3.4.1. Sources of law
Currently, there is no specifi c EU legislation on payments using electronic means of payment without the issuer, including primarily cryptocurrency. Basic-ally, as of now — in mid-2016 — there is no will to regulate virtual currencies at the EU level in the European Parliament; at most, they see such a need in the fi ght against money laundering and terrorist fi nancing191.
So far there is also no national legislation concerning the payment in cryp-tocurrencies (and more broadly — in virtual currencies) in any of the Member States of the European Union. Other countries in the world also do not have such special law — this applies even to the U.S. federal law, where cryptocurrencies are the most popular. However, proposals for such regulations are notifi ed192, and if cryptocurrencies become more common, it seems that the intervention of the legislators will be necessary.
The state of New York stands out, which announced a separate, specifi c legis-lation for economic activity in the area of virtual currencies, including main-ly cryptocurrencies, by introducing the so-called BitLicense (hereinafter: NY regulation) on June 24, 2015193. This regulation does not concern payments using cryptocurrencies as much as it is focused on defi ning terms and conditions for licensing of economic activity with the use of virtual currencies, items of capital requirements and defi ning public responsibilities in the fi ght against money
laun-191 See European Parliament resolution of May 26, 2016 on virtual currencies (2016/2007(INI)), published http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+TA+20160526+I-TEMS+DOC+XML+V0//PL&language=PL (access: October 6, 2016).
192 France intends to introduce relevant regulations — see http://www.economie.gouv. fr/
fi les/regulatingvirtualcurrencies.pdf (access: 10/06/2016) and Japan — see http://pl.scribd. com/
doc/289131216/Japan-Ministry-of-Economy-Trade-and-Industry-FinTech-Group-Second-Meeting;
http://www.newsbtc.com/2015/11/22/japanese-government-to-draft-regulatory-billfor-bitcoin-by-early-2016/ (access: October 6, 2016).
193 N.Y. COMP. CODES R. & REGS. tit. 23, § 200 (2015), see http://www.dfs.ny.gov/legal/
regulations/bitlicense_reg_framework.htm (access: October 6, 2016); http://www.dfs.ny.gov/legal/
regulations/adoptions/dfsp200t.pdf (access: October 6, 2016); see also I. Kiviat, op. cit., pp. 597 ff .
dering and terrorist fi nancing, consumer protection, as well as — as a signifi cant new regulation — in the fi eld of cybersecurity of licensed entities.
The lack of regulations regarding payments using cryptocurrencies obviously means the lack of detailed legal regulations for the protection of consumers using cryptocurrencies. Certainly, the use of cryptocurrencies involves a specifi c risk for the consumer, resulting largely from the lack of an entity responsible for the correct execution of transactions in a decentralized cryptocurrency system. The legislation of the State of New York regarding business carried out with the use of virtual currencies show the direction of regulations for the protection of consumers using cryptocurrencies. As is usually the case with rules intended to protect con-sumers, it is about obligations regarding information. The NY regulation imposes these obligations on the entity, which received “bitlicence”, and places it under obligation to inform the consumer that:
— Cryptocurrency is not legal tender
— Changes in legislative and regulatory or actions on the state, federal, or international level may adversely aff ect the use, transfer, exchange, and value of cryptocurrency
— Transactions made using cryptocurrency may be irreversible, and therefore the amount lost due to fraudulent or random transactions may not be recoverable
— Transactions in cryptocurrency are recognized at the time of making an entry in the public register (blockchain194 in the case cryptocurrencies), which does not necessarily coincide with the moment of the initiation of the transaction by the consumer.
However, the risks, which are not related to the specifi cs of payments in cryp-tocurrency, but refer to payments on the Internet and acquiring goods and services
“remotely” in general, are covered by existing consumer regulations, which in the case of acquisition of goods and services through cryptocurrency can be used after a proper interpretation (for example, of Art. 3851 of the Civil Code specifying the prohibited provisions of contracts with consumers, as well as the regulations in specifi c laws (e.g. the law on consumer rights195) or, more broadly — consumer directives, such as Directive on consumer rights196).
Due to the lack of the issuer, one cannot apply specifi c provisions on electronic money to cryptocurrencies (and more broadly, to electronic means of payment
194 The legislature of New York tries to be technologically neutral, and uses a broader concept of “public ledger” instead of the term “blockchain”.
195 The Act of May 30, 2014 on Consumer Rights (Journal of Laws of 2014 item 827). It must fi rst be determined in the specifi c case whether there are grounds for exemption from its application specifi ed in Articles 3 and 4.
