Serbia has been among the pioneers of crypto-asset market regulation. When the Digital Assets Act (Zakon o digitalnoj imovini, Official Gazette of the Republic of Serbia no. 153/2020) (DAA) was enacted, only a few countries in Europe including Switzerland, Liechtenstein, France, and Malta – had regulations in place for crypto-assets. DAA was implemented three years before the adoption of Regulation (EU) 2023/1114 on Markets in Crypto-Assets (MiCAR). In the meanwhile, many EU countries have put in place a comprehensive set of rules governing crypto-assets and have adopted policies fostering the rapid growth of crypto-asset market. Serbia, despite the early regulation, has failed to become a prominent hub for blockchain and cryptocurrency enterprises.
The digital markets in Serbia have remained relatively underdeveloped, with only two crypto-asset service providers having obtained licences from the supervisory authority, the National Bank of Serbia. Additionally, there have been a total of nine initial coin offerings, with six taking place in the past year.
With MiCAR now fully in force within the EU, it is crucial to assess the current state of digital market regulation in Serbia in comparison to that of the EU. This text, the first in the four-part series, points to the goals of the DAA and MiCAR and summarizes the main substantive differences between the two pieces of legislation. The second article in the series will explore how the two legal instruments define and classify crypto-assets and determine the scope of application of the relevant legislation. That will be followed by an article presenting the legal rules that govern the issuance of crypto-assets. Finally, the last article will focus on the provision of crypto-asset services and financial institutions as actors in the crypto-assets market.
Serbian and EU legislation alike sets the disclosure and transparency requirements for the issuers of crypto-assets. The laws provide licencing requirements for crypto-asset service providers and in a similar way regulate their operation, organization, and governance. Both regulations contain provisions regulating market abuses and prohibiting market manipulation and insider trading.
However, despite their similarities, DAA and MiCAR differ significantly, to the extent that DAA in its current shape does not align with MiCAR. Although MiCAR was implemented only three years after DAA, the context changed due to rapid technological and financial advancements in the financial services sector. Additionally, there are notable differences between the specific situation of the Serbian market and that of the EU market, which have played a crucial role in shaping the unique objectives and contexts of DAA and MiCAR.
Goals of the legislation
The shared goals of DAA and MiCAR are legal certainty in transactions that involve crypto-assets, growth of crypto-asset markets, protection of consumers and investors, market integrity, and prevention of money laundering activities.
The primary aim of regulating crypto-assets under DAA is to promote the growth of crypto-assets while also preventing illicit activities that may be facilitated using crypto-assets, such as illicit trading and money laundering. DAA was influenced by the latest recommendations, standards, and guidelines from the Financial Action Task Force (FATF), the international body that sets standards for anti-money laundering and countering the financing of terrorism. DAA also contributed to the compliance of the Serbian legislation with the Fifth Anti-Money Laundering Directive (Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing), in the aspect concerning transactions with crypto-assets. In the context of an underdeveloped securities market in Serbia, another important DAA goal was also to enhance capital raising by small and medium-sized enterprises through coin issuance, as well as to foster the growth of capital markets.
MiCAR, on the other hand, while also aimed at providing legal certainty and preventing illicit transactions in, or transfers of, crypto-assets, was designed to establish a unified market for crypto-assets by introducing harmonised rules on crypto-assets throughout EU, and to “position the EU digital economy at the forefront as a competitive participant in the global crypto assets industry” (Agata Ferreira and Philipp Sandner, EU Search for Regulatory Answers to Crypto Assets and Their Place in the Financial Markets’ Infrastructure).
Classification of crypto-assets and the scope of laws’ application
A key substantive difference between DAA and MiCAR is that the former does not categorize “stablecoins” as a separate type of crypto-asset and does not subject them to a distinct regulatory framework. Furthermore, DAA does not apply to e-money, and consequently, e-money tokens as a specific type of stablecoins. Another important difference between DAA and MiCAR is that crypto-assets under DAA cannot be used as a means of payment.
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.
Although both DAA and MiCAR exclude financial instruments from their scope of application, DAA provides for an important exception. The law applies to the financial instruments which are not shares nor are exchangeable for shares, if the total value of crypto-assets issued by an issuer during a period of 12 months does not exceed EUR 3 million.
Issuance of crypto-assets
DAA and MiCAR significantly differ when it comes to the rules applicable for the issuance of crypto-assets. Whereas DAA does not require authorisation for the issuers of crypto-assets, MiCAR requires prior authorisation for a certain class of crypto-assets – stablecoins.
Furthermore, while DAA as a general rule requires issuers to have the white paper approved by the supervisory authority and published only if the issuance will be advertised in the Republic of Serbia, MiCAR requires publication and notification of the white paper to the supervisory body whenever the crypto-assets are offered to the public.
Provision of crypto-asset services
DAA and relevant bylaws, similar to other regulations in the Serbian finance industry, provide for a number of reporting requirements for crypto-asset service providers, which do not exist under MiCAR. Significant changes in the ownership and composition of management of crypto-asset service providers are under DAA subject to approval from the competent supervisory body whereas MiCAR requires notification only.
Finally, DAA does not allow businesses established and licensed in an EU country (or any other country) to offer their services in Serbia without establishing a legal entity and obtaining a licence from the competent supervisory body in Serbia (“passporting”). By contrast, one of the key features of MiCAR is the passporting regime applicable to crypto-asset service providers allowing such entities established and licensed in one EU country to provide their services in another EU country. Furthermore, similar to other financial regulations, MiCAR and related Guidelines on reverse solicitation under MiCA issued by the European Securities and Markets Authority (ESMA) provide for the rules under which a non-EU crypto-asset service provider may, in limited circumstances, provide services to the EU customers (“reverse solicitation rules”) without the obligation to establish a legal entity and obtain a licence. While there are no explicit rules on reverse solicitation in the DAA, a recent public statement by the National Bank of Serbia seems to imply that a foreign crypto-asset provider may offer services to Serbian residents if the service provision is solely initiated by the Serbian resident.
Financial institutions as actors in the crypto-assets market
Due to inherent risks for the stability of financial markets and institutions, DAA prohibits financial institutions under the supervision of the National Bank of Serbia from holding crypto-assets on their balance sheets, engaging in activities connected with crypto-assets, and having ownership of or assuming a management role within crypto-asset service providers. MiCAR, on the other hand, does not have such wide-ranging prohibitions. Financial institutions including credit institutions, and electronic money institutions may conduct certain crypto-asset services subject to the requirement to notify the competent supervisory body.
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.
