin ATM, where only Bitcoins can be obtained in exchange for euros and not vice versa.

Against the write-off of euros, the pinner receives a barcode which can be scanned, so that Bitcoins can be obtained via the internet. Entrepreneurs there accept the Bitcoin as well. However, the use of Bitcoins as a means of payment increases on the worldwide Internet, as well as in the real world of the United States and Europe to China, but also in Afghanistan. Investors also recognize this trend.

Not that they are investing directly in Bitcoins, but large-scale venture capital investments are now taking place in the United States in Bitcoin and e-cash related start-ups.

Comparison of law

In international publications it is argued that Bitcoins can be regarded as currency or as commodity kind goods. Incidentally, one concept excludes the other. If the Bitcoin is a commodity commodity, it can not be a currency and vice versa. We will hereafter mention a few publications as inspiration for possible further research.

According to the Bitcoin.org website Bitcoin is money, which indicates that it would be currency. By contrast, the Finnish central bank categorizes Bitcoin as a commodity rather than a currency. The Japanese government is also tending to that. [26] In Germany, the Bitcoin has now obtained an official status. In response to questions from parliamentarian Frank Schaeffler, the Ministry of Finance replied that Bitcoin is a financial instrument, more specifically as currency units to be equated with currencies as referred to in the Credit Scheme Act.

This makes Germany the first country to recognize the digital currency as a financial instrument. This does not mean that payment can be made anywhere with Bitcoins, but that assets are recognized in the digital currency and that private parties are free to agree on it as the current payment method.

In the United States, Bitcoin has already been classified as a regulatable currency by a judge, but the American government has not yet commented on the currency. The state of New York intends to regulate the Bitcoin in the second half of this year. It is still unclear how this will look like.

The Bitcoin insurance

Although the Bitcoin creates many opportunities, such as fast and cheap settlement of transactions, there are also a number of drawbacks to acquisitions.These disadvantages apply to consumers, but also to Bitcoin entrepreneurs and bitcoin or crypto insurance.

Bitcoin exchange platforms can go bankrupt faster due to the absence of supervision than exchanges that are supervised. They can also be closed for money laundering if there is criminal involvement whether or not in connection with the anonymity of the Bitcoin. The position of the Bitcoin in the various worldwide jurisdictions is also unclear, which causes major price fluctuations when a government or regulator in a relevant jurisdiction turns over the Bitcoin.

It has also happened several times that wallets, the digital Bitcoin wallet, are being cracked due to inadequate IT security. And last but not least, there is no financial protection under the Deposit Guarantee Scheme or Investor Guarantee Scheme. This clearly made itself felt in the bankruptcy of Mt. Gox in early 2014.

By increasing the use of Bitcoins in the real white economy, the legitimate need for users to hedge 'price risk' of the Bitcoin is growing. In 'customer centric terms' you could speak of an emerging new customer need. For Dutch banks and insurers this is an opportunity to be socially useful and to connect with the customer's experience of the future. Bitcoin can be a harbinger of what is of lasting value in the future, just like the computer and the internet.

Assuming that this customer need is increasingly manifested, product development departments of banks and insurers will be stimulated more to investigate whether they can meet these needs through a thorough product development process. Depending on the outcome

As we wrote before, we are inclined to consider the digital coins as foreign-rights property rights, which have the nature of commodities. Based on this, it is legally possible to enter into derivative transactions with regard to Bitcoins, as well as with respect to other currencies or commodities.

These transactions can be used to hedge risks, for example by taking an option on the purchase or sale of Bitcoins at a predetermined price, in which any price increase or price decrease is discounted. Or by exchanging Bitcoins against euro or US Dollar and the like.

There are in particular several parties active in the United States that already offer such derivatives. Initially, this was only done by niche players who were specifically targeting Bitcoins, such as the derivatives trader ICBIT. For example, ICBIT offers all sorts of futures whereby Bitcoins are traded against Dollars Euro Yuan or oil. Recently more traditional derivatives parties have also started using derivatives in Bitcoins.

For example, at the end of March TeraExchange announced that it would offer Bitcoin swaps. TeraExchange is supervised by the US Commodities Futures Trading Commission.

In addition to derivatives in which Bitcoins are directly involved, it is also possible to trade in derivatives in which only the price of the Bitcoin is used. That price is then determined on the basis of a few Bitcoin exchanges.

