Virtual Currencies - A Threat to the Price Stability of National Currencies

9. 23. 2021

Nobel laureate Joseph Stiglitz (2017) pointed out in a Bloomberg interview that Bitcoin, which lacks public control, is thriving as a representative of numerous virtual currencies, only because of its potential to circumvent it, and at the same time called for a ban as there is no socially useful function inherent in virtual currencies. Since a ban also includes criminalizing private money creation, Stiglitz opened the public discussion about mandatory regulation.  The following work examines whether virtual currencies pose risks to the existing currency system, price stability, and state currency sovereignty, tries to analyze associated criminal law components in European legislation, and nota bene concludes that even strict legislation cannot prevent the worldwide spread of virtual currencies. However, just like state currencies, virtual currencies require the trust of their users for their existence, stability, and proliferation. 


The Havard Professor Kenneth Rogoff (Hesse, 2018), on the other hand, is against a ban on virtual currencies and called for their regulation in order to bring them out of anonymity. However, it is precisely this regulation of virtual currencies that could develop into a significant risk for the financial system. The wave of regulation could then go so far that virtual currencies experience the same regulation as regular money and are thus effectively equated with money. Consequently, Professor Krahnen (Jauernig, 2018) sees the anchoring of virtual currencies as "legal tender" as the problem of a de facto creation of a private money machine for the initiator of a virtual currency. In addition to the risks for the existing currency system and the state's currency sovereignty, there are increasing risks for investors in dealing with this highly volatile form of investment and risks in the area of ​​combating money laundering or tax evasion. Further, externally controlled interventions, be it through hacker attacks, could lead to a total loss of digital assets (Diwok & Gritsch, 2020). 

The global reactions of legislators and regulators to the phenomenon of virtual currencies are very different. To date, there are no international standards concerning virtual currencies (Majcen, 2017, p. 691). Accordingly, the challenges have been approached inconsistently so far. Some countries such as Norway, Thailand, or India have issued a ban on the use of digital currencies and prohibited anonymous transactions(Eberwein, 2014). China is making the transition from prohibition to active inclusion in the conventional currency system. The People's Bank of China implements comprehensive digitization of the Chinese currency. That means it wants to issue a state virtual currency. The idea behind it is control and thus promises more stability for the government. In Liechtenstein, a separate law was passed that provides a legal framework for blockchain-based business models and virtual currencies and has been in force since 01.01.2020 (Raschauer & Silbernagl, 2020). The USA can be cited as an international example of the regulation of virtual currencies. The American Securities and Exchange Commission refers to them as "securities." Therefore, exchange platforms for virtual currencies require registration so that the lawful provision of their service is given. Their operators are also subject to a license and supervisory obligation (Diwok & Gritsch, 2020). 

This research paper focuses on the risk of virtual currencies for the existing currency system and would like to add a criminal law perspective to the discussion. If the following is about whether virtual currencies already fall under the existing criminal law protection of the monetary system and, if not, whether they should do so under the existing legislative objective, a purely legal perspective is insufficient. Monetary law, in particular, is characterized by such a close connection between law and economy that a legal evaluation of virtual currencies requires the clarification of important preliminary economic questions.

Legal qualification 

It is now a matter of discussing the actual question of the present work. The focus will be on whether virtual currencies represent “money” in the legal sense and whether they are legal tender. Do virtual currencies also have other monetary properties? Analyzing the individual money terms should bring clarification.

Money in economic theory 

This concept of money developed from primitive money, which was used in earlier times for payment transactions (Omlor, 2017). For example, cowry shells were exchanged for goods or services. Over time, the means of payment developed into modern fiat money. The term „fiat“originates from Latin and means something like “it happens.” Fiat money has no intrinsic value, serves as a medium of exchange, and is issued by state central banks in paper money and coins. 

Three elements define the theoretical economic concept of money: firstly, it must be a suitable means of payment that, secondly, due to its nature, can fulfill the function of a unit of account and, thirdly, it serves as a store of value (Proctor et al., 2005). The examination of whether virtual currencies are to be subsumed under these three criteria, and consequently can be described as money from an economic theory point of view, ends with an affirmative. Virtual currencies are utilized as a medium of payment to purchase goods or services. This function is currently available so that virtual currencies are suitable means of payment. The function of a unit of account is also undoubtedly fulfilled since a virtual currency, for example, every Bitcoin (BTC), has a specific value. Although this value is subject to constant fluctuations, it does not damage the function of an arithmetic unit, as the goods and services sold can still be valued and compared with the money received at any time. Finally, the property as a store of value must be fulfilled.

