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Iceland: National Digital Currency Auroracoin Launched

(Aug. 12, 2014) On March 24, 2014 creators of Auroracoin launched a helicopter drop of Auroracoins; they were available to all Icelanders who wanted to claim them. The digital currency is a competitor of Bitcoin and meant to cater to Iceland, although it can be changed into Bitcoins. It acts as a gateway currency for Iceland’s otherwise closed currency system. (Eric Mack, National Bitcoin Alternative Auroracoin Launches to Save Iceland’s Economy, FORBES (Mar. 24, 2014); Alex Hern, Bitcoin Goes National with Scotcoin and Auroracoin, GUARDIAN (Mar. 25, 2014).)

In anticipation of the drop, the Central Bank of Iceland issued a statement explaining the legal status of digital coins in Iceland. Not only are the coins not a recognized and protected currency, but purchasing them may violate the Icelandic Foreign Exchange Act, which specifies that Icelandic currency cannot leave the country. A purchase of Auroracoin rival Bitcoin, which is based overseas, would, according to this view, be a violation of the Act, as the Bitcoin is purchased from abroad. (Act No. 87/1992 on Foreign Exchange, Ministry of Finance and Economic Affairs website; Press Release, Central Bank of Iceland, No. 9, 2014, Significant Risk Attached to Use of Virtual Currency (Mar. 19, 2014).)

The present use of Auroracoins has been dubbed limited, as they cannot currently be used for payment of goods or services in Iceland. Instead, commentators claim, the digital currency will be used simply for speculation. (Daniel Cawrey, How Auroracoin Is Forcing Digital Currency Discussion in Iceland, COINDESK (May 1, 2014).)

The founder of Aurora, known by the pseudonym Baldur Friggjar Odinsson, claims that use of the digital currency is a way to criticize the now six-year old restrictions on foreign exchange of currencies, put in place following Iceland’s banking crisis. (Michale J Casey, Auroracoin Already Second Biggest Cryptocoin – and It’s Not Even Out Yet, WALL STREET JOURNAL (Mar. 5, 2014).) He has asserted that Icelanders will be able to use the digital currency abroad or sell the coins in exchange for foreign currency. (Id.)

Prepared by Elin Hofverberg, Foreign Law Research Consultant, under the supervision of Peter Roudik, Director of Legal Research.