196 Directive 2004/39/EC of the European Parliament and of the Council of 25 April 2011 on markets in fi nancial instruments amending Council Directives 85/611/EEC and 93/6/EEC and Di-rective 2000/12/EC of the European Parliament and of the Council and repealing Council DiDi-rective 93/22/EEC (OJ. EU L 304 of 11/22/2011).
without the issuer). In the European Union, this applies to Directive 2009/110/
EC and national regulations that implement it (e.g. the provisions of Polish LPS regarding electronic money or the rules of English Electronic Money Regulations 2011197 or German Gesetz über die Beaufsichtigung von Zahlungsdiensten (Zah-lungsdiensteaufsichtsgesetz — ZAG)198.
Transactions executed using cryptocurrencies are not included in the scope of PSD and the PSD 2 directives, because cryptocurrencies are neither legal means of payment nor electronic money. Thus, national provisions implementing PSD Directive do not apply to cryptocurrencies. Any legal regulation of transactions using cryptocurrencies should be made by an amendment to the PSD 2 directive, and it certainly will not be a simple procedure.
A signifi cant exception concerns Brazil, where a legal document regulating the provision of payment services and the operation of payment institutions is in eff ect — LEI Nş 12.865, de 9 de outubro de 2013199. The scope of this act includes, as it seems, payments made by cryptocurrencies, which mainly results from the defi nition of electronic currency (moeda eletrônica) contained in Art. 6 VI of this act. According to this defi nition, an electronic currency means resources stored in the memory of a device or electronic system that allow the user to make a payment transaction (“recursos armazenados em dispositivo ou sistema eletrônico que per-mitem ao usuário fi nal efetuar transaçăo de pagamento”)200.
The lack of a specifi c legal regulation does not mean the lack of legal regula-tion in general. First of all, naregula-tional civil law (e.g. Civil Code in Poland) is applic-able to transactions using cryptocurrencies. As already indicated, specifi c rules on consumer protection can also apply to transactions using cryptocurrencies, although so far these provisions do not apply directly to such transactions.
It may be necessary to reach for the rules of private international law in the case of cross-border transactions using cryptocurrencies. Due to the high degree of anonymity of payments using cryptocurrencies and the scatter of information in physical space, specifi c to the Internet (physical locations of the user, computer,
197 Her Majesty’s Stationery Offi ce (HMSO) 2011 No. 99; http://www.legislation.gov.uk/
uksi/2011/99/made (access: October 6, 2016).
198 Zahlungsdiensteaufsichtsgesetz vom 25. Juni 2009 (BGBl. I S. 1506), das zuletzt durch Artikel 23 des Gesetzes vom 20. November 2015 (BGBl. I S. 2029) — http://www.gesetze-im-in-ternet.de/zag/index.html (access: October 6, 2016), see also the version in English: https://www.
bafi n.de/SharedDocs/Downloads/EN/Aufsichtsrecht/dl_zag_en.pdf?__blob=publicationFile (ac-cess: October 6, 2016).
199 Lei No. 12.865, de 9 de Outubro de 2013 [Law No. 12,865 of October 9, 2013], http://www.
receita.fazenda.gov.br/Legislacao/leis/2013/lei12865.htm (access: 6.10.2016); see also http://legisla-cao.planalto.gov.br/legisla/legislacao.nsf/Viw_Identifi cacao/lei%2012.865-2013?OpenDocument (access: October 6, 2016).
200 Translated into English: “»Electronic currency« is defi ned as resources stored on a device or electronic system that allow the end user to perform a payment transaction” — see http://www.
loc.gov/law/help/bitcoin-survey/#_ftnref14 (access: October 6, 2016).
and server may diff er, not to mention the possibilities provided by the information processing in the so-called clouds), the determination of a proper national law and application of the relevant international regulations may be troublesome to a large extent. In extreme cases, especially in the event of keeping maximum anonymity by cryptocurrency users (e.g. using the TOR network), problems with determining the applicable law may prove to be insurmountable.
3.4.2. Payment using cryptocurrency as a change of entry in the registry, which is a blockchain
One can use the concept of the payer and the recipient for the purposes of legal analysis of payments using cryptocurrencies. These are concepts defi ned by the PSD Directive and used in its legislation, as well as the concept of a payment transaction. As already indicated, PSD and the PSD 2 directives do not apply to payments made in cryptocurrencies, however, it does not seem to prevent using some terms and concepts used in the directive. Of course, both the payer and the recipient must be users of the cryptocurrency system, i.e. control the private key. They may, but need not have installed a blockchain on computer hardware controlled by themselves. In practice, controlling the private key amounts to con-trolling the so-called wallet (see Chapter 1).
