The Spanish government agency that oversees matters of finance and taxation has issued a new ruling stating that bitcoin should be treated as an electronic payment system, a decision that could have a far-ranging impact on Spain’s bitcoin economy.

El Ministerio de Hacienda y Administraciones Públicas issued the ruling in response to questions from Coinffeine, a Spain-based, open-source bitcoin exchange platform. Abanlex, the company’s law firm, had previously reached out to both El Ministerio de Hacienda and the country’s Congress seeking clarity on two issues in April.

With its response, El Ministerio de Hacienda found that bitcoin-based online gambling companies in Spain must now apply for licenses. Further, the ruling, coupled with new statements from Congress, suggests that bitcoin transactions involving a business may be subject to existing laws that impose a cap on cash transactions of €2,500 or more.

Coinffeine sought clarity from el Ministerio de Hacienda on whether online bets conducted with bitcoin should be considered binding from a legal standpoint. Further, it aimed to solicit a response from Congress as to whether certain financial laws applied to bitcoin.

Coinffeine CTO and co-founder Ximo Guanter told CoinDesk that the rulings represent a significant development in terms of how bitcoin is being regulated globally.

He told CoinDesk:

“The ‘big-theme’ news here is that Spain is starting to treat bitcoin more like a currency than as an asset, which is the inverse of what the US has done.”

The regulatory update marks the first update from Spain’s government on bitcoin since May, when its tax authority, the Agencia Estatal de Administración Tributaria (AEAT) indicated it was monitoring digital currencies for illicit activity.

Possible transaction cap

Although el Ministerio de Hacienda said it will treat bitcoin as an electronic payment system for the purpose of gambling law, it is not yet clear if this interpretation is more broadly applicable.

Congress said in its statements to Abanlex that, should bitcoin be considered an electronic payment system, then additional laws would apply to bitcoin businesses, leading Abanlex to interpret that a current law prohibiting cash payments to businesses of more than €2,500 and existing anti-money laundering (AML) laws apply to bitcoin.

Introduced in 2012, the cash transaction cap prohibits Spain’s consumers from paying cash to settle bills of more than €2,500. The law was part of a broader effort to curb tax evasion in the wake of the country’s larger economic issues.

Notably, the law only applies to transactions in which at least one entity is a business, meaning peer-to-peer bitcoin transactions are not affected.

Guanter told CoinDesk:

“The interpretation of our lawyer was: if the Ministerio de Hacienda considers bitcoin an electronic payment system for the purpose of gambling law, then that same definition applies for other laws, and therefore the €2,500 law and the AML laws apply.”

However, for now, he cautioned, this remained an interpretation.

Bitcoin’s legal definition evolves

The ruling also built on previous statements issued by international legal bodies, addressing the subject of whether bitcoin is money under Spain’s laws.

El Ministerio de Hacienda shed light on this issue, asserting that bitcoin cannot be considered legal tender or electronic money.

The agency further stated that bitcoin can’t be considered an “economically accessible object” as it functions as a medium of exchange.

Its statement reads:

“Ultimately, bitcoin is a convertible virtual currency that can be exchanged between users and converted into dollars, euros or other currency of real or virtual legal tender.”

Clarity for gambling sites

The impact on Spain’s bitcoin gambling industry is far more certain, and adds to the growing regional differences globally on the issue. For example, the US government’s crackdown on online gambling has lead many gambling platforms to embrace bitcoin. Still others have avoided the market due to uncertainty.

All Spain-based gambling sites, even those that operate only in bitcoin, will be subject to the ruling. El Ministerio de Hacienda stated that it is now mandatory for these businesses to obtain a general betting license as well as the corresponding individual license.

El Confidencial stated in its report that online gambling with bitcoin is becoming increasingly popular in Spain as the sector had previously been able to use bitcoin to avoid the country’s Gambling Act.

However, el Ministerio de Hacienda indicated that all game activities are governed that involve “amounts of money or economically valuable objects in any form”, a definition it said includes bitcoin.

The agency’s formal response states (via an informal translation):

“In consideration of the foregoing, betting activity with bitcoins is included within the definition of gambling.”

Images via El Ministerio de Hacienda y Administraciones Publicas and Shutterstock