A new bill presented in Spain by the People’s Party (PP) aims to promote digital transformation by outlining possible innovations, how they should work, who is authorized to develop them and which authorities such developments and Monitor and regulate activities.
However, the bill is effectively bitcoin-blind and instead focuses on blockchain and cryptocurrency – a misunderstanding by Satoshi Nakamoto’s real innovation that could keep both the country and its people from real long-term recovery.
A focus on cryptocurrency
For example, Article 48 in Chapter Seven describes the intended guidelines for the use of “cryptocurrency” in the country. The bill would allow private individuals to do business with it in order to fulfill private obligations, for example in private contracts. That would likely include Bitcoin though, so that’s a positive thing. When people enter into contracts on BTC it promotes its use as a medium of exchange in Spain and legitimizes it for that purpose. However, the bill explicitly states that such agreements should not jeopardize the country’s current legal tender regulations – which means that Bitcoin would not be as legitimized as it is in El Salvador, for example.
In addition, all transactions with Bitcoin would be subject to the same tax and tax regulations as regular money transactions in Spain. Tax enforcement is highlighted as a primary objective throughout the bill. As a result, Bitcoin and cryptocurrency trading and custody providers in the country are said to be required to use comprehensive Know-Your-Customer (KYC) procedures to identify all of their customers. This aims to indirectly strengthen the public administration of Spain, which, according to the law, will take all measures in its power to control and monitor all trading activities – often by soliciting information from service providers.
In contrast, the draft law provides that citizens who trade in cryptocurrencies for financial purposes are guaranteed their data rights and the authority to request such information from service providers or the public administration. However, it is not clear whether they can request the deletion of information. However, given the nature of the bill and its regulatory approach to taxes and records, it can be assumed that this would not be possible.
The National Cryptoassets Council, Real Estate and Banks
Article 50 of the bill introduces the creation of an administrative unit for the cryptocurrency sector, the Consejo Nacional de Criptoactivos (CNC – National Cryptoassets Council). It would consist of representatives from the General Directorate of the Ministry of Finance, the National Commission for the Securities Market and the Bank of Spain.
The main tasks of the council would be to study and analyze the impact of cryptocurrency usage in the country, assess whether blockchain technology is valuable for public services, and put in place mechanisms to detect and prevent fraud, terrorism and capital flight.
The bill also states that the real estate sector would be allowed to create its own cryptocurrency and use it in their investments in mortgage groups. Real estate owners, on the other hand, could pay their mortgage with their own cryptocurrency. Additionally, the bill would empower banks to use blockchain technology to manage mortgage and insurance services and contracts in a proprietary manner. This is where PP is showing what is probably the biggest misconception about Bitcoin and its true innovation.
Bitcoin, not blockchain
Contrary to popular belief, blockchain technology is not the breakthrough innovation that Satoshi Nakamoto brought to the world. Without Bitcoin, the currency, blockchain becomes useless – especially if it is used by central authorities on stand-alone development systems, as is often called in Spain’s draft law. As Parker Lewis articulates, the innovation is Bitcoin, not blockchain.
“Ultimately, a blockchain is only useful when using money because it relies on a local currency for security,” wrote Lewis. “Bitcoin is the most secure blockchain by orders of magnitude. Since all other blockchains compete for the same basic use case of money and because the network effects of Bitcoin only increase its security and liquidity advantage over the field, no other digital currency can compete with Bitcoin. Liquidity creates liquidity and monetary systems tend to act as a medium as a derivative. Bitcoin’s security and liquidity made all other cryptocurrencies obsolete before they left the proverbial gates. “
It is the Proof-of-Work (PoW) system in Bitcoin, along with the immutable ledger, cryptography, and its permissionless nature that allow suspicious parties to reach an unstoppable, irrevocable consensus. In other “cryptocurrency” and “blockchain” systems operated in a proprietary manner by a specific team of people, the ledger is often not immutable and the parties have to rely on a certain level of trust between themselves.
These systems will ultimately fail because, similar to Spain’s draft law, they confuse Bitcoin with blockchain. This is not surprising, however, as governments tend to seek control. Spain in particular has demonstrated some totalitarian tendencies with a new bill that would allow the government to confiscate private property in “times of crisis”. It wouldn’t be difficult to imagine the same thing being achieved in fragile, proprietary systems that attempt to mimic Bitcoin.