CCIA Legal Topic Overview

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.