Second part of Crypto-assets in French Law - The Example of Complementary Local Currencies (CLC) 1/2.
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II. CRYPTO-ASSETS
The recognition of crypto-assets follows a logic similar to that of complementary local currencies. They are thus recognised as a means of payment (A-), without specifically regulating the operation since it is based on the will of the parties. The specificities of the use of smart-contract as a transaction register also implied recognition of this particular medium (B-).
A- Recognition as a non-monetary unit of value
The premises of monetary recognition - crypto-assets, like complementary local currencies, belong to the category of private currencies. As their development requires, at the very least, legal recognition or the establishment of a legal regime, the question of qualification is of prime importance, as the monetary regime is appropriate for these particular assets. In this respect, despite the major disagreements within the French legal doctrine, the CJEU has apporté́ an important contribution to the qualification of what it calls virtual currencies [1]. Indeed, during a preliminary ruling on the exemption from value added tax (VAT) of transactions involving the exchange of bitcoins against traditional currencies, the Court has précisé́ that the exemption provided for à̀ in Article 135(1)(e) of the VAT Directive[2] including transactions "involving currency, banknotes and currencies which are legal means of payment" should apply both in the presence of traditional currencies and virtual currencies. This decision is taken on the grounds that it follows from the "context and the finalité́" of Article 135 précité́ that a reductive interpretation of the concept of currency would deprive this text of some of its effects[3]. 3] This reference to context and finalité́ is all the more surprising given that, at the time this directive was drafted, Bitcoin did not yet exist. Although not a legal means of payment, like MLCs, they are nevertheless a means of payment accepted by the parties to a contractual transaction. By this interpretation, the Court stated souhaité́ that it considered Bitcoin to be a conventional currency[5]. Although the decision is given on the basis of a VAT directive, the contribution is no less important, since it affects the taxation of foreign exchange transactions in all the Member States. Thus, recognition by a Member State as a good would be incompatible with this decision from a tax point of view: subjecting foreign exchange transactions to VAT would be contrary to Community law, even though classification as a non-monetary good would make a person liable to that tax.
A non-monetary unit of value - The Banque de France considers that crypto-assets are "units of non-monetary value (...) which do not represent a claim on the issuer"[6]. 6] It is therefore difficult to see what a non-monetary unit of value can be, especially since it states that crypto-assets are accepted in payment. 7] This difficulty lies in the value function incorporated in money that is difficult to tolerate in other goods. It had moreover been pointed out that the objections to the qualification of money concerned more the function of unit of value than that of payment[8], and yet it is this function that is raised by the institution. However, whether or not it is considered as a means of payment has no bearing on its use, and if a dispute were to arise on this point, a number of questions would renew the problem of its intrinsic monetary nature or not.
B- The recognition of the electronic support "blockchain".
Notion of "blockchain" - The "blockchain" belongs to the category of smart-contract, the blockchain being only its first functional manifestation by application to money. Indeed, if "the blockchain is an Excel table, smart contracts are macros" [9]. 9] For example, the creator of Bitcoin computerized that the units would be issued in consideration for the operation of the peer-to-peer network, i.e. the provision of the computing power necessary for the operation of the computer protocol. Thus, he was able to foresee that the maximum number of Bitcoin would be 21 million, through a degressive transmission (Bitcoin will only reach its maximum in 2050, whereas in 2018, more than 15 million have already been transmitted[10]), and the keeping of a register that makes it possible to render a unit forgery-proof since it records any movement by means of a writing that is forgery-proof since it is fractionated and dispersed among all the persons participating in the network. This database [11] serves as a register of all operations carried out on the network using the attached unit of account. Thus each cryptographic money transfer is recorded anonymously, but each account holder is identifiable as the holder of the units. The "blockchain" [12] allows multiple entries and exits to be referenced, but a specific entry can only be used once as an entry, guaranteeing the veracity of each operation. This prevents the same amount of money from being spent twice. To justify its validity, any transaction refers as an input to one or more past transactions whose sum of the outputs is greater than or equal to its amount. Thus, as indicated by the Banque de France and despite what is often said "The purpose of this register is to ensure a complete traçabilité́ of the operations on each crypto-active". Since transactions are totally transparent, a crypto-active is forgery-proof because it relies on cryptographic technology to "ensure protection against attempts to tamper with the register" [13].
