Definitions of crypto-assets under the Serbian Digital Assets Act (“DAA“) and MiCAR are for the most part similar: both instruments define crypto-assets as a “digital representation of value” that can be transferred electronically (the term used in MiCAR), i.e. digitally (the term used in DAA). DAA defines crypto-assets as a digital representation of value that can be digitally bought, sold, exchanged, or transferred and used as a means of exchange or for investment purposes. MiCAR defines a crypto-asset as “a digital representation of a value or of a right that is able to be transferred and stored electronically using distributed ledger technology or similar technology”.
Nevertheless, there is an important difference in the definitions, insomuch as DAA limits the scope of use of crypto-assets, and the definition in MiCAR does not refer to purpose in any way. Under the definition in DAA, crypto-assets can be used only for exchange or investment purposes and cannot be used as a means of payment. By contrast, the use of crypto-assets as a means of payment presents a significant feature of certain important crypto-assets under MiCAR. Furthermore, the definition used in DAA is technologically neutral and does not contain a reference to any specific technology. MiCAR, on the other hand, contains explicit reference to applicable distributed ledger technology or similar technology. The principle of technological neutrality is the reason why DAA uses the term “digital asset” instead of “crypto-asset” which refers to the use of distributed ledger technology. For the sake of consistency, we use the term crypto-asset in this and subsequent articles in the series.
Classification of crypto-assets under DAA and MiCAR
DAA has followed the common approach of classifying crypto-assets into two categories: cryptocurrencies (or virtual currencies) and tokens. In contrast, MiCAR’s classification of different types of crypto-assets was based on the level of risk they entail and the need to provide for each of the categories a distinct set of regulations.
In line with traditional classifications of crypto-assets, DAA differentiates between two types of crypto-assets: virtual currency and digital token. DAA defines virtual currency as a type of crypto-asset that (i) is not issued or guaranteed by a central bank or public authority, (ii) is not necessarily attached to a legal tender (iii) does not have the legal status of money or a currency, (iv) is accepted by natural or legal persons as a means of exchange and (v) can be bought, sold, exchanged, transferred, and stored electronically. The law defines digital token as an intangible property representing, in digital form, one or more property rights, which might include the right of a digital token user to specific services.
The distinction between virtual currencies and digital tokens is not clearly marked, and many crypto-assets may exhibit characteristics of both virtual currencies and digital tokens. In practice, if a crypto-asset does not provide for any rights (such as the right to share in the profit of the project, interest payment, right to use services, or similar) and it is only used for exchange, as is the case with, for example, Bitcoin, then it is considered a virtual currency. If a crypto-asset contains certain rights but is not intended for exchange, then it is likely a digital token. If a crypto-asset provides some additional rights besides being used for exchange, then it is a hybrid crypto-asset.
The rules in DAA that apply to virtual currency and digital tokens are substantially the same. The only significant difference concerns the competence of the supervisory authority. Thus, the National Bank of Serbia supervises the issuance and trading of virtual currency as well as the activities of those crypto-asset service providers that provide services with virtual currencies. The Securities Commission supervises the issuance and trading of digital tokens as well as the activities of those crypto-asset service providers who provide services with digital tokens.
MiCAR classifies crypto-assets into several categories based on the level of risk involved and subjects each category to a distinct set of rules. MiCAR’s classification is based on one criterion: whether or not a crypto-asset seeks to stabilize its value by reference to another asset. MiCAR distinguishes between (i) asset-referenced tokens, (ii) e-money tokens, and (iii) other crypto-assets such as utility tokens.
Asset-referenced tokens and e-money tokens are often referred to as “stablecoins”. Stablecoins are a subset of cryptocurrencies that are linked to the value of another asset to maintain its stable value. The principal difference between asset-referenced tokens and e-money tokens is that asset-referenced tokens aim to stabilize their value by reference to another value or right, including one or several official currencies, whereas e-money tokens aim to stabilise their value by reference to only one official currency. MiCAR further divides asset-referenced tokens and e-money tokens into significant and non-significant tokens based on several criteria, such as inter alia: customer base, market capitalisation or the number of transactions. More stringent rules apply to “significant” stablecoins. MiCAR provides for a different set of rules for each of the three categories of crypto-assets and special rules for “significant” stablecoins.
While DAA contains a definition of stablecoins, the law does not have any substantive provisions dedicated to stablecoins specifically. That means that the rules applying to stablecoins are the general rules concerning crypto-assets.
