Startups and Bitcoins in Spain
Spain is the country divided politically and regionally. The Spanish Constitution of 1978 created 17 autonomous communities and 2 autonomous citieseach of which has its own constitution, president and the government. However, Madrid still holds on to its exclusive sovereignty in finance, military and external affairs matters. In the past several decades, as the micro-economic conditions in the country worsened, this status-quo has been periodically challenged by Basque and Catalonia regions.
Spain is the constitutional monarchy. Spanish monarch’s role is mostly ceremonial, except in case of war declaration. Spain goes to war only if the Parliament approves it and the king says so. The Presidente del Gobierno is both the Prime-Minister and the President of Spain. He/she designates Consejo de Ministros members for monarch’s approval.
Bicameral Cortes consists from 350-members Congreso do los Diputados and 259-members Senado. Deputies in both chambers are directly elected by popular vote. For several previous decades Spain had been the two-party state with the centrist Partido Popular (PP) and the left-wing Partido Socialista Obrero Espanol (PSOE) holding on to the absolute majority of seats in the Cortes.
This power balance was changed on December 20, 2015 elections when the one-year-old Podemos and the Catalonian Cidadans parties became 3rd and 4th biggest opposition factions in the Spanish Parliament, effectively ending the political monopoly of PP and PSOE.
Spanish economy had been in the bad shape after the real estate boom of 1990th. In 2008 it turned from bad to worse, when the World financial crisis destabilized country’s budget and its banking system. Still, Spanish GDP yearly growth rate is under 1–2% and the unemployment affects over 15% of country’s working population. At the same time, Spain entered into in the deflation zone in 2014. The inflation rate now stays around 0% exacerbating Spanish debt crisis.
Spain has the large service sector, which provides local startup founders with multiple market opportunities in a wide variety of tech industries. However, continuing economic recession, chronic unemployment, high taxes, and accelerating brain-drain have prevented sustainable growth of the local startup ecosystem.
Spain is considered to be generally cryptocurrency friendly country. However, this statement is based on an absence of specific regulations addressing digital currencies in the Spanish legal jurisdiction and on the here-says of local bureaucrats. For example, the General Directorate of Taxes, a subsidiary of the Spanish taxing authorities, made the statement that Bitcoin transactions are exempt from value-added-tax (VAT). The Spanish Ministry of Finance said that it plans to tax Bitcoin mining profits up to 47 percent, which will effectively recognizing this type of business as a legal taxable activity.
According to the Financial Action Task Force (FATF), Bitcoin cannot be considered as a legal tender in Spain. Also, Bitcoin must comply with the Spanish Anti Money Laundering Act in several cases. However, in February 2015, the European Central Bank stated that cryptocurrencies are not regulated yet and they are not subject to the scope of application of the Payment Services Directive and the Electronic Money Directive.
Consequently, we should wait for the Spanish and/or EU authorities to work out more systemic legal tactic regarding digital money. Meanwhile, trading crypto as well as organize ICOs are technically legal in Spain. Moreover, the rising competition from part of the neighboring states and territories (for example, Gibraltar) in the field of financial technologies makes it less likely that Spain will took a hard-line approach to crypto.
Business Notes for Startups Founders:
- political climate: indifferent;
- economic climate: marginally not friendly;
- regions to focus: locally;
- industries to focus: many;
- major limitations: slowly growing economy (GDP growth rate has recovered from -4% in 2012 to 2–3% in 2017), high unemployment rate (exceeds 16%), excessive tax burden on SME business (minimal tax rate is 25%), brain-drain;
- stimulus: large population of more than 45 million inhabitants, mid-income consumers (per-capita at around $25000), fixed Internet penetration rate exceeds 80%;
- opportunities: to create an e-business aimed at the growing number of young users of the mobile Internet in multiple C2C sectors;
- Cryptocurrencies and ICOs (outlook): legal (positive).
The author: Svyatoslav (Svet) Sedov
Angel investor and founder of The First International Incubator for Silicon Valley Companies (FirstInternational.In) in the Bay Area, CA, USA.
- Twitter: https://twitter.com/SvjatoslavSedof