Block Validation Mechanism - Individuals on the network validate transactions on the basis of consensus. "This consensus depends on the computing power that each minor is able to deploy. »[14]. Depending on the network used, validation may be different. There are two types of evidence for validating a transaction block: the "Proof of work"[15] and the "Proof of stake"[16]. The second depends on less computing power than the first, which is mostly used (BTC for the most important and LTC), and is therefore less energy consuming. One can therefore imagine in the future, in the hypothesis of taxation on energy consumption, a differentiated treatment according to the mechanism specific to each one. If Mr. X wishes to send 10 LTCs to Ms. Y, he has to integrate into the network of transactions made by synchronizing to the UTXO's database. Once this has been done, the network will be able to know the amount of the transactions carried out, and therefore the identity of each CTS holder: thus if Mr X has 9 CTS, the operation will not be validated and the CTS will not be received by Mrs Y, whereas the operation is validated as soon as the number of CTS available to Mr X is greater than 10. [17]
Recognition of the blockchain - Since 2016 [18], the "blockchain" has been legally recognised as a "shared electronic recording device enabling the authentication of specific securities transactions intended to be traded on participatory financing platforms". On the other hand, the transfer of ownership of mini-vouchers results from the recording of the transfer in the electronic recording device, which takes the place of a written contract for the application of Articles 1321 and 1322 of the Civil Code. Thus, the registration on the blockchain of mini-voucher transactions has the value of a writing and is therefore enforceable against third parties. The use of the term "mini bon" does not refer exclusively to cryptomoney[19] but especially to cash vouchers, so that the notion is not yet perfectly clear although the creation of new securities called "mini bons" suggests that they may be registered on the "blockchain"[20].
Once this has been stated, it appears that the monetary nature is the most appropriate because it is closest to the original purpose of cryptomoney, which is to be a decentralized digital money system. Yet other forms of cryptographic assets that do not pursue the objective of creating a decentralized currency are emerging. While the grievances about the monetary nature of cryptomoney systems are well-founded, the existence of other types of assets is not such as to negate their function as money, since these other digital forms serve different purposes. Since the financial categories do not suffer from the same monopoly as that of the State for money, the transposition of the existing categories seems to be possible for most cryptographic assets. Their nature should be modelled on the legal object they imitate.
[1] CJEU 22 Oct. 2015, Case C-264/14, Skatteverket v. Hedqvist, Skatteverket v. David Hedqvist; Revue Internationale des Services Financiers 2016, No. 1, p. 170, note R. Vabres; Revue Trimestrielle de Droit Européen 2016. 77, obs. D. Berlin.
[2] Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, OJEU L347/1, 11 December 2006.
[3] CJEU 22 Oct. 2015, Case C-264/14, Skatteverket v. Hedqvist, Skatteverket v. David Hedqvist, para. 51.
[4] T. Bonneau, "Analyse critique de la contribution de la CJUE à l'ascension juridique du bitcoin", in Mél. B. Sousi, Revue Banque, 2016, p. 295, para. 21.
[5] G. Marain, "Le bitcoin à l'épreuve de la monnaie," Dalloz revues, AJ contrat 2017, p. 522.
[6] Banque de France, "L'émergence du bitcoin et autres crypto-actifs : enjeux, risques et perspectives", Focus n° 16, 5 March 2018, p. 1.
[7] Idem, p. 5.
[8] L. Corbion-Condé, "Monnaie légale - De la misance à l'égard desnaies nationales au miroir du bitcoin", Revue de Droit bancaire et financier n° 2, March 2014, dossier 13, p. 122, par. 12.
[9] D. Legeais, "Fasc. 534: Blockchain", JurisClasseur Commercial (Maj. 7 March 2017), para. 51.
[10] [https://bitcoin.fr/evolution-du-nombre-de-bitcoins-a-travers-le-temps/].
[11] Ibidem: "Transactions are assembled as a block and then added to a chain, giving the register the name of blockchain.
[12] Or any protocol using UTXO: behind this name is a referencing mechanism leading to the formation of a chain of transactions ("block chain"), each node of which corresponds to a validation of a transaction whose aggregate, once validated and copied, constitutes a forgery-proof block.
[13] Banque de France, "L'émergence du bitcoin et autres crypto-actifs: enjeux, risques et perspectives", Focus no. 16, 5 March 2018, p. 2.
[14] Ibidem.
[15] The process of solving an IT challenge imposed by a "Proof of Work" is called "mining".
[16] [http://blogchaincafe.com/les-consensus-proof-of-work-vs-proof-of-stake].
[18] Art. 2, Ord. n°2016-520, 28 Apr. 2016, relating to cash vouchers, JORF n°0101, 29 Apr. 2016, reprinted in art. L223-12, Code, mon. fin.
[19] J-F. Riffard, "Synthèse 40. Services bancaire", JurisClasseur Banque Crédit Bourse (Maj, Sept. 9, 2017), par. 5.
[20] Art. L223-6, C. mon. fin.