Six keys to understanding how cryptocurrencies work in Spain

A few weeks ago, the draft law to prevent and combat tax fraud was passed, laying the foundations for the use and possession of cryptocurrencies. In this phase, The Spanish Association of Fintech and Insurtech Companies (AEFI) has prepared a report that attempts to analyze the functioning of cryptocurrencies from a regulatory perspectiveand which they shared with Cointelegraph en Español.

The paper took into account both the Spanish and European levels, as well as some of the uses and benefits that can be obtained from investing in crypto assets. Below you can see the analyzed points:

1- A digital medium of exchange

Cryptocurrencies came onto the market in 2009 with the introduction of Bitcoin as a digital electronic money system to conduct transactions between people (peer-to-peer) without financial intermediaries.

Six keys to understanding how cryptocurrencies work in Spain
Six keys to understanding how cryptocurrencies work in Spain

You work with blockchain technology. Through purses or wallets in which the cryptographic keys are stored in the devices, electronic money can transfer the value from one device to another.

The initial approach of these electronic currencies is that they were issued on a public blockchain (which can be accessed by anyone) and that they were independent of traditional and virtual currencies, acted as a decentralized currency and, moreover, had some advantage over traditional ones Money: anonymity.

However, there are cryptocurrencies that are not dependent on a central bank or government, as is the case with the rest of the legal tender currencies in circulation, although laws are being developed around the world to control their use.

2- Beyond Bitcoin

There are currently thousands of cryptocurrencies out there. The first and most famous worldwide is Bitcoin, but there are also Altcoins (Ethereum, Ripple, Dash, Monero and many more), a term that encompasses cryptocurrencies alternative to Bitcoin.

Another typology to highlight would be tokensThis is a unit of value that can be viewed as cryptocurrencies, but has more uses than a means of payment as it can represent digital assets or economic rights.

Álvaro Alcañiz, co-founder of Onyze stated: “Like Bitcoin and the rest of the altcoins, tokens require a blockchain for transactions and usually use smart contracts, i.e. tokens can be programmed with their functions (of payment, coupon payment, etc.)”.

Finally, stablecoins are configured as cryptocurrencies that are created in such a way that their value remains stable.

3- On the way to intensive regulation at national and European level

According to AEFI On October 13th, the Spanish government approved a bill obliging cryptocurrency holders to disclose their holdings and all profits recorded on these assets, limit payments in cash (1,000 euros) and enforce reporting to the treasury to cryptocurrency service providers (im Basically custodians and stock exchanges) as well as better control over these new digital currencies.

On the other hand, they also remembered AEFI In June of this year, the Spanish executive approved the draft law to implement EU Community Directive 2018/843 on the prevention of money laundering and terrorist financing – 5th directive – and amended Law 10/2010, which strengthens the control of money laundering and terrorist financing by incorporating new ones regulated companies, which also include service providers for virtual currencies. However, this draft law would only be valid in Spain and would not act as a community passport in the EU, where each country will implement the Community Directive according to its own legislation.

At the municipal level, the finance ministers of several countries in the European Union (Spain, Germany, France, Italy and the Netherlands) have asked the European Commission to establish a strict regulatory project or, in other words, the existence of a “superorgan” to establish a legal framework (MICA) for To create cryptocurrencies like stablecoins.

This project is mainly focused on the regulation of stable coins and other cryptocurrencies that are not considered financial assets (utilities).

4- Spain and its place in the world of cryptocurrencies

Recently, Madrid has become one of the most important cryptocurrency centers in Europe with more than 40 projects related to cryptocurrencies, positioning itself as one of the sectors in the field of financial innovation that has seen the greatest growth in recent years. , where the number of investment operations in this type of company is increasing, which additionally demonstrates an important ability to generate income.

This sector sees continued growth for Spain in the coming years, which, according to DASI, could reach around 200 projects related to cryptocurrencies and 2,000 people working in this ecosystem by the end of the year.

5- Open the door to the possibility of a digital euro

The European Central Bank (ECB) recognizes that digitization is changing economies, which is why the possibility of starting a digital euro project in mid-2021 is being considered. This digital euro could be a complement, not a substitute, for cash and an alternative to private digital currencies.

This new position by the ECB arises from a change in consumer preferences as a result of the COVID-19 crisis, such as: B. lower cash consumption, while it is expected that payments can be made faster and securely through this digital method.

6- An investment alternative for savers

The cryptocurrency market opens up an investment opportunity for every saver as there is no minimum investment amount or a specific type of currency. However, it is important to understand how these assets work and why each cryptocurrency performs differently.

These are assets with very high potential for profitability, but they can also be subject to high volatility and a high risk factor on top of buying and selling commissions, which are usually low except in network saturation scenarios. .

It is true, however, that this type of new asset can also help younger generations get interested in finance and learn about saving and investment alternatives to diversify and grow their wealth.

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