Consequently, the value of consideration must be reflected in the money given for it. The money given must therefore be equivalent to the benefit received. In the light of payment in virtual currencies, fulfilling it as a store of value appears logical, as payment is always made in amounts equivalent to the service received, analogous to payment with fiat money. However, it is crucial to consider the high volatility of some virtual currencies. However, the requirement of value stability is not stipulated in the definition of the theoretical economic concept of money. These fluctuations in value do not damage with limitation, and virtual currencies represent a store of value at the moment of payment. From an economic theory point of view, it follows from this that virtual currencies fulfill the concept of money. 

Money in legal theory 

The requirements for fulfilling the concept of money according to theoretical legal considerations are firstly the issuance by the state within the framework of its sovereign power to legislate, secondly the function of a unit of account and, last but not least, the declaration of the means of payment by the state. According to the state theory of creating money, money is usually a physical thing (Diwok & Gritsch, 2020). Checking the system of virtual currencies fails with the first prerequisite. Virtual currencies are not issued by the state but are created by private individuals. The state thus has no influence and does not exercise its authority to legislate here. Although virtual currencies fulfill the functions of a unit of account, the state also lacks an explanation of the means of payment. In addition, virtual currencies represent an immaterial thing. From a legal theoretical point of view, virtual currencies do not meet the concept of money.

Legal definition 

With Directive (EU) 2018/843 of 30 May 2018(OJ L156), the virtual currency was legally defined in Art 3 (18) as "a digital representation of a value that has not been issued or guaranteed by any central bank or public body and is not necessarily linked to a legally defined currency, and which does not have the legal status of a currency or money, but is accepted as a medium of exchange by natural or legal persons, and which can be transmitted, stored and traded electronically."

The legal definition contains six elements of the offense. Firstly, it must be a digital representation of value. A digital representation is anything that is not represented in analog form (Völkel, 2019). For digital representation, a database is usually required in the background that records. This storage represents the value digitally.

Regarding value, it is based on market value. So things that have no value are not included here. The second criterion requires that there may be no issuance or guarantee by a central bank or public body. The issue is the issuance of money or securities. In this context, the term means the first emission, but not a later resale. The third prerequisite is the not inevitable possibility of connection to a legal currency. A virtual currency, therefore, does not necessarily have to be linked to a legal currency. However, the opposite does not do any harm in achieving the status of a virtual currency.

Furthermore, there must be a lack of legal status as currency or money; hence, the virtual currency must not have been declared legal tender. If this status was granted by law, it remains a "normal" currency. The fifth criterion is acceptance as a medium of exchange by legal or natural persons. From a legal point of view, money is not an object of the exchange contract. Conversely, a sales contract is only fulfilled by giving a certain amount of money. If a different type of remuneration than money is agreed upon, this is not a purchase process but of exchange (Diwok & Gritsch, 2020). The medium of exchange must be accepted. The term acceptance does not mean a legal but a purely factual reason to be accepted and asked for by the general public (Völkel, 2019). Ultimately, electronic transmission, storage, and traceability are required. A transfer is the digital overwriting of the values ​​of the virtual currency from one person to another. Saving is securing per se. Therefore, it must not be possible for another person to transfer the virtual currency to another person without the owner's assistance. Tradability is to be understood as the real possibility that trading is possible with it. It does not matter whether there is an actual trade taking place or whether the trade is legal.

