That Amazon gift card your sister-in-law passive-aggressively gave you for your birthday can also be used as a shadow currency if it falls into the wrong hands. The exchange of electronic coupons from more than a hundred companies, from Amazon to the Casa del Libro, has become an emerging way to obtain cryptocurrencies without having to declare them to the Treasury and guaranteeing anonymity. This informal market has flourished in recent years thanks to new cryptocurrency brokers and virtual platforms that facilitate these operations, accessible from Internet forums.
The resale of these cards, also called “closed-loop” because they can only be used in a trade in exchange for cryptocurrency, has created its own secondary market thanks, mainly, to the fact that they are almost impossible to track by financial regulators. These are operations that are not supervised by the Bank of Spain, nor can they be tracked by the Tax Agency, as confirmed by sources from both entities. Five days. In addition, it benefits from legal loopholes within European regulations on the use of electronic money. Chainalysis, an analytics firm that tracks Bitcoin transactions, can see any transactions that occur on-chain, such as funds sent from one person to another, as well as trades on decentralized exchanges. However, they have confirmed to this newspaper that “we would have no way of providing information about the purchase of gift cards.”
In most cases, the brands that offer these prepaid cards are not aware of their use in the secondary market. Sources from the House of the Book have confirmed to Five days that the use of their cards in providers such as BitRefill and Coinsbee has surprised them: “the brand’s gift cards can only be used in the Casa del Libro stores,” they point out. Exchange for cryptocurrencies is also not allowed. This has also been detailed by the logistics giant, Amazon, which accumulated 5,400 million dollars (5,039 million euros) in unredeemed cards at the end of 2023. The technology company has alerted its consumers that the cards should only be used in its stores .
For Francisco Serantes, coordinator of the Personal Income Tax Expert Group of the Spanish Association of Tax Advisors (AEDAF), these activities can be considered a tax crime, or even money laundering in the event that the assets were acquired with money from some activity. illicit “The Tax Agency is, computer-wise, one of the most powerful tax administrations in the world,” said Serantes. “However, I don’t think I can still trace these transactions. What it can do is control the intermediaries.” The penalties for not declaring your cryptocurrencies in the Income Tax Return, according to Serantes, “could range between 150%, although for compliance it could be reduced by 30% for compliance with the settlement and an additional 40% for compliance and payment of the sanction itself.”
Popular forums on platforms such as Discord, Reddit and Telegram have provided an unregulated market for transactions peer-to-peer of Bitcoin, and are full of users looking for ways to make transactions without using fiat currencies. “I want to spend part of my earnings on gifts for my one-year-old daughter,” writes a user from the Netherlands on a forum. “I was thinking about using cryptocurrencies directly and leaving fiat money aside. Does anyone recommend doing this?” ask. In the bowels of these forums, strangers exchange both codes and advice to avoid the traditional financial system.
In many cases, they end up exchanging these cards (below the face price) at cryptoasset brokers such as Paxful, BitPay or Coinsbee, although there are endless options. These payment providers—which account for more than half of such transactions in Western Europe, according to Chainanalysis—act as a fintech and they promise to be a safer way to make these transfers. At Paxful, a cryptocurrency exchange broker that offers the option to use gift cards from 133 brands, you can redeem a Google Play card for Bitcoin with an anonymous user like ‘LOVEBTC666666’ located in China, who claims to be ‘honest and fast’ . The interested party provides the code for the card worth 20 euros in the Google Play stores and, in exchange, receives 0.0003 in Bitcoin (current currency exchange) from the other side of the world.
The user, with 1,261 previous transactions, has 706 positive comments to assure the client that he is reliable, although he has blocked 84 people and has been blocked by 32. If the user trusts the counterparty, he only has to enter the information of the counterparty. gift card and the code of the wallet where you want to receive the transfer. Conversely, cryptocurrencies like Bitcoin or Ethereum can be sold on one of these exchanges and pay the bill at a gas station with a Cepsa gift card.
However, although these companies provide banking services, they are not subject to the same regulation as a traditional financial entity. For example, not all of these companies comply with European verification or know-your-customer (KYC) requirements, a risk that can facilitate the proliferation of scams. In the United States, 41,632 of the scams reported in 2023 involved prepaid or gift cards, according to data from the Federal Trade Commission (FTC). In Spain, it is not possible to put a figure on these activities. Sources from the Association of Treasury Inspectors have confirmed to Five days who have no knowledge of these companies or the activities they are carrying out in Spain.
At BitPay, for example, only transfers above $3,000 require the customer to verify their identity. On the other hand, Paxful, which maintains that they follow KYC requirements, does require users to identify themselves by name, email and ID before making a transaction. The Bank of Spain has a hundred companies that provide digital currencies, but none of the three companies mentioned appear on the list. Sources from the Bank of Spain have confirmed that the list only implies that the companies comply with regulations on the prevention of money laundering and not that they are under the supervision of the entity. BitPay and Paxful have not responded to this newspaper’s requests.
Allison Owen, research associate at RUSI’s Center for Financial Crime and Security Studies, a think tank based in London, believes that jurisdictions must strengthen their regulation. However, he adds that tracking transactions on decentralized exchanges is not entirely impossible. “I don’t understand when people say it’s hard to track large decentralized exchanges,” she noted. “With cryptocurrencies there is a huge opportunity, you have some traceability compared to cash.” Christian Menda, head of Chainalysis Iberia, stated that “surveillance, along with solid KYC policies, is essential to dismantle the networks that facilitate these crimes.”
Brussels wants to put these transactions in order. The European Commission has adopted a new package of requirements for these digital currency exchange providers. Among them, they will be under the supervision of an anti-money laundering authority and will have to tighten their KYC policy. In the United States, the US Securities and Exchange Commission (SEC) has begun to tighten its policy on cryptocurrency providers. This Monday, the regulator announced its intention to sue the stock brokerage, Robinhood. A year ago, the SEC sued Coinsbee, another of these entities.
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