Crypto license in Bosnia and Herzegovina – MiCA alternative

Companies planning to operate in the field of cryptocurrency exchange and storage in the territory of the Republic of Srpska are offered an effective licensing solution with full legal support. The Republic of Srpska, part of Bosnia and Herzegovina, has officially recognized virtual assets since 2023, including them in the list of regulated instruments through amendments to the Law on the Securities Market. In February 2024, the updated Law on Combating Money Laundering and Terrorist Financing entered into force, implementing provisions in line with the FATF recommendations, including the legal definition of virtual asset service providers (VASPs).

To operate in the field of exchange, custody, digital wallet management, and token issuance in the Republic of Srpska, it is necessary to establish a local legal entity and obtain the relevant permit from the Securities Commission of the Republic of Srpska. Company registration in this jurisdiction is available to both residents and foreign investors. There are no minimum requirements for the authorized capital, which makes entry into the market accessible even for small teams. At the same time, strict requirements are imposed on the company structure, transparency of funding sources, business reputation of founders and directors, as well as compliance of internal documentation with AML standards.

To submit an application, it is necessary to prepare a package of documents, including a business plan, a description of the service model, KYC/AML policy, a description of the technical infrastructure, a financial model, certificates of no criminal record and reliability of beneficiaries and management, as well as information on IT systems that ensure the storage of keys and the protection of client data. Particular attention is paid to the appointment of a person responsible for compliance with AML/CFT legislation and the availability of internal control procedures.

The procedure for registering a company and obtaining a license takes from 4 to 6 weeks, provided that all documents are ready. The consideration of the application by the regulatory authority lasts on average from one to three months, depending on the complexity of the project. As part of the support, assistance is also provided in renting a legal address, organizing accounting and tax accounting, and, if necessary, selecting a qualified specialist for the position of MLRO (responsible for combating money laundering).

With no capital requirements, fast review times and flexible regulation, the Republic of Srpska is becoming an attractive jurisdiction for launching European-oriented digital asset projects and is the best alternative to MiCA regulations.

Regulation of Cryptocurrency Companies in Bosnia and Herzegovina

The legal environment in Bosnia and Herzegovina is clearly defined in the entity of Republika Srpska, which adopted the Law on Digital Assets in 2023. The provisions of the Law on the Banking Agency of the Federation of Bosnia and Herzegovina define the duties of the Agency, which include supervision of the activities of entities in the banking system of the Federation of Bosnia and Herzegovina. Entities in the banking system of the Federation of Bosnia and Herzegovina within the meaning of the above law are banks, banking groups, development banks, microcredit organizations, leasing companies, factoring companies, exchange offices and other financial organizations that are required by law to operate under the supervision of the Agency, the FBA indicates.

In accordance with the current legal regulations of the Federation of Bosnia and Herzegovina (Law on Domestic Payment Transactions and Law on Foreign Exchange Transactions), payment transactions (domestic and international) can be carried out exclusively in institutions recognized by law as carriers of payment transactions, i.e. institutions authorized to carry out this type of transaction, which are banks and, to a certain extent, authorized postal companies of the country.

Also, in addition to the above-mentioned authorized organizations, they add that domestic payment transactions are also carried out by the Central Bank of Bosnia and Herzegovina, and they are carried out in accordance with the rules of the Central Bank. They drew attention to the fact that, in accordance with the provisions of the Law on the Banking Agency, they are not authorized to adopt laws and establish a regulatory framework for the implementation of payment transactions. The regulatory framework is under the jurisdiction of the Government and the Parliament of the Federation of Bosnia and Herzegovina, which have not yet made any statements on the possible regulation of the field of electronic money and cryptocurrencies.

Securities Commission (KHOV) issues licenses to entities that meet the requirements for conducting business related to virtual currencies .In the Republic of Srpska, a provider of services related to virtual currencies is required to notify the Securities and Exchange Commission (KHOV) about the provision of these services and apply for registration within 30 days from the date of establishment. It is only possible to carry out its activities after registration in the register of providers of the above-mentioned services.

What is the tax rate on cryptocurrency profits in Bosnia and Herzegovina?