Digital assets as virtual currencies 

The digital representation of a value is fulfilled with digital assets since these do not exist in analog form but are stored on the blockchain. This database makes the recording and displays it digitally. The requirement that there is no emission or guarantee from a central bank or public body must also be affirmed since private individuals create digital assets, and thus there is no influence from government agencies. The following factual feature is that a link to a legal currency does not necessarily have to exist. If there is one, however, this in no way harms the qualification. Virtual currencies are linked to a state, legal currency through their exchange rate and are therefore linked to a legal currency without having the status of a legal currency themselves. Natural and legal persons accept digital currencies as a medium of exchange, proven by their use in payment transactions. Since the devotion of virtual currencies does not represent remuneration in money and therefore, the definition as a sales contract would be wrong, one concludes that this process is to be classified as an exchange transaction, so that digital currencies represent a medium of exchange that is in any case in demand and undoubtedly accepted. The sixth, and thus the last, criteria for the concept of virtual currency are electronic transmission, storage, and traceability. Since digital assets can be digitally overwritten to another person due to the blockchain technology, the transactions made and the transactions released by the secret key are saved on the "wallets," and there is the abstract possibility of tradability; these requirements are undoubtedly met. 

In summary, it can be said that Directive (EU) 2018/843 is a fundamental EU directive, as the virtual currency issue was regulated for the first time. The legal definition of the term virtual currency applies to digital assets, as all cumulative criteria are met.

Virtual currencies

The term “virtual money or virtual currency” alone indicates that virtual currencies have a certain resemblance to money. The term “virtual currency” indicates the meaning of “currency” as a specific unit of calculation, such as the dollar or euro currency. This definition of the term must be distinguished from the currency as the monetary constitution or monetary order. However, it is more correct, since it is more comprehensive, to view virtual currencies from the perspective of the unit of account and their potential property as money. According to economic theories, virtual currencies fulfill all three money functions, but to such a limited extent in relation to the recognized forms of money that they cannot currently - in the absence of state and social recognition - be treated as money. Virtual currencies can be used as a means of payment when purchasing goods and services, provided that the respective payee accepts them. However, they are not a generally accepted good, because they are acceptable to all potential exchange partners - in the case of cash as legal tender - or - especially in the case of book money, usually accepted.

Nonetheless, there is an increasing acceptance of virtual currencies as a means of payment, which in the future could lead to them being classified as a general means of payment. Some virtual currencies are also exchangeable. Virtual currencies can be exchanged for state currencies such as dollars or euros on trading platforms. Among other things, this contributes to the fact that virtual currencies fulfill a different monetary function to a certain extent, namely that of a store of value(Beck, 2015). Due to their exchangeability, they are particularly suitable for storing assets - usually combined with the hope of an increase in value in relation to national currencies.

Nevertheless, they only fulfill their function as a store of value to a minimal extent because a necessary prerequisite for a real store of value is that their exchange value remains stable. However, virtual currencies are currently still highly volatile. Finally, virtual currencies are also suitable as a unit of account to a limited extent. Although they are not denominated in state currency units, they do have their unit of account, with the help of which goods and services can be expressed on a broad value scale and thus made comparable (Beck, 2015). Also, due to their high volatility or because they are not yet recognized as a means of payment by all potential exchange partners, they have not yet been a constant or not a common and, therefore, the general standard of value for determining economic obligations.

Virtual currencies and dematerialized forms of money 

The most apparent form of money in everyday life is cash. Overall, however, the present is characterized by a desubstantialization of money (Ohler, 2017). The amount of book money in circulation, as "invisible money" because it is not embodied but only stored electronically in bank accounts, far exceeds the cash in circulation. In addition, there is so-called electronic money, which is not stored in bank accounts but on other electronic data carriers (debit or credit card, et cetera). The exchange of money is thus moving away from an exchange of embodied forms of money towards an exchange of dematerialized forms of money based on electronic data. Virtual currencies continue this dematerialization process because they are produced, stored, transmitted, and received purely electronically (Beck, 2015, p. 581)). Virtual currencies initially exist as digital data records that are stored on a computer or other storage medium. If payment is to be processed with a virtual currency, the digital data record must be changed on the payer and the payee. This booking process is processed via a peer-to-peer network based on the blockchain - a type of public transaction list. The transaction verification is carried out by so-called "miners" by solving complex algorithms with the computing power available to them. As a reward for verifying the transaction, the miner is credited with a certain number of new virtual value units. Ergo, the production of virtual currency is purely electronic.

