Bitcoin and blockchain from a consumer protection perspective Dr. - - PowerPoint PPT Presentation

Bitcoin and blockchain from a consumer protection perspective

• Dr. Evripides Rizos, European University Cyprus

BITCOINS AND CONSUMER RIGHTS DIRECTIVE (CRD)

• Is payment with bitcoins an obstacle to the consumer’s right to withdraw?
• Art. 9 – 16 Consumer Rights Directive
• If not, what shall have the trader to reimburse in case of withdrawal?
• Dr. Evripides Rizos, European University Cyprus

LEGAL STATUS : HOW BITCOIN SHOULD BE LEGALLY TREATED

• Mostly unregulated
• Bitcoin is not a legal tender
• Case – to case judgement. Examples :
• VAT Directive
• Electronic Money Directive
• Payment Services Directive 2
• Dr. Evripides Rizos, European University Cyprus

CONSUMER RIGHTS DIRECTIVE (2011/83/EU)

• Art. 6 : Information requirements for distance contracts (e.g. e-commerce)
• Art. 9 – 16 : Consumer’s right of withdrawal (even without reason)
• Time limit : 14 days. Can be extended.
• Information requirements about the right of withdrawal. Art. 6 (1) (h) – (k)
• Exercise of the right of withdrawal  reimbursement of payments / return of the

goods

• Dr. Evripides Rizos, European University Cyprus

IS PAYMENT WITH BITCOINS A HINDRANCE TO THE RIGHT TO WITHDRAW ?

• Concept of consumer
• “Sales or services” contract
• Is payment with bitcoins a “payment” ?
• Exception to the right of withdrawal of Art. 16 (b)
• A right of withdrawal shall not be provided with regards to distance and off-premises

contracts in respect of “the supply of goods or services for which the price is dependent

• n fluctuations in the financial market which cannot be controlled by the trader and

which may occur within the withdrawal period”

• Conclusion : Payment with bitcoins cannot be an obstacle.
• Dr. Evripides Rizos, European University Cyprus

EXERCISE OF THE RIGHT TO WITHDRAW

• Art. 13 (1) : The trader shall reimburse all payments received from the

consumer, using the same means of payment.

• In which currency?
• In which value?
• Dr. Evripides Rizos, European University Cyprus

PAYMENT IN A FOREIGN CURRENCY

• European Commission : “The trader should refund the full amount paid by

the consumer in the currency of the payment”.

• Decisive is the “money of account”, the currency in which the price was

denominated in the contract, as the measure of the consumer’s obligation.

• Dr. Evripides Rizos, European University Cyprus

Source : www.amazon.com

• Dr. Evripides Rizos, European University Cyprus

PAYMENT WITH BITCOINS - COMMON PRACTICE : AGREEMENT

• The traders, who accept bitcoins, include usually into the contracts a refund policy.
• They reimburse the value of the price denominated in a state currency. E.g. Price :

600 €  Value of the reimbursement 600 €.

• Some reimburse by means of state currency (600 €).
• Others reimburse by means of bitcoins. E.g. :
• Price : 600 € paid with 3 bitcoins (BTC to Euro exchange rate at the moment of payment : 200/1).
• BTC to Euro exchange rate at the moment of reimbursement : 300/1  The consumer receives 2

bitcoins ( equivalent to 600 €)

• Validity of the agreement
• Dr. Evripides Rizos, European University Cyprus

PAYMENT WITH BITCOINS – DENOMINATION OF THE PRICE IN A STATE CURRENCY

• In most cases prices are denominated in a state currency, even when the

consumer pays with bitcoins.

• Bitcoins are not a different currency option, but an alternative method of

payment

• Dr. Evripides Rizos, European University Cyprus

Source : www.overstock.com

• Dr. Evripides Rizos, European University Cyprus

PAYMENT WITH BITCOINS – DENOMINATION OF THE PRICE IN A STATE CURRENCY

• Most of the traders who accept bitcoins do not actually receive bitcoins.
• The consumer pays the price in bitcoins to a bitcoin exchanger and the bitcoin exchanger pays instantly the price

in a state currency to the trader.

• Value of reimbursement : The nominal value of the price, denominated in a state currency.
• Means of reimbursement : the bitcoin exchanger conveys to the consumer the amount of bitcoins equivalent to

the value of the price in state currency. E.g. :

• Price : 600 € paid in 3 bitcoins (BTC to Euro exchange rate at the moment of payment 200/1)
• BTC to Euro exchange rate at the moment of reimbursement : 150/1. The consumer shall receive 4 bitcoins.
• Dr. Evripides Rizos, European University Cyprus

PAYMENT WITH BITCOINS – DENOMINATION OF THE PRICE IN A STATE CURRENCY

• Same solution in cases, where prices are denominated in a state currency,

but no bitcoin exchanger is involved.

• Means of reimbursement : Direct conveyance of bitcoins from the trader to

the consumer.

• Amount of bitcoins to be reimbursed : The equivalent to the nominal value of the price

at the moment of the reimbursement.

• Dr. Evripides Rizos, European University Cyprus

PAYMENT WITH BITCOINS : DENOMINATION OF THE PRICE IN BITCOINS

Very rare cases, where prices are denominated only in BTC

Source : http://www.bitcoffee.eu/

• Dr. Evripides Rizos, European University Cyprus

PAYMENT WITH BITCOINS – DENOMINATION OF THE PRICE IN A STATE CURRENCY

• Object of reimbursement : The exact amount of bitcoins paid
• Risks for both parties
• Increase/Decrease of bitcoin’s value
• Information duty about the bitcoin’s volatility?
• No specific information duty
• Compatibility with the goal of the effectiveness of the right of withdrawal
• The effectiveness of the right of withdrawal is not an ultimate goal of the CRD
• This solution is not incompatible to the goals of the CRD
• Dr. Evripides Rizos, European University Cyprus

CONCLUSION

• The use of bitcoins does not rule out the application of the rules of the CRD.
• The consumer receives the nominal value of the price denominated in a

state currency, when :

• 1. There is an agreement between the parties.
• 2. The price was denominated in a state currency, even if the consumer was provided

with the ability to pay with bitcoins.

• The consumer receives the amount of bitcoins paid, if the price was

denominated only in bitcoins

• Dr. Evripides Rizos, European University Cyprus

THANK YOU!

• Dr. Evripides Rizos, European University Cyprus