An Overview of the Relevant Areas of Law

 Overview of areas of law

a. Taxation  

Tax  authorities  and  regulators  can  consider  community  currencies  to  be  a  means  by  which  individuals  and  companies  can  more  easily  escape  the  tax  implications  of  the  transactions  that  they  engage  in.  It  is  therefore  vital  that  any  community  currency  seeks  to  mitigate  these  legitimate  concerns  by  addressing  the  impact  on  VAT,  Corporation  tax  and  Income  tax  of  individuals  and  companies  using  the  scheme.  

 Social  currencies  (e.g.  Timebanking,  LETS  etc.),  due  to  their  relatively  limited  scale  in  terms  of  individual  balances  and  individual  earnings,  and  spending  opportunities,  in  general  have  a  low  risk  of  tax  avoidance  by  users.  For  currencies  in  the  professional/b2b  closed  loop  payment  systems  and  legal  backed  tender  currencies,  where  the  potential  risks  are  higher,  measures  need  to  be  implemented  to  help  ensure  that  businesses  and  users  are  fully  aware  of  their  obligations  under  the  law.    

 

b. Insurance  

Under  this  topic  there  are  key  areas  for  consideration.  Firstly  the  impact  on  user  of  the  currency  and  volunteers  engaging  in  work  on  behalf  of  the  currency  operator  and  related  need  for  insurance.  Secondly  how  the  governance  board  will  be  indemnified  against  major  risks.    In  some  cities/municipalities  citizens  engaging  in  volunteer  work  are  covered  by  a  municipal  (accident/disability)  insurance  policy.  There  are,  however,  many  municipalities  where  this  not  the  case.    

 Companies,  charities,  foundations  and  other  entities  (either  profit  or  non-­‐profit)  who  seek  to  introduce  a  currency  scheme  will  need  to  consider  the  issue  of  potential  liability  of  governance  board  members  in  the  case  of  default,  bankruptcy  or  other  eventualities.      For  insurance  companies  the  risks  involved  in  running  a  community  currency  scheme  may  not  be  straightforward  to  assess,  which  means  a  negotiation  can  be  required  to  agree  upon  the  appropriate  insurance  policy.    

c. Social  Security  and  Employment  

One  of  the  main  target  groups  for  social  currencies  are  the  those  members  not  actively  engaged  in  the  economy  as  well  as  vulnerable  people,  such  as  those  with  disabilities,  the  unemployed  and  

 

 

people  in  deprived  communities  generally.  Many  of  the  people  that  can  be  (re)engaged  and  could  participate  in  a  social  currency  scheme  are  recipients  of  government/municipal  welfare  or  (unemployment)  benefits.  For  them  to  safely  participate  it  is  important  that  a  dialogue  is  started  and  rulings  are  obtained  on  the  potential  impact  of  participation  in  social  currency  schemes  from  the  relevant  national  and  local  authorities  in  the  countries  in  which  we  implement  them.    There  is  also  a  growing  trend  especially  in  the  legal  backed  tender  area  to  have  individuals  paid  in  the  new  currencies.  It  is  therefore  also  vitally  important  to  consider  how  this  impacts  on  employment  law    

d. Data  Protection  and  Health  and  Safety  

Data  protection  is  an  important  topic  for  most  network  services.  The  currency  operators  will  be  responsible  for  formulating  and  implementing  privacy  policies  to  protect  sensitive  user  data.  The  safety  protection  of  individuals  is  embedded  in  several  legal  texts.      Similarily  there  is  also  a  need  where  engaging  certain  section  so  society,  like  children  for  instance,  to  ensure  that  there  are  adequate  policies  to  protect  these  users.    

e. Financial  Services  

Any  organisation  that  prints  physical  ‘money’,  or  vouchers,  makes  electronic  monetary  units  available,  that  are  convertible  into  legal  tender  or  is  engaged  in  the  provision  of  payment  services  will  need  to  review  how  the  relevant  financial  services  regulations  apply  to  their  currencies  and  which  enforcement  bodies  (central  banks,  national  and  international  financial  regulators)  need  to  be  engaged  with  for  compliance  or  exemptions.    All  countries  have  very  strict  laws  restricting  who  can  print  money  and  currency  operators  will  need  to  ensure  that  they  do  not  contravene  these  rules.  The  provision  of  the  electronic  money  directive  and  payment  services  directive  only  apply  to  those  currencies  that  are  not  able  to  show  that  they  operate  in  limited  network.  But  more  general  rules  and  laws  might  apply,  for  example  for  the  issuance  of  paper  notes.        

f. Public  Sector  Acceptance  of  CCs  

Being  accepted  in  lieu  of  legal  tender  particularly  by  public  entities  is  the  goal  of  many  CCs.  Municipalities  accepting  local  currencies  for  both  services  (swimming  pool,  public  transport  etc..)  and  taxes  (business  rates,  local  taxes)  gives  CCs  greater  use  value  and  credibility.  However,  especially  in  the  Eurozone,  those  who  tried  to  establish  such  spending  possibilities  in  different  countries  encountered  barriers  of  different  kind,  sometimes  of  personal  nature  (risk  averseness)  sometimes  allegedly  due  to  regional  procedure  regulations,  state  law  or  even  EU  law.