• cryptocurrency-related service providers are among the obliged subjects under AML Act (Art. 4, p. 38 and 39), which means that they have to adjust their activity to the legal requirements for prevention against money laundering, otherwise sanctions may follow;
• for the very first time a legal definition of virtual currencies has been provided, namely “any digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily attached to a legally established currency and does not possess a legal status of currency or money, but is accepted by natural or legal persons as a means of exchange and which can be transferred, stored and traded electronically”;
• a registration regime with NRA is set in place as mandatory for some cryptocurrency-related service providers (those under the AML Act).
Thus, in August last year, the Ministry of Finance issued Ordinance No. N-9 from 07.08.2020 setting the terms and procedure for entry into a public register held by NRA. Each register entry is conducted ex officio by NRA and before the start of the cryptocurrency-related activity by the respective person, be it natural persons, including sole proprietors, legal persons like companies as well as other legal entities.
1.1. Submission of an application
The procedure for entry into the public register encompasses the submission of an application with specific content and form. The application is made using the form adopted by NRA, available at its official web page, and is submitted electronically. It shall be signed with a qualified electronic signature and contain the required information pursuant to Art. 2, p. 2 of the Ordinance, namely:
a) For sole proprietors, legal persons and other legal entities:
1. *firm name; 2. *seat and address of management; 3. address of correspondence; 4. Email; 5. representatives entered into the Registry Agency; 6. contact person (capacity, telephone number, email); 7. *UIC at the Commercial Register/UIC at the BULSTAT Register/Official reference number from the NRA Registry; 8. Bank accounts opened in Bulgaria and abroad; 9. *Information about Internet page or software, including a mobile application, used for exchange services between virtual currencies and fiat currencies and/or services to safeguard private cryptographic keys on behalf of customers, to hold, store and transfer virtual currencies; 10. Description of the intended cryptocurrency-related services; 11. Countries where the cryptocurrency-related services shall be provided; 12. Information whether the applicant is a company with cross-border activity or part of a cross-border enterprise (within the meaning of EU law).
b) For natural persons:
1. *names; 2. *permanent address; 3. address of residence; 4. contact person (capacity, telephone number, email); 5. *PIN/Personal Number of a Foreigner/Official reference number from the NRA Registry, and the information in points 8-11 above.
The circumstances marked with (*) in the table above are publicly available at the NRA register as well as the Certificate of Registration date and number (See below). The register entry shall be conducted within a period of 14 days upon receipt of the application or upon rectification of an error or another shortcoming in the submitted data (the applicant shall be notified and given 7 days for rectification).
1.2. Changes in circumstances
NRA supervises for any changes in circumstances such as name/firm name, addresses and legal persons representatives’ data. For any other changes in circumstances the cryptocurrency-related service providers bear the obligation to notify NRA. No additional register entry fee is due upon a change in the information provided about the Internet page or the software for cryptocurrency-related services.
1.3. Issue of a Certificate of Registration
On a ground for registration with NRA, namely offering cryptocurrency-related services within the meaning of the AML Act, upon a successful submission of an application filled with thorough, unambiguous and correct information, and after paying a register entry fee in the amount of 50 leva according to Tariff No. 12 for collecting fees within the system of Ministry of Finance under the Law on State Fees, NRA shall issue a Certificate of Registration. It represents an electronic document signed with a qualified electronic signature. Each cryptocurrency-related service provider shall be notified for the issue of the certificate at hand.
2. Register entry removal and invalidation of the Certificate of Registration
A register entry with NRA might be removed:
• upon a personal request in cases like terminating cryptocurrency-related services; dissolution of legal persons; and in case of proclaiming incapacity regime for natural persons.
• ex officio by NRA in cases like establishing that incomplete, ambiguous or incorrect information has been provided; register entry removal of legal persons with the Commercial Register or BULSTAT Register at the Registry Agency; and upon death of the natural person.
A register entry with NRA shall also be removed in case a sanction has been imposed for committing violations under the AML Act (See Art. 125).
What is new in the Bulgarian regulatory framework for cryptocurrencies are the terms and procedure for meeting the AML Act obligation for entry into the NRA designated public register and the subsequent receipt of an electronic Certificate of Registration.
Regarding taxation, the tax regime for income from the sale of cryptocurrencies, which we have analyzed here, remains unchanged. In principle, only the positive difference (profit) between the buy and the sale price is susceptible to taxation. A distinction should be made as to whether a natural person trades cryptocurrency as a matter of professional occupation or only for personal use. As far as legal entities and their transactions with cryptocurrencies are concerned, the rules for corporate taxation shall apply.
What’s next on EU level?
Cryptocurrencies today are still far away from the zenith of unified regulation. However, the European Commission has made steps for serious regulatory changes. At the heart of this is the Proposal of the Commission from September last year for establishing a pilot regime for market infrastructures that wish to try to trade and settle transactions in financial instruments in crypto-asset form (DLT Pilot). A draft of a new EU Regulation, Markets in Crypto-Assets Regulation - MiCA - has also been proposed. In conclusion, it appears that virtual currencies are turning into a leading legal and regulatory priority for the EU.
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