Bitcoin is a so-called „digital currency”, created in 2009, which offers the promise of lower transaction fees than traditional online payment mechanisms, and is operated by a decentralized authority, unlike government issued currencies. There are no physical Bitcoins, only balances associated with public and private keys. These balances are kept on a public ledger, along with all Bitcoin transactions, that is verified by a massive amount of computing power. This paper discusses some Civil and Tax Law implications regarding Bitcoin and Bitcoin transactions. Currently there is no explicit regulation concerning Bitcoin in Romania, a situation that is similar in most countries, and also at European Union level. Some countries have explicitly outlawed Bitcoin, but it is not the case in Romania. Therefore, the applicabile legal framework must be determined using the general legal provisions concerning goods and transfer of goods.

Regulation of Bitcoin in Selected Jurisdictions, Global Legal Research Directorate Staff,  The Law Library of Congress, Global Legal Research Center, Regulation of Bitcoin PDF

Bolivian Central Bank Resolution no. 044/2014 prohibits the use currency or coins not issued or regulated by the government, including bitcoin and a list of other cryptocurrencies including namecoin, peercoin, Quark, primecoin and feathercoin.

Legal status of Bitcoin

According to Article 4 (1) f) of Romanian Law no. 127 of June 20th 2011 regarding the activity of issuing electronic currency, electronic currency is defined as an electronically (including magnetically) stored monetary value, representing a receivable against its issuer, issued at the receiving of funds with the purpose of making payment operations, and which is accepted by a person, other than the issuer.

Because Bitcoin is not issued by an authorized issuer according to Chapter II of Law no. 127/2011, it can not qualify as electronic currency, and therefore can not fall in the category of legally accepted currency according to Romanian Law. This is also the point of view of the Romanian National Bank.

Having these circumstances in mind, the only category in which Bitcoin can be included is movable goods, as defined by Article 539 of the Romanian Civil Code: Goods that the law does not classify as immovable are movable goods.

This legal status determines a series of consequences: Bitcoins, the same as most other movable goods, can be bought and sold freely, can be lended or used as collateral for loans, and also can be seized and liquidated in foreclosure (forced execution) proceedings. Of course, this statement is made from a legal point of view, because in a practical situation the seizing and transfer of Bitcoins without the private key held only by the owner is very hard, if not impossible.

Theoretically, there is no procedural obstacle for a bailiff to liquidate Bitcoins in a foreclosure procedure initiated in accordance with the Romanian Civil Procedure Code: the assets can be seized, evaluated and then sold at public auction in accordance with the law. The only practical obstacles (as stated above) would be the lack of a public registrywhere the bailiff (or the creditor) might discover the existence of these assets, and the impossibility to transfer the Bitcoins without the private key held by the owner. We can only speculate regarding the technical possibility of overcoming these obstacles, but it can be argued that publicity of ownership and possibility of transfer without the owner’s consent might cancel all the advantages that made Bitcoin a popular and efficient means of payment.

See the proceedings initiated by the FBI agains Silk Road founder Ross Ulbricht:

Bitcoin transactions and Tax Law implications

Because Bitcoin falls into the category of movable goods and is not currency, any transaction which implies a „payment” in Bitcoin can be qualified as a barter, according to Article 1763 of Romanian Civil Code. Of course, purchasing Bitcoins in exchange for money (accepted currency) is a sales-purchase agreement.

In the case of a Bitcoin-for-immovable-property transaction, according to Article 33 (4) of the Application Rules to Article 111 of the Tax Code, the property transfer tax shall be based on the value of the transferred immovable property. But the seller must pay this tax in currency that is a form of legal tender, therefore the practical utility of such a Bitcon transaction can be diminished.

In the case of a business which accepts payment in Bitcoins, the Bitcoins must be registered as assets in the bookkeeping, and income tax will be determined based on the „market price” for those respective assets (as provided by Article 10 of the Romanian Tax Code). This might trigger the need to evaluate the Bitcoins in order for them to be correctly registered in the bookkeeping.

Publisher: Budușan & Associates