Virtual currencies as private and decentralized forms of currency 

Two other elements characterize the concept of virtual currency. Virtual currencies are currently not circulated by government agencies, such as a government or a central bank, but by non-governmental, private sources. Hence, it is a private form of value creation, not a state, as is the case with the emission of state cash (Ekkenga, 2017; Schrey & Thalhofer, 2017). Virtual currencies are also primarily organized on a decentralized basis. They do not have a single administrator who controls the creation and exchange of virtual currencies. Instead, this takes place in a decentralized manner in a peer-to-peer network based on mathematical principles. Ergo, virtual currencies can ultimately be transferred like cash, namely directly from the payer to the payee. In particular, the decentralized exchange of virtual currencies enables a form of payment fundamentally different from other forms of electronic payment. Book money such as electronic money can only be transferred through the involvement of banks or payment service providers as intermediaries, who execute and verify the transaction. Since a transfer of virtual currencies is carried out and verified decentrally via the network and the blockchain, there is no longer any need for an intermediary. In theory, this results in little or no transaction costs. Transactions are also beyond government control insofar as they are carried out anonymously or at least pseudonymously, and no intermediaries subject to monitoring and reporting are active. At least, in theory, virtual currencies are thus an alternative to the existing monetary system (Spindler & Bille, 2014).

Virtual currencies and the monetary system of the European Monetary Union 

Virtual currencies are not money, mainly because they are not yet a generally accepted means of payment. However, they are similar to money and, with increasing acceptance, could become money alongside the recognized forms of money. How do they relate to the existing currency order now or in the future?

Monetary sovereignty of the European Monetary Union and the goal of price stability 

Every modern currency order knows - even in an otherwise free market economy - a state monopoly for the emission of banknotes and coins as well as strict regulation of the banking system. The state controls the money supply and sets the interest rates as part of its monetary policy. The state controls the exchange rates and the exchange rate system and can decide on foreign exchange and capital controls. In this respect, we are talking about currency sovereignty for the state. In Europe, when the third stage of "Economic and Monetary Union" came into force on January 1, 1999, almost all sovereign rights associated with the currency sovereignty of the participating member-states passed over on the European Central Bank (ECB) and the system of European Central Banks (ESCB). The euro was introduced as the currency and legal tender. The monopoly of decision-making over the issuance of banknotes and coins was transferred to the ECB. Banknotes and coins denominated in euros were finally issued on 1.1.2002 (Art 10, 11 Euro Introductory Regulation, OJL 139, 1998). The primary goal of the European Monetary Union is to guarantee and secure price stability. This stability is already expressed as a general objective of the European Union in Art. 3 TFEU(Treaty on the Functioning of the European Union, OJ C326, 2012), and applies specifically to the common monetary policy, Art. 119 (2), 127 (1) sentence 1, 282 (2) TFEU, Art. 2 Statute of the ESCB and the ECB. While price stability is one of several objectives of the European Union, it is the primary objective of the common monetary policy; Support for general economic policy to achieve the other objectives of the European Union is only permitted following Art. 127 (1) sentence 2 and 282 (2) TFEU if possible without impairing the objective of price stability. 

Monetary policy must therefore primarily be about protecting the institution of money as such. Money is only money when used like that (Carstens, 2018). This assumes that all users of money trust that it will continue to fulfill its function in the future. Otherwise, users fall back on alternative forms of money, such as currencies of foreign countries or so-called commodity money. The state first creates this trust by introducing a currency and defining it as legal tender. However, he must also ensure that money is suitable for securing value, i.e., that with a certain amount of money, a comparable value of goods, goods, or services can also be acquired in the future. Therefore, the state must ensure price stability and protect against its conceptual counterpart, inflation as a continuous rise in the price level (Herdegen, in Maunz et al., 2018, art. 88 para. 30). 

The euro is designed as a so-called fiat currency. The euro's value is not secured, as in earlier currency systems, by pegging it to a naturally scarce commodity such as gold. Therefore, there is no entitlement to exchange money for gold, or the central banks are not obliged to cover at least part of the money in circulation with gold (gold standard). Fiat currencies have no natural protection against an inflationary expansion of the money supply. The state itself must ensure that money remains a scarce commodity. 

The goal of price stability is to be institutionally secured in the European Monetary Union by the ECB as an independent central bank (Art. 282 (1) sentence 1 TFEU). In addition, the ECB has the appropriate monetary policy powers; this means, above all, the definition and execution of monetary policy for the euro area, the execution of foreign exchange transactions, the holding and administration of the official currency reserves of the member states of the euro area, and promoting the proper functioning of the payment systems (Art. 127 (2) TFEU). 