Scope of application under DAA and MiCAR
E-money
DAA explicitly excludes from the field of its application the issuance of e-money as well as services connected with e-money. E-money is subject solely to the Payment Services Act (Zakon o platnim uslugama, Official Gazette of the Republic of Serbia nos. 139/2014, 44/2018 and 64/2024). By contrast, MiCAR regulates e-money tokens, which present a special subcategory of e-money. E-money tokens are distinct types of crypto-assets that purport to maintain their value by referencing the value of one official currency. MiCAR provides that e-money tokens are deemed to be electronic money (Article 48, paragraph 2) within the meaning of the E-Money Directive (Directive 2009/110/EC on the taking up, pursuit and prudential supervision of the business of electronic money institutions) and provides that they are governed both by MiCAR and E-Money Directive. Similar to e-money, e-money tokens represent electronic substitutes for coins and banknotes and are used as a means of payment.
Financial instruments
Both DAA and MiCAR exclude financial instruments from the scope of their application. However, the lack of a clear definition of a financial instrument might lead to uncertainty as to whether or not a particular financial instrument is within the scope of the respective legislation.
Both Serbian Capital Markets Act (Zakon o tržištu kapitala, “Official Gazzete of the Republic of Serbia”, no. 129/2021 and Markets in Financial Instruments Directive II (MiFID II) (Directive 2014/65/EU ) use the same approach when defining a “financial instrument”, by listing a number of instruments rather than providing a clear definition based on a set of conditions and criteria. This approach has proved to be problematic in the EU as it does not clearly distinguish between crypto-assets qualifying as financial instruments and thus being outside the scope of MiCAR and those falling under MiCAR. To that effect, the European Securities and Markets Authority (ESMA) has issued Guidelines on the conditions and criteria for the qualification of crypto-assets as financial instruments. Due to the underdevelopment of capital markets in Serbia, no authority has weighed in on the distinction between crypto-assets that qualify as financial instruments and those that do not.
DAA provides for an important exception to the general rule of exclusion of financial instruments from its scope, by allowing issuance of a financial instrument in the form of a crypto-asset if (i) such financial instrument does not have the characteristics of shares, (ii) such financial instrument is not exchangeable for shares, and (iii) the total value of crypto-assets issued by an issuer during a period of 12 months does not exceed the amount of EUR 3,000,000.00. This exception permits the issuance of financial instruments like bonds under the auspices of DAA avoiding the application of the Serbian Capital Markets Act.
Crypto-mining and decentralized crypto-assets
While expressly providing that crypto-mining is permitted, DAA also provides that the acquisition of crypto-assets through crypto-mining is out of its scope. Similarly, MiCAR provides that the rules concerning the issuance of crypto-assets do not apply in the case of crypto-mining i.e “where the crypto-asset is automatically created as a reward for the maintenance of the distributed ledger or the validation of transaction” (Article 4(3)(b)).
MiCAR does not cover crypto-asset services provided in a fully decentralised manner, without any intermediary. Therefore, for example, the world’s most well-known cryptocurrency, Bitcoin, is not regulated by the MiCAR. No such exclusion exists under DAA.
Non-transferrable crypto-assets and non-fungible token
DAA does not apply to the transactions with crypto-assets between a limited group of entities (i.e. use of crypto-assets for certain products and services as loyalty schemes or rewards without the possibility of further sale or transfer of such crypto-asset by the issuer or offeror of the loyalty points). Similarly, under MiCAR crypto-assets that cannot be transferred are not within the scope of the definition of crypto-assets.
DAA is silent on the non-fungible tokens (“NFTs“), however, the broad definition of crypto-assets, in the absence of explicit exclusion, leads to the conclusion that DAA also covers NFTs. The general rule under MiCAR is that it does not apply to crypto-assets that are unique and not fungible with other crypto-assets. However, MICAR may apply to crypto-assets as NFTs which are more likely to be fungible (e.g., NFTs issued in series or as a collection).
Digital fiat currencies
DAA excludes digital fiat currencies from the definition of the crypto-asset. Similarly, MiCAR does not apply to central banks acting in capacity as monetary authority including when they issue digital fiat currencies.
This article is published for information purposes only and does not constitute legal advice. For more information or assistance with the topic, please contact office@bdkadvokati.com.
Photo by Milad Fakurian on Unsplash