Cryptocurrencies in Bosnia and Herzegovina (BiH) are taxed in two ways depending on whether they are owned by an individual or a legal entity.There is a capital gains tax paid by individuals and a profits tax paid by legal entities. If an individual buys cryptocurrencies that they sell after a certain period of time, they pay a capital gains tax of 13 percent on the profit made from the sale. Cryptocurrencies are considered intangible assets and are taxed in the same way as securities, software. Additionally, if an individual holds cryptocurrency for more than seven years and does not sell it, it is considered a long-term investment, in which case he does not pay any taxes.On the other hand, if cryptocurrencies are acquired by a legal entity, it pays a 10 percent tax on profits from cryptocurrencies. Let us recall that the cryptocurrency sector is legally regulated only in one part of Bosnia and Herzegovina – the Republic of Srpska, while in the Federation of Bosnia and Herzegovina cryptocurrencies have not yet received legal recognition. The last day of January 2023 can be considered a historic date for the cryptocurrency market in Bosnia and Herzegovina. On this day, the Register of Cryptocurrency Service Providers was created in the Republic of Srpska, but this day also marks the beginning of the practical application of the Law on Amendments to the Law on the Securities Market, which regulates the sphere of cryptocurrencies or, as the legislator called them, virtual currencies.

A list of companies that can provide services related to virtual assets is available here: Securities Commission (KHOV) – regulator of VASP companies in the Republic of Srpska

The Securities Commission of the Republic of Srpska is an organization and the main objective of its work is to ensure through regulation, promotion and supervision:

• Support for the creation and development of the securities market in the Republic of Srpska;
• The functioning of a regulated, fair, open and efficient securities market, i.e. the creation of trust in all institutions and market participants;
• Protecting the interests of investors and other market participants.

The Commission shall consist of a chairman, a deputy chairman and three members appointed by the National Assembly of the Republic of Srpska on the proposal of the President of the Republic of Srpska. The term of office of the members of the Commission shall be five years. Domestic and foreign specialists, as well as persons with higher economic or legal education and personal qualities that make them worthy of performing this function, may be appointed members of the Commission. In addition to other restrictions established by law, the following may not be members of the Commission:

• Be members of political parties and participate in political activities incompatible with work in the Commission
• Members of legislative, executive or judicial bodies, supervisory or management boards of any joint-stock company or securities company
• Perform any other work for remuneration, with the exception of scientific, research and teaching activities
• Own, directly or indirectly, more than 5% of the shares of any joint stock company or securities company and
• Carry out activities or conduct activities that are contrary to the principles of investor protection or the independence of the Commission

Republika Srpska: legal system, economic prospects and business conditions

Republika Srpska is one of two constitutionally recognized entities of Bosnia and Herzegovina, along with the Federation of Bosnia and Herzegovina. Formed as a result of the Dayton Agreement of 1995, Republika Srpska enjoys broad autonomy, including its own parliament, government, justice system, tax policy, and regulatory bodies. This makes it a de facto separate legal and economic system within a sovereign state.

The center of executive power of the Republic is the city of Banja Luka, which is the administrative, financial and commercial capital. All the main ministries, the central regulator of financial markets, the bodies for registration of legal entities, as well as the actively developing IT infrastructure and banks are located here.

Legal system and regulatory framework

The Republic of Srpska has its own set of laws regulating civil, corporate, tax and financial relations. Although Bosnia and Herzegovina strives to harmonize its legislation with the European Union, the normative acts of the Republic of Srpska are formed and applied autonomously, relying on local judicial practice and legislative initiative.

Since 2022, the region has seen a trend towards digitalization of the financial sector and the introduction of legal regulation in the field of virtual assets. In particular, amendments to the Law on the Securities Market recognized digital assets as objects subject to regulation, and the Law on the Prevention of Income Laundering adopted in 2024 legally enshrined the status of virtual asset service providers (VASP). This created a regulatory framework for the legal activities of cryptocurrency companies, including exchanges, custodial services and token issuers.

The supervisory authority for the capital and digital asset markets is the Securities Commission of the Republic of Srpska, which has the authority to license, monitor and apply sanctions against market participants.

Company Registration and Ownership Structure

To conduct business in the Republic of Srpska, foreign investors can register a limited liability company (doo), which is the most common and flexible form of commercial presence. Registration is possible for both individuals and legal entities from other countries.