Before the link can ultimately be drawn about how virtual currencies fit into this currency order, careful consideration of the monetary policy instruments the ECB aims to achieve price stability is required.

Money creation and securing of price stability in the system of the European Monetary Union 

Price stability is guaranteed above all by the fact that money remains as scarce a commodity as possible. To achieve this, the ECB controls the amount of money in circulation. Control over the cash in circulation is granted to the ECB via the monopoly to authorize the issuance of euro banknotes (para. 1 sentence 1) and coins (para. 2 sentences 1) within the currency area of ​​the European monetary union under Art. 128 TFEU. Although the national central banks are still authorized to issue these banknotes, or only the governments of the euro member states are authorized to issue coins, this is only possible within the framework approved by the ECB (Kempen, in Streinz & Michl, 2018, Art. 128 TFEU marginal number 8). The volume of banknotes put into circulation is otherwise determined solely by the demand for cash. Any additional control of the amount of cash is only carried out using the other monetary policy instruments of the ECB. Book money, on the other hand, arises outside the sphere of activity of the ECB. Banks create it through a booking process: As a rule, the bank grants a customer a loan and credits him with the loan amount on his account. Book money in the amount of the loan arises. Alternatively, the bank buys an asset from a customer and, in turn, book money arises in the amount of the purchase price credited. The ECB cannot directly control the creation of book money as a private form of money creation. However, it controls them indirectly through the monetary policy powers available to it. This is mainly done by setting the key interest rate: Banks are dependent on the ECB granting them loans through "refinancing transactions," above all, to obtain the cash demanded by customers. The banks must pay interest to the ECB for these loans. If the ECB increases the so-called key interest rate, the banks, for their part, usually also increase the interest rates at which they grant loans. In turn, this method tends to dampen the demand for credit from companies or private individuals, and consequently, the creation of money through book money decreases. Another limiting framework for book money creation are rules on minimum reserves: when creating book money by lending or purchasing assets, banks must comply with the so-called Basel rules (Basel II / III) analogous to Regulation (EU) No 575/2013 (OJ L176), for every credit risk and other risks that they take on, raise and hold equity capital to a precisely defined extent. This procedure, too, limits the ability of banks to lend beyond a certain amount.

Virtual currencies as private money creation 

As has already been stated, virtual currencies are not money because they do not sufficiently fulfill the functions that money usually fulfills; but they still have a certain resemblance to money. If this similarity to money is taken into account, some money is also created through virtual currencies in the broadest sense (Tu & Meredith, 2015). This specific creation of money cannot be compared with the creation of book money on the banks via the issuance of loans or the purchase of assets. However, virtual currencies are not created simply by exchanging them for state currencies. If yes, in this case, the monetary units in circulation would remain the same. Instead, they arise through the process of so-called mining as the verification of a transaction in virtual currencies. Like book money, virtual currencies can thus be viewed as a private form of money creation because government agencies do not emit virtual currencies.

In contrast to book money, however, virtual currencies move outside of the two-part money creation system of the European Monetary Union (state money creation through the issue of cash and private money creation through the creation of book money). Their creation is not subject to the direct control of the ECB, nor can this be controlled indirectly through the monetary policy powers of the ECB. Virtual currencies collide with the currency sovereignty of the European Monetary Union insofar as the creation of at least money-like values ​​takes place outside of sovereign control. In any case, this can theoretically result in dangers for the goal of price stability since the ECB cannot exert any direct or indirect influence on the amount of these monetary values ​​in circulation.

Intermediate result 

Virtual currencies are not money. However, they are designed like money and, if they are used more often like money, can also become money one day. Taking this into account, virtual currency mining is the third form of money creation besides issuing cash and bank money creation. Money creation through virtual currencies is not subject to the direct or indirect control of the ECB through the monetary policy powers available to it. Virtual currencies collide with the currency sovereignty of the European Monetary Union and can endanger the goal of price stability insofar as uncontrolled monetary values are put into circulation.