The advantage of this type of derivatives is that they can be used without the parties having to transfer to the Bitcoins. They are only a hedge against the relevant price risks. Examples of such derivatives are contracts for difference. Such derivatives are also offered in the Netherlands by the derivatives traders Plus500 and Avatrade.

Here and there it is claimed that credit default swaps can also be entered into with respect to Bitcoins. We can not put that right. A Bitcoin is not a bond-like product, on the basis of which there is a debtor who has to pay an amount. The holder of a Bitcoin therefore has no claim. In the absence of a claim, there can also be no shortcoming in the fulfillment thereof, so that a credit default swap can not have a function.

For example a receivable from Bitcoins may play against the parties where Bitcoin holders hold credits in Bitcoins. Due to the bankruptcy of Mt. Gox has shown that these claims are not necessarily guaranteed.

It would be conceivable that credit default swaps with regard to the Bitcoin obligations of such parties would be closed, although in our opinion it is not obvious.

Supervision

The Netherlands Authority for the Financial Markets and De Nederlandsche Bank have indicated that they do not monitor Bitcoin because virtual currencies fall outside the scope of the Financial Supervision Act.

Development of the Bitcoin

 

However, both regulators closely monitor the development of the Bitcoin. Minister Dijsselbloem had also previously stated in reply to parliamentary questions that the use of Bitcoin is not subject to any form of government financial supervision.

In politics, on the other hand, there are voices to tighten the financial supervision of new digital currencies, such as Bitcoin. In particular, to stop the use by criminals.

Should the Bitcoin insurance come on the market, then there is an 'insurance' as referred to in art. 1:1 and the provider is an insurer that falls under the supervision regime of the Wft. But also the (previously) controlled monitoring of the Bitcoin results from the aforementioned supply of derivatives by Plus500 and Avatrade.

Developments are also taking place in Germany, as a result of which the Bitcoin is under supervision. The German Fidor Bank has entered into a partnership with the Bitcoin platform Bitcoin.de. With this collaboration, customers of the bank are given the opportunity to buy the virtual money via their payment account.

Major collaboration between a bank and a Bitcoin  

The collaboration is seen as the first major collaboration between a bank and a Bitcoin platform in Europe. However, approval from the regulator is still required. This cooperation with Fidor Bank is important for the Bitcoin platform Bitcoin.de. As a result, the virtual currency is increasingly given a serious status. In this way, bitcoin.de hopes to grow into an EU-regulated trading platform that complies with the rules of the financial markets.

When the cooperation is complete, the approximately 70,000 customers of Bitcoin.de will also be protected by the supervision that is in force on the financial market. 

 
Given the international nature of the Bitcoin, it is more logical for the Bitcoin to come under international supervision. Or at least European supervision. To this end, the French Minister of Finance Pierre Moscovici recently called on European supervisors to cooperate in regulating the virtual currency bitcoin. He wants a consultation with all EU member states for this.

In this article we conclude that the digital coins, the Bitcoins, are individualisable pieces of software that have been assigned or transferred to someone according to the software program and to which value is assigned in society. As indicated, these are not claim rights. In our view they could be regarded as a property right under foreign law. After all, on the basis of the software program, pieces of software that belong to persons are transferable according to the same program and which are intended to provide the beneficiary material benefit or have been obtained in exchange for material benefit. Like the fei, the value is as high or as low as the reputation it deserves. In our opinion Bitcoins can also be used to settle monetary debts, provided parties agree. Dutch private law does not oppose this.

For insurers and banks it is to be welcomed from the social role to positively influence the development of virtual money. To this end, we provide an incentive for the development of Bitcoin insurance in this article. This reduces the risks associated with the anonymity of the Bitcoins owners because insurers and banks apply their CDD policy. This also creates an indirect form of supervision by the institutions that supervise the insurer.

Conclusion

We see the Bitcoin as a forerunner of what is of lasting value in the future. It is an open-source software program, set up under license to the model of MIT. In short, this means that everyone is free to use the software, to copy it and to adjust it at its own discretion, while the author of the software accepts no liability.

Despite the considerable economic value, the legal qualification of the Bitcoin is causing headaches in many countries with all its consequences, such as lack of legal protection for the consumer and lack of supervision.