Benefits include:

• No restrictions on the nationality of founders and directors
• Minimum requirements for authorized capital (usually a symbolic amount)
• Access to the banking system and foreign currency accounts
• Prompt registration (on average from 5 to 10 working days)
• The possibility of complete foreign ownership and control

Taxation and financial regime in Republika Srpska

The tax system of the Republic of Srpska is characterized by moderate rates and transparency. The main tax parameters are:

• Income tax – 10%
• VAT – 17%
• Dividend tax – 5% (in the absence of an agreement on the avoidance of double taxation, the rate may be higher)
• Social security contributions are at a level comparable to those in Central and Eastern European countries

There are a number of tax treaties in force, including with countries such as Germany, Austria, Slovenia, etc. Foreign investors can take advantage of opportunities to structure transactions with minimal tax costs, provided they have the appropriate legal support.

Virtual assets and digital technologies

Taking into account the adopted legal acts, the Republic of Srpska becomes one of the first territories in the Balkans to offer formalized and legally protected activities in the field of cryptocurrencies and tokenized assets. Companies can obtain a license to provide services for the exchange, storage and issuance of digital assets if they have a registered local legal entity and comply with AML/KYC requirements.

At the same time, the region is seeing growing interest in the digitalization of financial services, the development of the fintech sector, blockchain projects, and the creation of Web3 service centers. Such conditions create a stable legal environment for the development of startups, investors, and technology platforms.

Investment attractiveness

Among the key factors contributing to the growing interest from foreign investors, the following can be highlighted:

• low operating and tax costs;
• a stable regulatory framework with predictable procedures;
• availability of own licensing authorities;
• loyal migration policy in relation to founders and managers of companies;
• availability of an educated and inexpensive workforce, especially in IT and accounting;
• openness to international cooperation and digital initiatives.

Republika Srpska is gradually building a reputation as a progressive jurisdiction with a flexible regulatory environment that can accommodate innovative business models, including crypto companies, exchange platforms, and fintech services. With an independent legislative process, local licensing authorities, and a growing interest in digital transformation, the region offers real opportunities for foreign entrepreneurs interested in launching and legalizing operations in Europe with a relatively low barrier to entry.

If you are considering expanding your business into a region with a crypto or fintech focus, Republika Srpska may be a suitable entry point due to its combination of jurisdictional flexibility and regulatory certainty.

How can lawyers from Regulated United Europe help in obtaining a crypto license in the Republic of Srpska?

Regulated United Europe’s legal team provides comprehensive support in obtaining a virtual asset provider (VASP) license in the Republic of Srpska, part of Bosnia and Herzegovina. We specialize in legal support for crypto companies in Eastern and Central European countries and have up-to-date expertise in the field of digital asset regulation, including compliance with FATF requirements and local AML legislation.

Work with each project begins with a legal analysis and assessment of the client’s business model. We determine whether the project is subject to licensing under the provisions of the Securities Market Act and the Law on the Prevention of Money Laundering in force in the Republic of Srpska. If necessary, we offer business structuring options taking into account tax and regulatory risks, including the optimal legal form, ownership structure and the procedure for interaction with the regulator.

As part of licensing, we register a company in the Republic of Srpska, prepare all statutory documents, and submit an application to the register of legal entities. Our team interacts with notaries, registrars, and tax authorities, representing the client’s interests at all stages.

The next step is to prepare a full set of documentation for obtaining a VASP license. We draw up a detailed business plan, internal procedures and policies to combat money laundering (KYC/AML), a description of the technical infrastructure, and ensure the legal registration of the management structure and sources of capital. Particular attention is paid to documentation confirming the reliability of the founders and management, including certificates of no criminal record and business reputation. In addition, we develop procedures for the secure storage of keys and access to virtual assets, which is a key element in custodial activities.

After preparing the documents, we submit a license application to the Securities Commission of the Republic of Srpska, accompany the client in all communications with the regulator and ensure prompt response to possible requests. We also help appoint or select a qualified person for the position of MLRO (anti-money laundering specialist) and prepare related personnel and regulatory documentation.

After the licensing procedure is completed, we continue to provide legal support, including consulting on current activities, preparing regulatory reports, supporting inspections and legal assistance in the event of changes in legislation. If necessary, we also advise on business expansion into EU countries, taking into account the requirements of MiCA and other regulatory initiatives of the European Union.

Regulated United Europe lawyers provide a professional approach, full compliance with legal requirements and safe entry into the virtual assets market of the Republic of Srpska. Upon request, we will provide an individual list of necessary documents and organize a consultation to discuss the specifics of your project.