Prohibition of private money creation through private currencies according to current law 

The phenomenon of private money creation beyond state control is not new. There have been isolated attempts to establish private currencies as an alternative to state currency systems. However, in order to protect the currency sovereignty, the Member States of the European Monetary Union, as well as several other legal systems such as US America., 18 USC § 336 - Stamps Payments Act of 1862(Murphy et al., 2015), have the issuance and use of private currencies with criminal sanctions proven. Anyone who spends or uses money in an unauthorized manner primarily affects the sovereign money-spending monopoly. Hence, ECB has the exclusive right to authorize the issuance of euro banknotes within the Union or the right of the national central banks to issue them. Since the sovereign monopoly on spending money, as shown above, serves to control the creation of money or the amount of money with the aim of price stability, this prohibition protects the currency per se. The legal asset of currency is subject to protection against an assumption of the monetary function and thus protection against so-called ancillary money. The issuing or use of money tokens describes an abstract, dangerous activity for the protected legal interest. Issuing money tokens increases the amount of money in circulation. However, this does not automatically mean that confidence in money is lost; it concretely jeopardizes or even eliminates price stability; this would only be the case if, for example, the amount of ancillary money in circulation takes up a considerable volume compared to the state money supply. According to Article 3 (1) (c) TFEU, the monetary policy of the Euro Member States falls under the exclusive competence of the Union. According to Art 127 (2) TFEU, this includes the definition and implementation of monetary policy for the euro area, the execution of foreign exchange transactions, the holding and administration of the official currency reserves of the euro area member states, and the promotion of the smooth functioning of the payment systems. Furthermore, according to Art. 128 TFEU, the exclusive right of the ECB to authorize the issuance of euro banknotes and coins; measures required for the use of the euro as the single currency under Art. 133 TFEU; and finally, under Art. 129 Para. 3, 4 TFEU, the authority to amend or specify individual provisions of the statutes of the ESCB (Calliess, 2016, Art 3 TFEU para. 11). However, this section does not contain a power standard to protect the euro from private currencies, even in a criminal provision. The concept of monetary policy and thus the scope of exclusive competence for monetary policy according to Article 3 (1)(c) TFEU does not cover the corresponding provisions. There is no exclusive competence in this regard at the Union level. The fact that there is no competence to issue regulations to protect against private currencies at the Union level can be deduced from a recommendation of the ECB of 07/07/1998: "The respective legal systems of the individual Member States should ensure that unauthorized issuance of banknotes is excluded"  (ECB/1998/7, OJ EC 1999, C 11/13). Facit, the responsibility, and thus the legislative competence for currency, money, and coinage, lies in the hands of the national governments. The Member States can and have imposed bans and penalties for private money creation in order to protect their currency sovereignty (cf. France: Art. 442-4 code pénal; Austria: Art. 81 National Bank Act 1984; Germany: Art. 35 of the German Bundesbank Act of 26 July 1957).

Prohibition of virtual currencies under existing law 

Although individual European member states have made the issue and distribution of money tokens a criminal offense, this prohibition is not applying to the issue and use of private virtual currencies. The common legal definition for money symbols speaks of documents and thus embodied money symbols such as tokens, coins, and bills. However, since virtual currencies are intangible assets that are only represented electronically and cannot be subsumed under the concept of monetary signs due to the lack of a document, the issuance and use of virtual currencies do not fall within the scope of the national criminal provisions; and is therefore not punishable.

Prohibition of private money creation through virtual currencies according to future law 

According to the current legal status, the issuance of virtual currencies and their use, their use as a means of payment, and exchanging them into state currencies are unpunished and otherwise largely unregulated. Only the regulations to ensure investor protection and the public's trust in the functioning of the financial sector provide for a license requirement for the use of virtual currencies, but not to protect the currency, but only when virtual currencies are used as an object of speculation and not - against them original target direction - when used as a means of payment. Although a ban or at least a regulation of virtual currencies is sometimes called for, no such efforts are recognizable on the legislative side. In theory, virtual currencies pose a risk to the price stability of the national currency. Such a risk depends on the volume of virtual currencies issued, their connection with the real economy, their trading volume, and their acceptance by users as a means of payment and thus money in the functional sense. However, since the volume of issuances and the use of virtual currencies as means of payment are currently low, there are still no significant risks to price stability (Schrey&Thalhofer, 2017, p. 1431). 

