Crypto Licence in Bulgaria

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Crypto Legislation in Bulgaria

Since Bulgaria is a member of the EU, it’s obligated to transpose all crypto-related rules. Currently, the main law governing cryptocurrency businesses in Bulgaria is the Measures Against Money Laundering Act (MAMLA) which partially transposed the provisions of the 5th EU Anti-Money Laundering Directive (5AMLD), which introduced additional measures for the prevention of the use of the financial systems for the purposes of money laundering or terrorist financing.

In accordance with the 5AMLD, MAMLA introduced the concept of “virtual currencies” and defines them as a digital representation of value that isn’t issued or guaranteed by a central bank or a public body, isn’t necessarily related to legal tender, and has no legal status of currency, but is accepted by natural or legal persons as a means of exchange and can be transferred, stored and traded electronically. A crypto wallet provider who offers custodial services is defined as a natural or legal person, or other legal entity, providing services for the protection of private cryptographic keys on behalf of its customers for owning, storing, and transferring virtual currencies.

MAMLA obligates crypto businesses to engage in the following activities:

• Establish and carry out customer due diligence and know-your-customer procedures; where the former should be performed at simplified, advanced, or complex levels; complex due diligence is a standard and must be performed in the cases of transactions exceeding 30,000 BGN (approx. 15,000 EUR) regardless of whether that transaction is carried out in a single operation or several
• Record transactions by collecting and maintaining relevant information and documentation in relation to the identifications of customers, transactions, and related activities
• Assess risks of money laundering, terrorist financing, and other criminal financial activities by employing internal standardised procedures
• In the case of payments above 30,000 BGN (approx. 15,000 EUR) notify the Financial Intelligence Directorate of the State Agency for National Security
• Disclose information about suspicious customers, transactions, and other activities to the Financial Intelligence Directorate of the State Agency for National Security in accordance with the internal procedures

Crypto companies can choose to establish an AML/CFT compliance department or exercise other forms of internal control to meet legal obligations through their managing directors, managers, and representatives.

When it comes to licensing crypto-related services, the following activities don’t fall within the category of licensable payment service activities pursuant to the Payment Services and Payment Systems Act (PSPSA):

• Mining and trading in virtual currencies
• Financing through virtual currencies
• Mining and sale of virtual currencies
• Purchase and sale of machines and devices for mining virtual currencies

The Markets in Financial Instruments Act (MFIA) doesn’t recognise cryptoassets as financial instruments. Instead, they’re treated as commodities and their trades are regulated by the Obligations and Contracts Act and the Commerce Act. The main applicable rule is that the contract of a sale transaction obligates the seller to transfer the ownership of possession or a different right to the buyer for an agreed price. Pursuant to the Commerce Act, if a natural person purchases cryptocurrencies, their transfer isn’t considered a commercial transaction. Disputes regarding cryptoasset transactions are addressed in accordance with the General Claims Procedure instead of the Commercial Disputes Procedure under the Bulgarian Civil Procedure Code. In terms of consumer protections, the Consumer Protection Act is applicable only if cryptoassets aren’t acquired for investment purposes (i.e., trading for profit).

When it comes to promoting crypto-related activities, their advertising is allowed and not regulated. That said, it should comply with general relevant legislation, for instance, the Protection of Competition Act, which means misleading messages or comparative advertising causing damage to competitors is strictly prohibited for cryptoasset companies.

For the EU, the cryptocurrency industry is among the regulatory priorities and the authoritative institutions have been working tirelessly to introduce much-needed improvements which will set global standards and build trust in the industry. In 2022, the European Securities and Markets Authority (ESMA) introduced a pilot regime for market infrastructures based on distributed ledger technology (DLT Pilot Regime). It was originally published as part of the EU Digital Finance Package along with the proposal for a regulation on markets in crypto-assets (MiCAR), the aim of which is to support the development of digital finance and mitigate associated risks. The pilot is launching in March 2023 and is scheduled for review in 2026.

Essentially, the DLT Pilot Regime introduces an EU-wide regulatory sandbox that will enable safe experimentation with cryptographic technologies for companies willing to operate securities trading and settlement systems based on DLT. The participation may allow such companies to be exempt from certain EU regulations that might be disrupting the deployment of DLT in securities trading.

Furthermore, in 2022, the Economic and Monetary Affairs Committee approved the Markets in Crypto-Assets (MiCA) regulation for a vote by the European Parliament and the EU members which will clarify the existing regulations applicable to European Crypto Asset Service Providers (CASPs). MiCA’s framework seeks to combat crypto market abuse and manipulation, including insider trading. Key changes introduced by MiCA encompass such environmental responsibilities as an obligation for crypto businesses to publish the levels of their energy consumption on their business websites and share these data with national authorities.

