Issuers of crypto-assets may be subject to two types of potential requirements: (i) to obtain authorisation from the competent authority for the issuance of crypto-assets, and (ii) to publish a “white paper” providing potential investors with sufficient information about the project necessary for the investor to make an informed decision. The white paper contains information necessary for the investor to make an informed investment decision. That includes, among others, information on the issuer, reasons for the initial offer and the purpose of the funds raised by the initial offer, information on the crypto-assets being offered, and the technology used and risks associated with the crypto-assets.
Serbian Digital Assets Act (DAA) and MiCAR 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.
Issuance of crypto-assets
Issuers of crypto-assets under DAA are not required to be established in Serbia nor to obtain an authorisation to issue crypto-assets from the competent authority. Furthermore, crypto-assets can be issued in Serbia with or without the white paper being published and approved by the competent supervisory authority. Only if the issuer intends to advertise the issuance in the Republic of Serbia, the white paper must be approved by the competent supervisory authority, save in a limited number of exceptions, mainly in case of small offerings.
Under MiCAR, any offer to the public of crypto-assets that are not asset-referenced tokens and e-money requires that the offeror (including also issuer) must be a legal entity, publish a white paper, and notify the competent authority, save in cases of small offerings and offerings to certain categories of investors. Similar to the Prospectus Regulation (Regulation (EU) 2017/1129 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market, and repealing Directive 2003/71/EC), MiCAR relies on the concept of “offer to the public” to determine whether or not the issuer must publish and notify white paper to the supervisory authority. In contrast, DAA relies on the notion of “advertising” to determine whether or not an issuer must publish and have approved a white paper by the supervisory authority.
The principal distinction between the concept of “advertising”, as used in DAA and “offer to the public”, as used in MiCAR is that “offer to the public” must contain sufficient information regarding the offer and the crypto-assets to enable potential investors to decide on the purchase of crypto-assets, whereas no such requirement exists for the notion of “advertising”. Advertising is a wider concept, encompassing any kind of communication related to the commercial activity of the issuer to entice potential investors into the purchase of crypto-assets. The application of these two concepts might lead to different results in practice and activities caught by the term advertising might not be covered by the term “offer to the public”.
Another important distinction between the two pieces of legislation is that under DAA, a white paper must be approved by the competent authority before being advertised, whereas under MiCAR white paper must only be notified to the competent authority before a public offer. Thus, under DAA, the whole process of issuance of digital assets is put on hold until the competent authority issues its decision on the white paper, and under MiCAR, that is not the case. Nevertheless, under MiCAR, the supervisory authority will conduct an assessment of the white paper for its compliance with the regulation. The competent authority may ask for the amendment of the white paper or even suspend or prohibit an offer to the public of crypto-assets if the offer does not comply with regulatory requirements.
Although both DAA and MiCAR provide for the exemptions from the obligation to publish and notify/receive the regulator’s approval of the white paper, these exemptions differ considerably. The exceptions include: (i) an offer to a limited number of investors (20 under DAA, 150 under MiCAR), (ii) set amount of total consideration for the crypto-assets over one year (EUR 100,000 under DAA, EUR 1 million under MiCAR), (iii) an offer to certain investors (investors purchasing at least EUR 50,000 under DAA, or qualified investors under MiCAR). Furthermore, DAA contains an additional exception in case the offer includes less than 20 digital tokens.
MiCAR contains a special regime concerning the issuance of stablecoins:
- The issuance of asset-referenced tokens requires a specific authorisation and white paper approval from the competent supervisory authority. In order to obtain authorisation, asset-referenced tokens issuers are under an obligation to demonstrate compliance with the own funds requirements, governance arrangement requirements, disclosure requirements, absence of conflict of interest, and the existence of governance arrangements and complaint-handling mechanisms. Additionally, issuers of asset-referenced tokens must hold a certain level of reserves of assets on custody under certain policies and procedures of the governance and with limitations on their investments.
- Only electronic money institutions authorised to conduct their activities pursuant to the E-Money Directive and credit institutions are allowed to issue e-money tokens, subject to prior notification of the white paper to the competent supervisory authority.
The strictest rules in MiCAR apply to “significant” asset-referenced tokens and e-money tokens that meet certain criteria, including a large customer base, market capitalisation, or a number of transactions (Articles 43(1) and 56(1) of MiCAR).
Secondary trading in crypto-assets
Similar to the rules on issuance of crypto-assets, DAA also provides that crypto-assets issued in the Republic of Serbia or abroad may be accepted to trading in Serbia with or without the white paper being published and approved by the competent supervisory authority. Again, if the trading in crypto-assets will be advertised in the Republic of Serbia, approval of the white paper by the competent supervisory authority is necessary. Additionally, DAA permits advertising of trading in crypto-assets if any EU member state has approved the white paper for the assets or if such crypto-assets have been significantly traded on the global market through licensed or registered platforms in compliance with the EU regulations on anti-money laundering and counter-terrorism financing.
Under MiCAR, the conditions for the issuance of crypto-assets apply also in the case of admission to trading of crypto-assets.
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
