The Legislative Landscape for Cryptocurrencies in Spain Prior to 2024

Cryptocurrency Advertising Regulation

In Spain, despite cryptocurrencies not being recognized as financial instruments, significant steps were taken to regulate cryptocurrency advertising. In March 2021, amendments to the Spanish Securities Markets Law were enacted specifically to regulate the advertisement of cryptocurrency services. This regulation aimed to protect Spanish investors from the inherent risks associated with cryptocurrency trading. The National Securities Market Commission (CNMV) was appointed to oversee all advertisements that offered cryptocurrency to the public as investment opportunities, including those from foreign entities targeting Spanish investors. The CNMV’s authority, however, excluded formal advertising materials like “white papers” and certain crypto-assets. This regulatory approach aimed to enhance investor protection against potential frauds associated with Initial Coin Offerings (ICOs) and other cryptocurrency investments​​.

Anti-Money Laundering (AML) Amendments

Spain also took proactive steps in 2020 to align its AML and terrorist financing laws with the EU’s AML directive. The amendments required cryptocurrency service providers to register with the Bank of Spain, thus integrating them into Spain’s financial regulatory framework. These amendments were intended to combat the use of cryptocurrencies for money laundering and terrorism financing by imposing strict know-your-customer (KYC) regulations. This move was part of a broader effort to make cryptocurrency transactions less anonymous, thereby hindering the ability of criminals to use digital currencies for illicit activities. The regulations had implications for cryptocurrency exchange providers who were obligated to adhere to these AML requirements, potentially leading to increased operational costs for smaller firms​​.

Taxation of Cryptocurrencies

In the taxation realm, Spain classified profits from cryptocurrency transactions under personal income taxes, corporate income taxes, and non-resident income taxes. Cryptocurrencies were considered either intangible assets or commercial stocks, depending on their usage, and all operations involving cryptocurrencies were treated as barter transactions for income tax purposes. This classification resulted in either capital gains or losses, demanding meticulous record-keeping by taxpayers. In addition to income taxes, cryptocurrency activities, including mining, were subject to specific business-related tax requirements. Furthermore, several regions in Spain imposed wealth taxes on cryptocurrency holdings, with the level of taxation varying based on the region and the net wealth of the individual. The Spanish government also mandated the disclosure of cryptocurrency holdings and transactions, with significant penalties for non-compliance​​.

In summary, Spain’s legislative landscape for cryptocurrencies prior to 2024 was marked by a cautious yet progressive approach. The country focused on regulating cryptocurrency advertising, aligning its AML laws with EU directives, and establishing clear tax obligations for cryptocurrency transactions. These measures reflect Spain’s effort to integrate cryptocurrencies into its legal and financial framework while protecting investors and preventing financial crimes.