Non-compliant CASPs will be monitored and thoroughly checked by the European Banking Authority (EBA) which will maintain a public register of such service providers. A non-compliant CASP is a crypto business whose parent company is registered in a country that is classified by the EU either as a third country posing high money laundering risks, or non-cooperative jurisdiction for tax purposes.

Another change introduced by MiCA is related to stricter regulations of stablecoins. Stablecoin issuers operating within the EU will be required to build up a sufficient liquid reserve with a 1:1 ratio, partly in the form of deposits. It will allow all stablecoin holders to be offered a claim by the issuer at any given time and free of charge. The European Banking Authority (EBA) will be responsible for the supervision of stablecoins.

CRYPTO REGULATION IN BULGARIA

Why Choose a Bulgarian Crypto Licence

Bulgaria has no crypto-specific licence governing crypto-related economic activities and there are no particular restrictions or obligations, and companies can even accept pledging in cryptocurrencies as collateral for giving loans that don’t fall within any specific regulatory framework. That said, a licence is still required for most crypto-related businesses for AML/CFT purposes pursuant to MAMLA.

Cryptoasset exchanges and custodial wallet providers are obligated to register in the public register, which is maintained by the NRA, who’s also responsible for granting crypto authorisation. Upon registration, a company certificate is issued, which is an equivalent of a crypto licence and is the only official document issued by the national authority allowing cryptoasset entrepreneurs to engage in crypto-related economic activities within the general regulatory framework. List of legal entities operating as a virtual currency exchange operator in Bulgaria.

The main features of a Bulgarian crypto licence:

• No local staff is required
• Speedy application process
• The whole licensing application can be completed remotely
• No requirement for an AML/CFT compliance officer
• Low initial share capital requirements – from 2 BGN (approx. 1 EUR)

Requirements for Crypto Licence Applicants

Natural and legal persons from abroad are allowed to apply for crypto authorisation in Bulgaria as long as they’re able to demonstrate their capability to comply with AML/CFT regulations.

Pursuant to Art. 2, p. 2 of the Ordinance, the following information must be included in the crypto licence application for a company:

• Name of the company
• Seat and address of management
• Address of correspondence
• Business email address
• Representatives entered into the Registry Agency
• Contact person (role, telephone number, and email address)
• Unique Unified Identification Code (UIC), also called BULSTAT Code, of the company obtained from the Commercial Register
• Details of the bank accounts opened in Bulgaria and abroad
• Description of the business website and software, including a mobile application, used to offer the planned crypto products and services
• Description of the intended crypto-related products and services
• List of countries where the crypto-related services are planned to be provided
• Information on whether the applicant is a company with cross-border activities or part of a cross-border enterprise (within the meaning of EU legislation)

Pursuant to Art. 2, p. 2 of the Ordinance, the following information must be included in the crypto licence application for a sole proprietor:

• Name of the sole proprietor
• Permanent address
• Address of permanent residence
• Contact person (role, telephone number, email address)
• PIN/Personal Number of a Foreigner or official reference number from the NRA Registry
• Description of the business website and software, including a mobile application, used to offer the planned crypto products and services
• Description of the intended crypto-related products and services
• List of countries where the crypto-related services are planned to be provided
• Information on whether the applicant is engaged in cross-border activities or is part of a cross-border enterprise (within the meaning of EU legislation)

Open a Crypto Company in Bulgaria

The process of establishing a business in Bulgaria is fast and hassle-free. It normally takes up to two months to establish a new company in Bulgaria, which includes the preparation of documents and the registration of a new business. A new company can be registered within several days, provided that all the required documents are in order.

A ready-made company, by contrast, can be acquired within seven business days. Below we share the processes of establishing a new Bulgarian company but if you’re looking for a faster solution, please reach out to our well-experienced team who can as well consult you on acquiring a ready-made company.

The following legal types of business entities are available in Bulgaria:

• A Limited Liability Company, initial share capital – 2 BGN (approx. 1 EUR)
• A Closed Joint Stock Company, initial share capital – 50,000 BGN (approx. 25,600 EUR)
• An Open Joint Stock Company, initial share capital – 100,000 BGN (approx. 51,000 EUR)
• A Limited Partnership, initial capital – 4 BGN (approx. 2 EUR)
• A General Partnership, no capital requirements
• A Sole Proprietorship, initial capital – 2 BGN (approx. 1 EUR)

The most popular type of legal structure is a Limited Liability Company, which can be incorporated by any foreign natural or legal person pursuant to the Bulgarian Commercial Code.

