Activities related to cryptocurrencies and their acquisition

Cryptocurrencies are not a new thing, but in 2017 they became much more popular in Slovenia, too. This led to questions by enterprises and some institutions regarding the classification of services related to cryptocurrencies according to NACE Rev. 2. Because the Statistical Office of the Republic of Slovenia is responsible for this classification in Slovenia, we prepared some explanations regarding this issue.

What are cryptocurrencies?

The global financial crisis, which in 2008 led the world banking system almost to a breakdown, in 2009 led to the creation of the first cryptocurrency - the token crypt, i.e. bitcoin. Its primary purpose was to establish a decentralized electronic payment system - a dispersed payment network powered by users without a central authority or intermediaries.

The cryptocurrencies emerged as a critique of social dependence on financial institutions in the field of electronic payments, as they serve as trustworthy intermediaries in the payment process. It's an asset that does not exist in a physical, but in a digital, intangible form. Among the most famous cryptocurrencies are bitcoin, ethereum, ripple, litecoin, monero, etc.

Cryptocurrencies can be acquired by purchasing (exchanging money) or as a reward or "payment" for the service rendered (mining). The owner has cryptocurrencies stored in a digital wallet (multiple types) containing transaction records in blocks and having control over them, and decides when to sell or exchange them for services or goods.

Mining

Cryptocurrencies are created by the process of mining, which involves solving complex cryptographic algorithms that require powerful computer processors. Mining is an operation to create new blocks by miners.
Miners solve the complex cryptographic problem and when they find a solution, a new block is added, which is added to the existing block of blocks (blockchain) and stored in a public book of all transactions that records all transactions performed. In this way the transaction is confirmed and unchangeable. Verification and validation of transactions are performed by a number of computers connected to the network, which ensure that the cryptocurrency can be transferred from one wallet to another. Most transactions require a commission to be included in the block; the collected fees belong to the miners.
Cryptography is used for safe transfer of data and money online, which is a process for converting legible data into an almost unbreakable form of characters.

From the point of view of the activity, mining of cryptocurrencies is the provision of computer data processing services. This applies in the case of the verification and validation of transactions done with crypto tokens as well as in the case of solving cryptographic algorithms. Such mining activity according to NACE Rev. 2 classification should be classified into NACE 63.11 / SKD 63.110 Data processing, hosting and related activities and according to the Classification of Products by Activity (CPA) into 63.11.11 Data processing services.

Cryptocurrency trading and advice on buying/selling cryptocurrencies

Cryptocurrency trading consists of buying and/or selling cryptocurrencies, either for oneself or for the client. Trading takes place through special exchange platforms (virtual markets) acting as intermediaries. In the case of trading for the client, it is trade on a fee or contract basis.

Virtual currencies are not the means of payment covered by divisions 64 Financial service activities, except insurance and pension funding or 66 Activities auxiliary to financial services and insurance activities from section K Financial and insurance activities from the Statistical Classification of Economic Activities in the European Community NACE and our national SKD classification; therefore, the appropriate code for cryptocurrency trading for now is from section N Administrative and support service activities, class NACE 82.99 / subclass SKD 82.990 Other business support service activities n.e.c.; CPA 82.99.19 Other miscellaneous business support services n.e.c. This activity also includes commissions and payments for the service of exchanging conventional currencies into virtual, services related to the transmission of exchange platforms, electronic wallet services, cryptographic tokens services, and advice in relation to the sale or purchase of cryptocurrencies.

For easier classification or assignment of the appropriate activity code for a certain service or the production of a particular product according to the SKD classification, you can use the SKD E-search engine 2008.

Interesting facts:

• Cryptocurrency mining requires a lot of electricity. For example, following the current trend, this year Iceland, which is one of the most popular countries for bitcoin mining, will consume for bitcoin mining more electricity than it is consumed by all households in the country. Experts are warning that this could lead to electricity shortages. (Source: svetkapitala.delo.si)

• At the moment (4 April 2018) there are around 1,600 cryptocurrencies in the world. (Source: coinmarketcap.com; leading analytical website for cryptocurrencies)

• Google Trends data show that in the past year and in the past three months of all countries using Google the keyword "cryptocurrency" was the most sought in Slovenia. Google Trends is a powerful tool enabling detailed insight into topics attracting Google users the most. (Source: siol.net)

• Cryptocurrencies are a risky investment; the value of a cryptocurrency can grow fast but it can also drop fast. The value of a cryptocurrency can fall by 90% or more, even to zero and the cryptocurrency can disappear from circulation, so that investors lose everything.