Currently, virtual currencies are viewed more as marginal phenomena and are not expected to impact payment transactions significantly. The fact is that outside of the two-part money creation system of the European monetary union, there should be no other money or value creation. Virtual currencies create money or at least add value outside of the two-part money creation system. Although they cannot yet be qualified as money, they are quite suitable for being used as a general means of payment. They are issued and used in the context of mining, through use as a means of payment to purchase goods and services, and as a medium of exchange for state currencies on corresponding trading platforms. The lack of embodiment of virtual currencies alone prevents the application of penalties. Given the progressive dematerialization of money, the restrictions of the relevant penal provisions on embodied objects would have to be lifted, and the scope of application would have to be extended to include virtual currencies.

Consequently, the issue and use of virtual currencies could constitute a criminal offense. Such a step is certainly not mandatory. In return, the question could be asked whether criminal protection of the euro against private currencies in this form is still necessary at all; for example, because it believes that the euro can already be adequately protected with the existing monetary policy instruments or, in any case, low-threshold protection in the form of mere regulation or sanctioning under administrative offense law is conceivable; or whether the criminal law protection must start well in advance of any substantial dangers for the euro and the economic relevance of a private currency should not be actually demanded. 

Criminal liability for spending and using virtual currencies under future law may indeed also be rejected by anyone who, in a market-liberal fundamental conviction, rejects a state currency sovereignty in any way and therefore wants to leave the monetary system to the forces of the market; likewise who regards such a restrictive state procedure as an obstacle to technological progress. In any case, the current monetary constitution of the European monetary union does not foresee such an opening.

Moreover, despite all the promotion of technological progress, any absolute belief in technology should not ignore the risks and leave the questions of technological benefit unresolved. For as desirable as it may be to establish alternative cashless payment methods that do not require the use of intermediaries, on the other hand, the risk is significant that if virtual currencies establish themselves as means of payment, a few will create private money printing machines and so less the general public, but one group of individuals benefits. On the other hand, the monetary policy instruments of the ECB could do nothing since their effect is limited to the two-part money creation system and does not capture value creation outside of this system.

Summary and Outlook 

Virtual currencies harbor a multitude of risks. A risk is that these could establish themselves as forms of money in addition to the forms of money issued under the sovereign control of cash and book money. Such value or money creation outside the existing money creation system in the European monetary union can endanger the goal of price stability as a fundamental prerequisite for the functioning of the euro as a currency. The criminal law of some Member States makes the issuing and use of money tokens, which can be utilized as a medium of payment, a criminal offense. However, this criminal provision is not applicable to virtual currencies due to the lack of embodiment. The underlying legislative purpose of protecting the euro from private currencies, however, also applies to virtual currencies. Accordingly, the question is justified as to whether, in the course of the already increasing dematerialization of money, the applicable penal provisions should not be extended to include immaterial, virtual currencies. Whether a total ban on virtual currencies, as it were under criminal law, should actually be considered, so to speak as the last resort of any regulatory discussion, is ultimately a decision made by the legislature. A discussion and weighing of legal and economic aspects are required. In any case, the national legislature would continue to be responsible for such a step. However, it is doubtful whether it would make sense to go it alone nationally to protect the euro in view of such a global phenomenon as virtual currencies. At least by the Member States of the Eurosystem, a joint international approach would seem more sensible to oppose the spread of virtual currencies on a broad front. A Union's competence to achieve an approximation of the national criminal provisions is currently only conceivable in theory. The indispensability of an alignment within the meaning of Art. 83 (2) TFEU can only be considered, with some restrictions, if virtual currencies develop economic relevance and have left the state of a merely abstract danger for the euro. In such a situation, prosecution of individuals is still possible. 

However, it may appear much more difficult to curb the spread of global virtual currencies as a whole. Here, the element of trust would ultimately have to be relied on, just as the existence and stability of state currencies live on the trust of all users, so virtual currencies can only exist and spread if there is a corresponding basis of trust. This trust is currently nourished primarily by the possibility of exchanging virtual currencies for state currencies and by the fact that virtual currencies can increasingly be used as an alternative payment method. However, should there be any Union-wide sanctioning of virtual currencies, the basis for this trust would be largely withdrawn through the mere existence of a corresponding norm.

Author: Erich Auer


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