European Gaming Lawyer magazine Spring 2016 | Page 14

The future of bitcoins in European
igaming depends on taxation
by Matthias Spitz, Dr Gregor Fuehrich and Jessica Maier, LL.M.

W

Matthias Spitz

Dr Gregor Fuehrich

Jessica Maier

hen Calvin Ayre shared his
perspective on future trends
affecting the industry at last year’s
Malta iGaming Seminar, the
audience was packed. Many
European gaming lawyers, however, could tell a thing
or two about how taxation has stifled the development
of the online gambling sector in their respective
countries. Indeed, a couple of European tax
authorities held that bitcoin trading is not VAT
exempt under the VAT Directive1. As a consequence,
bitcoin trading would have been subject to a “double
taxation” under VAT – first, upon the sale of a service
and, second, when exchanging the earned bitcoins for
hard currency. Obviously, this would have rendered
bitcoin trading totally unattractive for any
e-commerce and online gambling service. Mr
Hedqvist, who owns Bitcoin.se and intended to
provide services consisting of the exchange of
traditional currency for bitcoin and vice versa through
his web portal, brought a corresponding dispute with
the Swedish tax authorities before court which then
referred the case to the Court of Justice of the EU (the
‘CJEU’). In a judgment of 22 October 2015, the CJEU
solved the dispute in favour of the bitcoin businesses
in declaring that trading bitcoins is VAT-exempt
under art. 135(1)e VAT Directive because it should
not be treated differently to more traditional means of

14 | European Gaming Lawyer | Spring Issue | 2016

payment – and thereby preserved Europe from
gambling away a technology which could be massively
changing our view on the online sector.
This article will first shed some light on the nature
of bitcoins, provide a short analysis of the recent
CJEU judgment and then enlarge upon the more
“technical” implications of the VAT exemption.
On the nature of bitcoins
Let’s start at the very beginning. Since their alleged
invention by Satoshi Nakamoto in 20082, bitcoins
have become increasingly popular for investors or
as a form of payment in e-commerce and the online
environment in general. This also includes the online
gambling sector where SatoshiDice was one of the
earliest betting sites and which sees an increasing
number of bitcoin casinos opening on the internet
nowadays. Entire bitcoin casino solutions are available
through software providers like Softswiss. Even in the
“real world” bitcoins have gained some momentum,
e.g. in the UK where in 2014 the first bitcoin cash
machine was launched in Shoreditch, London3.
But what are they? The answer to this question is
not straightforward.
1. Council Directive 2006/112/EC.
2. Nakamoto, Satoshi, “Bitcoin P2P e-cash paper”, 31 October 2008, “Bitcoin:
A Peer-to-Peer Electronic Cash System“, 24 May 2009,
https://bitcoin.org/bitcoin.pdf.