Business and cryptocurrencies

Cryptocurrencies. Most of you have surely heard this word at least once in your life. Perhaps you have read about them online or heard about them on television. Cryptocurrencies have become an inseparable part of modern history, and time will tell how much they will affect our everyday lives in the near future. Over the past year they have once again caught the attention of a great many people because of their rising price, and interest in doing business in this emerging field has clearly grown as a result. But how do you go about it?

Because cryptocurrencies are still a relatively young technology, the legislation surrounding them remains unclearly defined, and the legal framework differs from country to country. In Slovakia, 2 business activities have been in place since 2021. Specifically, these are:

• “Provision of virtual currency wallet services”, under which you as an entrepreneur provide services to safeguard private cryptographic keys on behalf of your clients, and to hold, store and transfer virtual currency. In other words, an individual or a legal entity can buy or store a certain amount of a chosen cryptocurrency through you, and you are then responsible for holding it securely and for any other operations set out in the contract (for example, transfers, staking and so on).
• “Provision of virtual currency exchange services” allows you, within the scope of your business, to offer or carry out transactions in virtual currency involving the purchase of virtual currency for euros or a foreign currency, or the sale of virtual currency for euros or a foreign currency. Put simply again, this means that you as an entrepreneur can trade cryptocurrencies on an exchange with your own capital or someone else’s.

These two business activities are closely related, so we would recommend that every entrepreneur planning to do business in the field of cryptocurrencies holds both of them. They are regulated trades (viazaná živnosť), which means that to have them registered for your company you need to pay a registration fee of €7.50 (or €15) and meet the requirements laid down by law.

For each business activity, you need to appoint a responsible representative (usually a shareholder or an employee), who must provide “proof of completed full secondary general education” or “full secondary vocational education”.

For the purposes of these business activities, a virtual currency is therefore a digital representation of value that is neither issued nor guaranteed by a central bank or a public authority, is not necessarily tied to legal tender, and does not have the legal status of a currency or of money, but is accepted by some individuals or legal entities as a means of exchange that can be transferred, stored or traded electronically.

Cryptocurrency mining

If you have decided that you do not want to trade cryptocurrencies on an exchange or safeguard cryptographic keys, but would rather mine cryptocurrencies instead, you are out of luck. Well, not entirely. Cryptocurrency mining was somehow forgotten when the new business activities were created. Fortunately, this problem can also be solved: with the help of the Ministry of the Interior (Ministerstvo vnútra), you can obtain a special business activity that allows you to mine cryptocurrencies through a company.

What about VAT on cryptocurrencies?

The Court of Justice of the European Union delivered judgment C-264/14, which clearly established that trading in cryptocurrencies, in this case Bitcoin, is exempt from VAT.

Judgment C-264/14 of the Court of Justice leads to the conclusion that a virtual currency with a bidirectional flow, such as Bitcoin, which is exchanged for traditional currencies such as EUR or USD in exchange transactions, cannot be regarded as tangible property within the meaning of Article 14 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, as amended and supplemented, since this virtual currency serves no purpose other than that of a means of payment.

We hope this article has helped you better understand the current state of doing business with cryptocurrencies in Slovakia. If you have already decided to trade on an exchange, hold private keys or mine the cryptocurrencies themselves, do not forget that accounting in this area of business can be more complex and time-consuming than it might seem at first glance. You should therefore look for people who already have solid experience of accounting for “crypto companies”. If you have any questions about doing business with cryptocurrencies, do not hesitate to contact us and we will be happy to answer them.