Key requirements for a Limited Liability Company:

• A Bulgarian corporate bank account
• Possession of the minimum share capital, ready to be transferred to a Bulgarian bank account
• At least one shareholder
• At least one managing director (can be the same as the shareholder and a foreign citizen not residing in Bulgaria)
• Registered office in Bulgaria which will give a tax resident status (a virtual office will suffice)

A current account for a Bulgarian company can be opened in one of the local banks remotely if the entrepreneur signs a power of attorney, and provides the representatives with notarised required documentation. One of the conditions, as mentioned earlier, is the significant presence of the company in Bulgaria. If you wish to explore all the viable options and receive help in this area, please reach out to our friendly and efficient team who will propose a tailored solution in accordance with your individual needs.

The following documents are required:

• Photocopies of the passports of the owners and managing directors
• Notarised Articles of Association
• Memorandum of Association in the case of a sole shareholder
• The minutes of the shareholder’s meeting
• Notarised signature specimen and written consent by a company representative
• Bank statement showing deposited initial capital
• A certificate of the company name

Key steps of establishing a crypto company in Bulgaria:

• Reserve a compliant company name (subject to state fees)
• Prepare all the required documents (you’ll need a certified translation, notarisation, and apostillisation services which we can help you with)
• Open a temporary bank account for the share capital contribution
• Deposit the initial share capital to the Bulgarian corporate bank account opened in the name of the company
• Pay a registration fee of 55 BGN (approx. 28 EUR) to the Commercial Register of the Registry Agency
• Submit an application along with the receipt of the payment and the required documents to the Commercial Register of the Registry Agency
• Register as a VAT payer (it’s a mandatory step for Bulgarian companies that exceed 50,000 BGN (approx. 25,600 EUR) in a 12-month period)
• Register employees for social insurance purposes (social security contributions are mandatory in Bulgaria)
• Apply for a crypto licence from the NRA

Crypto Taxes in Bulgaria

For tax purposes, the NRA treats cryptoassets in accordance with the MAMLA definition and the European Bank Authority’s policies and identifies natural and legal persons as tax-liable parties. Regular allowances and exemptions apply, as well as crypto-specific rules, introduced by the EU. For instance, cryptocurrencies are VAT-exempt as they’re considered equivalent to providing financial services. Other crypto-related economic activities may be subject to VAT at a standard 20% rate.

Other standard tax rates in Bulgaria:

• Corporate Income Tax – 10%
• Individual Income Tax – 10%
• Social Security Contribution – 24,3% (13,72% paid by employers, and 10,58% paid by employees)
• National Health Insurance – 8% (4,8% paid by employers and 3,2% paid by employees)
• Withholding Tax – 5% (levied on distributed dividends)

The following types of income are taxable:

• Income from trading or exchange of cryptoassets
• Income from acquiring cryptoassets
• Income from mining cryptoassets
• Income from exchanging cryptoassets into another type of cryptoassets
• Income from staking

Income from trading or exchange of cryptoassets is considered income from the sale of financial assets and therefore the following rules are applicable:

• Taxable income from the sale or exchange of financial assets is the sum of realised profit within the taxable period, defined for each separate deal, reduced by the sum of realised loss within the taxable period, defined for each separate deal; the sum of the net results of all deals forms and annual taxable base and must be declared in the annual tax return
• The annual taxable base can be formed from exchanging one cryptoasset into another if the acquired one generates profit
• No advance tax is due for cryptoassets
• No specific documents for the transfer of rights or property are regulated and all relevant documents must be archived for five years after the tax-due period
• If the trading activity is carried out through a company as a regular activity, the assignable costs might reduce the net taxable profit
• The unrealised profit from the sale or exchange of financial assets is taxable

Income from acquiring or mining cryptoassets is considered income from economic activities pursuant to the Income Taxes on Natural Persons Act, and purchasing crypto mining equipment and subsequent sale of the mined cryptoassets is considered an economic activity, and the taxable result is formed in accordance with the Corporate Income Tax Act. If the mining or acquisition is conducted through a company, the assignable costs might reduce the net taxable profit.

Staking is considered a profit-generating activity, although it’s not clearly defined by the Income Taxes on Natural Persons Act or the Corporate Income Tax Act. For companies, based on the National Accounting Standards, any acquisition of a cryptoasset must be entered as an increase of intangible assets and must be re-evaluated on a regular basis at a fair or market price.

Accounting and Reporting

The Accountancy Act of 2015 and the Independent Financial Audit Act of 2016 governs accounting and reporting processes in Bulgaria. Since Bulgaria is an EU member, these laws are aligned with the directives and regulations of the EU. If a company is exempt from statutory audit, cryptoassets must still be reported in the annual financial statements.

