The phenomenon of cryptocurrency and crypto technology and their relevant use in various industries is becoming more and more popular in recent years and its increase is occurring in a remarkable way.
The yachting industry has also been positively affected by the use cryptocurrency. In fact, we have already witnessed the occurrence of yachts’ purchases and charters paid in cryptocurrencies (mainly in bitcoins). For example, “Oryx”, a Benetti yacht, of 40,2 meters length has been sold in bitcoins for the value of EUR 9,9 million trough the assistance of Edmiston and SuperYachtsMonaco, which signed an agreement with BitPay, a world-wide provider of bitcoins and cryptocurrency’s payment services. Such purchase demonstrates that the use of cryptocurrency has undoubtedly gained ground in the pleasure yachting world, proving that payments in cryptocurrencies represent the future.
Despite the above-described positive outcome, payments in cryptocurrency present some issues that will be better analyzed below.
The aim of this article is to give a comprehensive overview of the use of cryptocurrency in the yachting industry, focusing on the relevant issues, the analysis of the applicable EU and national law (i.e., Italian and Monegasque law) and some suggestions for lawyers and brokers in order to avoid and mitigate the possible risks.
The phenomenon of cryptocurrency has enormously increased over the last years, expanding more and more to the point of being used in several industries, such as the yachting one. Cryptocurrency generally present some advantages, such as, above all, the speed of transactions, but, at the same time, they have some criticalities regarding the lack of sufficient safety and protection, of complete traceability and the risk of money laundering and terrorism financing.
Therefore, our advice to yacht brokers and lawyers involved in this kind of transactions is to have an extremely cautious approach, since such transactions are not yet fully regulated. However, both EU and national legal frameworks are adjusting in such sense in order to allow safe transactions, which may be advantageous for crypto-assets issuers, service providers and users. Indeed, we are heading toward an increasingly digitalized world and it is of utmost importance that legislators keep up, because the use of cryptocurrency is constantly growing and the assessment and prevention of the relevant risks is crucial for all the natural and legal persons involved in the use of cryptocurrency.
- What are the relevant issues regarding the acceptance of payments in cryptocurrency?
The advantages of using cryptocurrency, also regarding the yachting industry, are numerous. Above all, they regard: the speed of transactions, the elimination of the need to worry about business hours, intermediaries and manual operations with consequential lower fees for international payments and minimal administrative delays.
However, in some respects, cryptocurrency is considered a dangerous tool. The use, purchase or exchange of cryptocurrency may present meaningful risks, especially for those who use them without having an adequate knowledge or awareness of the associated risks. In this regard, the relevant issues are, inter alia, the following:
- a) price volatility: their value is extremely exposed to sudden changes and fluctuations. In fact, the value of cryptocurrency may easily be the object of important decreases of hundreds or even thousands of euros. In this regard, it should be briefly mentioned that cryptocurrencies constantly fluctuate, after reaching historical highs in 2020, they collapsed on May 19, 2021, after an Elon Musk’s tweet, dated May 10, 2021, regarding the stop of the acceptance of bitcoins’ payments for Tesla cars and after the statement of the Central Bank of China concerning the prohibition of using cryptocurrency as a payment method. However, there are several examples of cryptocurrency’s up and downs and, for such reasons, both Bank of Italy and CONSOB (e., Italian National Commission for Companies and the Stock Exchange) stated that cryptocurrencies present high risks and may entail the entire loss of the interested amounts;
- b) regulatory uncertainty: in most countries, cryptocurrency is not regulated by central bank and/or governments entailing a high risk of money laundering, terrorism financing and tax evasion;
- c) risks connected to errors and hacking: in this respect, security is certainly a relevant issue, because there is not an infallible way to prevent technical problems, human errors and hacking; digital wallets may be subject to hackers’ attacks and crypto exchange may permanently close. The loss of passwords or other sensivite data related to wallets may be permanent, since there are no central authorities capable of registering the relevant passwords and/or of replacing them. Hackers’ attacks, occurred throughout the years, are numerous and they regard several platforms involved in the business, such as cryptocurrency exchanges, established all over the world. For example, Binance, the world largest cryptoccurency exchange, has lost 7000 bitcoins, which at the time amounted to USD 40 million, and users’ sensitive data due to a hacker attack;
- d) lack of guarantee: wallets are not regular bank accounts, since they are stored only in online platforms, they are not protected by the standard guarantees provided for accounts in national banks. In fact, they do not envisage the intervention of any authorized and supervised intermediary, so the relevant security, legal and/or contractual guarantees provided for transactions in legal currency are not applicable to them;
- e) lack of traceability: although cryptocurrencies’ transactions may be viewed from users, the certainty of the origin of funds cannot be obtained. In addition, the owners of digital wallets, or more specifically the parties involved in the transactions may remain totally anonymous, contributing to the increase of criminal activities, such as money laundering and/or terrorism financing, thus possibly requiring the intervention of the competent authorities to shut down the trading platforms by preventing access to or use of any funds held therein. The EU, as a sanction towards Russia for the Russian-Ukranian conflict, prohibited the cryptocurrency transactions from Russia.
Another method, which facilitates the perpetration of criminal activities through the use of cryptocurrency, is the dark web. For example, the owner of DeepDotWeb received bribes in bitcoins amounting to USD 8.4 million. In order to hide the origin of the cryptocurrency, he laundered money and transferred the payments to other accounts, both bitcoin accounts and bank accounts connected to shell companies. DeepDotWeb worked as an intermediary between his users and the dark markets. Moreover, it is difficult to block illegally formed assets and the authorities may only intervene afterwards the creation of such assets and their circulation in the relevant platforms.
In light of the above, the European Supervisory Authorities (EBA, ESMA and EIOPA – the ESAs) warned consumers that many crypto-assets are highly risky and speculative. Above all, the main risks of cryptocurrency regard money laundering and terrorism financing. In this regard, the Italian Supreme Court in its decision no. 27023 of July 13, 2022 has highlighted that the occurrence of money laundering through cryptocurrency is an example of cybercrime, stating that it constitutes a way of investment of the proceeds of the crime and it grants greater anonymity and less risk to the involved individuals compared to traditional schemes, allowing the movement of large sums of money to jurisdictions, which are less compliant to anti-money laundering regulations.