On 21 October this year, the Bank of Spain created the registry where service providers for both the exchange of virtual currency for fiat currency and the custody of electronic wallets must register, as a result of the approval of Royal Decree-Law 7/2021, of 27 April. The new legislation creates an obligation to register for these service providers whose non-compliance may involve fines of up to EUR 10 million.
Registration in the Virtual Office of the Bank of Spain
Spain has recently enacted legislation which has a direct impact on companies that provide services involving virtual currencies in Spain or from Spain. In April 2021, the Spanish Government enacted Royal Decree-Law 7/2021 of 27 April, implementing the Fifth EU Money Laundering Prevention Directive,1 to amend Spanish Law 10/2010, of 28 April, on the prevention of money laundering and terrorist financing (the "AML Law").
The AML Law is the first Spanish legislation regulating some aspects of virtual currencies. It does so by, firstly, adopting the definition of virtual currency established by the Fifth EU Money Laundering Prevention Directive; and, secondly, by regulating the operators involved in the process of exchanging virtual currency for fiat currency and those entities that provide the service of electronic wallet custody.
- Virtual currency for fiat currency exchange services is considered to be the purchase and sale of virtual currencies through the delivery or receipt of euros or any other foreign currency or electronic money accepted as a means of payment in the country in which it was issued.
- Electronic wallet custody services consist of the safeguarding or custody of private cryptographic keys on behalf of clients for the holding, storage and transfer of virtual currencies.
The Royal Decree-Law turns these operators into obliged subjects of the AML Law, which means they are, subject to the supervision of the Spanish money laundering prevention agency ("SEPBLAC") and must register in a registry created by the Bank of Spain in October 2021. Therefore, natural or legal persons, regardless of their nationality, place of incorporation or effective management, that offer or provide the above services in Spain or from Spain, should be registered.
The creation of this registry represents a step forward in the regulation of new service providers, who are now subject to the same money laundering and suitability requirements applicable to credit institutions.
If service providers of virtual currency for fiat exchange or electronic wallet custody perform such services in Spain or from Spain without being registered in the registry, they will be committing an infringement, even if the activity is only carried out on an occasional or isolated basis, which can result in fines of up to EUR 10 million.
The Bank of Spain has published a description of the process for carrying out the registration in its Virtual Office,2 which involves submitting a series of forms, together with documentation detailed in the virtual office. Once the application for registration is submitted, the Bank of Spain has three months to process the application although this period can be increased if, during processing, the supervisor requires additional documentation or information.
This new legislation creates an obligation on existing operators in Spain to be registered by no later than 29 January, 2022 and on those who intend to provide such services in Spain to register before starting their activity. Our lawyers can assist your company in ensuring a smooth transition to registration and compliance with the new legislation in order to prevent the imposition of any possible sanctions.
1 Directive (EU) 2018/843 of the European Parliament and the Council, of May 30, 2018.
2 https://sedeelectronica.bde.es/sede/es/menu/tramites/autorizaciones-de-entidades-de-credito-y-otros/registro-de-proveedores-de-servicios-de-cambio-de-moneda-virtual-por-moneda-fiduciaria-y-de-custodia-de-monederos-electronicos.html.
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