Virtual Currencies and Blockchain Technology

On the 22 of March 2018, the Minister for Finance and Public Expenditure and Reform, Paschal Donohoe TD announced the creation of an internal working group (the Intra-Departmental Working Group) to monitor further developments in the areas of virtual currencies and blockchain technology.

This follows the Department of Finance's active research into virtual currencies and the blockchain ecosystem that exists in Ireland, Europe and globally.

Press release and the Minister’s statement.

The aims of the Intra-Departmental Working Group are as follows:

• to monitor developments at a global (example: Financial Stability Board, Financial Action Task Force, International Monetary Fund) and European level (example: European Commission, European Parliament and European Central Bank) in relation to virtual currencies and blockchain, and to provide input into the discussions as and when required
• to build knowledge of developments in the technology with an aim to identify risks and assess potential economic opportunities for Ireland
• to engage with subject matter experts across industry, academia and the private sector to help build a dynamic communication flow
• to liaise with other areas of government to assess where involvement might be required
• to consider whether suitable policy recommendations are required
• to assist in promoting a better understanding of the technology across government
• to align with Ireland’s IFS2020 Strategy to foster opportunities in international financial services by building on the country’s strengths in technology, research and financial services

Alongside the announcement of the working group, a discussion paper called Virtual Currencies and Blockchain Technology was released.

When partaking in transactions relating to virtual currencies, consumers should refer to the guidance provided by the Competition and Consumer Protection Commission (CCPC).

This notice provides consumers with both an overview of virtual currencies and some of the consumer protection issues that should be taken into consideration.

In December 2017, the Central Bank of Ireland issued an alert in relation to Initial Coin Offerings (ICOs) that echoed warnings previously published by the European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA).

In February 2018, the Central Bank of Ireland issued a further warning to consumers and investors regarding the risks of investing in virtual currencies.

Links to these statements are listed below:

• Central Bank of Ireland Alert on Initial Coin Offerings (December 2017)
• Central Bank of Ireland Consumer Warning on Virtual Currencies (February 2017)
• European Banking Authority Warning to Consumers on Virtual Currencies
• ESMA, EBA and EIOPA Warn Consumers on the Risks of Virtual Currencies

Over the course of 2019, a number of international and European regulatory bodies have published research on the regulatory implications of cryptoassets and Initial Coin Offerings (ICOs). The purpose of these reports is to provide greater clarity to competent authorities and legislators. A selection of these publications have been listed below:

• European Securities & Markets Authority (ESMA): Advice - Initial Coin Offerings and Crypto-Assets (January 2019)
• European Banking Authority (EBA): Report with advice for the European Commission (January 2019)
• European Central Bank (ECB): Crypto-Assets - Implications for financial stability, monetary policy, and payments and market infrastructures (May 2019)
• Financial Action Task Force (FATF): International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation (June 2019)
• European Banking Authority (EBA): Report on Regulatory perimeter, regulatory status and authorisation approaches in relation to FinTech activities (July 2019)
• International Monetary Fund (IMF): The Rise of Digital Money (July 2019)
• Bank of International Settlements (October 2019): G7 Working Group on Stablecoins - Investigating the impact of global stablecoins
• European Council and the European Commission (December 2019): Joint statement on "stablecoins"

On 15 May 2018, the Office of the Revenue Commissioners published a tax and duty manual relating to the tax treatment of transactions involving virtual currencies.

The manual outlines tax considerations that apply to:

• Income Tax (IT)
• Corporations Tax (CT)
• Capital Gains Tax (CGT)
• Value-Added Tax (VAT)
• Pay As You Earn (PAYE)

Businesses should also consider the Value-Added Tax (VAT) implications of their activities when partaking in transactions that involve virtual currencies. For further information on this topic, see Value-Added Tax Considerations