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Crypto License in Bulgaria
For an extended period, Bulgaria has maintained a cautious stance towards cryptocurrencies, lacking specific regulations or extensive discussions about their status. The Bulgarian National Bank (“BNB”) and the Bulgarian Financial Supervision Commission (“FSC””) have yet to classify cryptocurrencies as financial instruments or electronic money, allowing them to remain unregulated and not deemed illegal. The lack of a defined regulatory framework has led to no special licensing regime for establishing a crypto asset entity in Bulgaria. Thus, the widely used term “crypto license in Bulgaria” refers to an additional registration requirement with the National Revenue Agency (“NRA”) in Bulgaria, rather than a distinct licensing process. This registration enables entities to engage in various crypto-related activities, including cryptocurrency exchange, custody services, wallet provision, crypto payment services, and crypto advisory services given a way for a “Bulgarian crypto license” in the industry. Bulgaria’s regulatory approach to cryptocurrencies has largely followed the guidance of the European Central Bank. The BNB expressed concerns about the inherent risks of buying virtual currencies in 2018, highlighting their extreme price volatility and potential pricing bubbles. The FSC echoed these sentiments in 2022, issuing warnings about the volatility and unregulated nature of crypto investment funds. Despite the absence of specific regulations, cryptocurrencies in Bulgaria are indirectly regulated by measures aimed at preventing money laundering. In 2019-2020 the Measures Against Money Laundering Act in Bulgaria (or well-known “MAMLA”, in Bulgarian “Закон за мерките срещу изпирането на пари”) introduced the first legal definition of cryptocurrencies in Bulgarian legislation. It defines “virtual currencies” as digital representations of value accepted by individuals or entities as a medium of exchange, without being issued or guaranteed by a central bank or public body. Based on the 5th Money Laundering Directive (Directive (EU) 2015/849) MAMLA also implemented the definition of “wallet provider, offering custodial services” is defined as “a natural or legal person, or other legal entity, providing services for the protection of private cryptographic keys on behalf of its clients for owning, storing and transferring virtual currencies” Further referring to these concepts the Additional Provisions of Ordinance No. Н-9 of 7 August 2020 in Bulgaria, established requirements to crypto-asset exchanges and custodial wallet providers to register in a public register maintained by the NRA in Bulgaria. This created a so-called “cryptocurrency license in Bulgaria”. Upon registration, companies receive a crypto-certificate or crypto-license, the only state-issued document allowing them to provide crypto-related services. In summary, Bulgaria’s regulatory landscape for cryptocurrencies remains open, recently a registration process replaces a formal licensing regime. The position on unregulated status of cryptocurrency activity is confirmed in court practice and opinions of BNB and FSC in Bulgaria. There are no specific crypto-currency or fintech law that regulated this shpere. The country’s approach aligns with preventing money laundering, ensuring transparency, and promoting responsible crypto-related activities. It is expected that in its further movements towards “crypto license in Bulgaria” regulation the country will mainly follow European Union approach. Advantages of Bulgaria Crypto License Bulgaria crypto license has several advantages, few of which are listed below. EU Location: Bulgaria’s strategic location within the European Union provides businesses with access to the EU market, fostering international credibility. Ease of Setup and Obtaining License: The process of a crypto company formation in Bulgaria is quick and easy, as well as obtaining a crypto license in Bulgaria is relatively straightforward compared to some other jurisdictions, promoting a hassle-free experience for businesses. Flexible Regulatory Environment: Bulgaria’s crypto regulatory environment is less stringent compared to some EU counterparts, offering businesses flexibility in their operations as holders of so-called “Cryptocurrency license” in Bulgaria. Competitive Tax Rates: Bulgaria maintains a relatively low tax rate, enhancing the financial attractiveness of operating a crypto business in the country. Favorable Business Environment: The country’s overall business environment is conducive to growth, with supportive policies and a commitment to fostering economic development. Currency Stability: Bulgaria’s adherence to the currency board arrangement and its use of the Bulgarian lev (BGN) contribute to a stable economic environment for crypto businesses. Cost-Effective Operations: Operating costs in Bulgaria, including a crypto company setup in Bulgaria, as well as a crypto license Bulgaria obtaining, labor and infrastructure, can be more cost-effective compared to some other EU countries. Skilled Workforce: Bulgaria boasts a skilled workforce, offering expertise in various fields, including technology and finance, to support crypto-related ventures. Innovative Ecosystem: The country is fostering an environment that encourages innovation, with a growing ecosystem of tech startups and businesses. These advantages collectively position Bulgaria as an appealing destination for obtaining a Bulgarian crypto license, attracting businesses seeking a conducive and cost-effective environment for their crypto-related operations. Types of Cryptocurrency Licenses in Bulgaria Despite the fact that crypto activity is not specifically regulated in Bulgaria, there might be situations when certain part of crypto activity falls under the existing licensing rules. Therefore, we could conditionally divide the following types of cryptocurrency licenses in Bulgaria: I. Registration with National Revenue Agency (NRA): Authorized Activities: A registration with the National Revenue Agency in Bulgaria grants entities the authority to engage in various crypto-related activities. These activities include cryptocurrency exchange, custody services, wallet provision, crypto payment services, and crypto advisory services. Applicability: This option is suitable for businesses primarily involved in cryptocurrency activities that do not fall under the categorization of financial services or financial instruments. II. Financial Services Commission (FSC) License: Scope of Financial Services: If the crypto-related activities potentially qualify as financial services or be categorized as related to financial instruments, a license from the Financial Services Commission (FSC) might be required. Investment Firm License: Services related to crypto-assets, particularly those that can be considered financial instruments, may necessitate obtaining an investment firm license under the Markets in Financial Instruments Directive II (MiFID II), transposed in Bulgaria as the Markets in Financial Instruments Act. Application of EU Financial Rules: According to the European Securities and Markets Authority (ESMA), when crypto assets qualify as financial instruments, various EU financial rules, including the Prospectus Directive, the Transparency Directive, the Market Abuse Directive, the Short Selling