In the case of payments by cryptocurrencies, there is no “payment service pro-vider” in the sense of PSD and PSD 2, and as a consequence, there is also no “pay-ment order” within the meaning of the Directive (pay“pay-ment order is an instruction from a payer or payee to its service provider requesting the execution of a payment transaction). Instead, there is a payment system, but it is decentralized. Decentral-ization is possible through the use of blockchain technology. Due to this technology, in case of cryptocurrencies it is diffi cult to talk about “payment transaction” within the meaning of the PSD. The action initiated by the payer (the recipient cannot yet initiate a payment in the cryptocurrency system) does not “deposit”, “transfer” or
“withdraw” the funds, because there is only one register, in which entries are made
— blockchain. For example, executing a transfer via the payment service provider means the “transfer” of funds in the form of a scripture (scriptural money) between two accounts held by the payment service provider of the payer and the payee, and it essentially consists in the relevant changes to the entries on these accounts201. There are no various payment service providers in the cryptocurrency system, there are no various accounts, therefore, there is no “transfer of funds”. There is also no “depositing” and “withdrawal” of funds, because the system does not pro-vide other units of cryptocurrency (e.g. 1 BTC), than an entry in the blockchain.
From the “technical” point of view, there is no “transfer” of cryptocurrency in the
201 From this point of view, “blockchain” diff ers from the payment accounts in that it is the only one (but it occurs in a large number of copies).
cryptocurrency system — there is only a change in the location and content of this entry within the blockchain. However, from a legal point of view, the payment in cryptocurrency clearly and indisputably leads to the transfer of property rights (property within the meaning of the civil law) from the assets of one cryptocurrency system user (payer) to the assets of another cryptocurrency user.
The question is, in the light of the current legal status, that is, in the absence of detailed legal regulation on payments using cryptocurrencies, whether a pay-ment order consisting in the making of specifi c conventional activities in the so-called wallet (that is, entering the recipient’s public key, indicating the amount in cryptocurrency [e.g. 0.01 BTC], and “clicking” the specifi c button to complete the transaction [e.g. the “send” button]) can qualify as a declaration of will. Certainly it is a manifestation of will, which suffi ciently expresses the intent to cause the legal eff ect of establishing, changing or removing a legal relationship. In this particular case it is about a remittance of an obligation by a payment or transfer of ownership to a certain number of cryptocurrency units to another person. Undoubtedly, the will of the payer is thus disclosed in a suffi cient way.
As already indicated, these activities do not necessarily have to have the re-cipient to be classifi ed as a declaration of will of the payer. While a payment order governed by the PSD Directive has a recipient — it is the payment service provider — the payment order in the cryptocurrency system is not directed to an entity, which could be compared to the payment service provider even by analogy.
The cryptocurrency system, as this paper has repeatedly stated, is decentralized.
Therefore, although the behavior of the payer aimed at initiating the payment using cryptocurrency is not made available to another person (legal, natural), but is only performed in a decentralized cryptocurrency system, it may be classifi ed as a statement of will from a legal perspective.
3.4.3. The moment of performance of commitment using cryptocurrency
The earliest time from which the recipient may have cryptocurrency, which is the subject of payment, at his or her disposal, is the moment of performance of commitment using cryptocurrency. This is the moment of making the entry in the blockchain system, whereby the amount of the transaction expressed in cryptocur-rency is associated with a private key controlled by the recipient.
3.4.4. The responsibility for the validity of the transaction carried out using cryptocurrency
Current payment systems are characterized by the fact that there is always a legal entity responsible for the validity of the payment transaction. At the level of the European Union, this has been specifi cally addressed in PSD (and PSD 2)
Directive. However, in the case of cryptocurrency, due to the fact that it is a decen-tralized system, the entire responsibility for the validity of the transaction lies with the payer, unless this responsibility will be regulated diff erently in the contract with the customer and wholly or partially transferred to the recipient. Thus, in the event of incorrect performance of a payment transaction, there is no one from whom the payer may assert any claims in the standard cryptocurrency system (such as bitcoin). At best, one can construct contract with the recipient so that he or she is liable (in whole or in part) for the validity of the transaction.
We cannot rule out that a third party will take the responsibility for the valid-ity of the transaction in cryptocurrency. This may be the entvalid-ity organizing the cryptocurrency system, but this way the system would cease to be a decentralized system202. We can also refl ect on the legal responsibility of entities providing diff erent IT solutions to facilitate the user to use the cryptocurrency system, these include the provider of the so-called wallet.