Pursuant to the Accountancy Act, the following companies must audit their financial statements:

• Small companies that exceed at least two of the following parameters: 1) total assets – 2 mill. BGN (approx. 1 mill. EUR), 2) total revenue – 4 mill. BGN (approx. 2 mill. EUR), and 3) the average number of employees – 50
• Medium and large companies and public-interest entities (PIEs)
• Medium and large groups, and groups which include a PIE
• Joint Stock Companies and Limited Partnerships with shares, except for the cases when no activities are conducted throughout the year
• Consolidated financial statements and the financial statements of the companies included in the consolidation

Removal from the Public Registry

For various reasons a crypto authorisation entry can be removed from the Public Registry and consequently the electronic Certificate of Registration can be invalidated.

An entry into the NRA’s Public Register might be removed in the following cases:

• If requested individually for such reasons as the termination of cryptocurrency-related services, dissolution of legal persons, and proclaiming incapacity regime for natural persons
• If NRA determines that incomplete, misleading, or incorrect information was provided
• If competent authorities determine that a company violated AML/CFT laws and sanctions have been imposed
• Due to register entry removal of legal persons with the Commercial Register or BULSTAT Register at the Registry Agency
• Upon the death of the natural person who was a licence holder

If you wish to obtain a crypto licence in Bulgaria and benefit from the relaxed licensing rules, as well as the very favourable taxation framework, our highly qualified and experienced consultants here at Regulated United Europe (RUE) will be delighted to equip you with the necessary knowledge that will help you lay your path to success. We very well understand and closely monitor crypto-related legislation in Bulgaria and the rest of the EU, and thus can guide you through establishing a company and obtaining a crypto licence, including developing internal AML/CFT procedures. Moreover, we’re more than happy to assist you with financial accounting and tax optimisation. Book a personalised consultation now to start a new journey in the cryptocurrency industry.

Also, lawyers from Regulated United Europe provide legal services for obtaining a crypto license in Europe.

Navigating the Cryptocurrency Landscape in Bulgaria 2024: A Guide to Obtaining a Crypto Exchange License

Bulgaria has emerged as a promising landscape for cryptocurrency enterprises, thanks to its strategic location in Europe and a growing acceptance of digital finance technologies. This article provides an in-depth analysis of how to obtain a crypto exchange license in Bulgaria, highlighting the regulatory framework, the application process, and the advantages of securing a license.

Regulatory Landscape for Crypto Exchanges in Bulgaria

The Bulgarian Financial Supervision Commission (FSC) oversees cryptocurrency activities, ensuring compliance with both national and European Union regulations. The regulatory framework is designed to foster innovation while ensuring security, transparency, and protection against financial crimes.

Types of Crypto Licenses in Bulgaria

Bulgaria offers various types of crypto licenses to cater to different facets of the cryptocurrency market:

• Crypto exchange license in Bulgaria: Permits the operation of platforms that facilitate the buying and selling of cryptocurrencies.
• Crypto broker license in Bulgaria: Allows entities to act as intermediaries in crypto transactions.
• Crypto trading license in Bulgaria: For businesses that engage directly in the trading of digital assets.
• VASP crypto license in Bulgaria: Intended for providers that offer a broader range of crypto services.

Requirements for Obtaining a Crypto License in Bulgaria

Applicants must provide comprehensive documentation, including detailed business plans, proof of compliance with anti-money laundering directives, and robust cybersecurity measures to protect traders and investors.

Cost Considerations for Crypto Licensing

The crypto exchange license in Bulgaria cost can vary based on the specific services provided and the complexity of the business model. Despite these costs, Bulgaria is known for offering one of the cheapest crypto licenses in Bulgaria, making it an attractive location for startups and established businesses aiming to expand their operations in Europe.

Benefits of Holding a Crypto License in Bulgaria

Securing a crypto license in Bulgaria not only enhances a company’s credibility but also provides access to a wide European market under a regulated framework. This regulatory compliance is crucial for attracting partnerships and fostering trust with clients and investors.

Challenges in the Crypto Licensing Process

Navigating the regulatory environment can be challenging due to frequent updates and modifications in the laws governing digital currencies. Businesses must stay informed and adaptable to maintain compliance and leverage regulatory changes for strategic advantage.

Investment Opportunities in Bulgaria’s Crypto Market

Bulgaria presents significant investment opportunities within its crypto market, characterized by a favorable tax regime and a supportive ecosystem for technological innovation. The potential for substantial growth makes Bulgaria an appealing choice for crypto-related ventures.

Purchasing an Existing Crypto License

For those seeking a quicker entry into the market, the option to purchase an existing crypto exchange license in Bulgaria for sale might be available. This route requires thorough due diligence to ensure the license meets all regulatory requirements and aligns with the buyer’s business goals.

Conclusion: As Bulgaria continues to develop its regulatory framework for cryptocurrencies, obtaining a crypto exchange license in Bulgaria offers businesses a gateway to not only the national market but also the broader European financial ecosystem. With strategic planning and compliance, businesses can effectively navigate this dynamic and evolving sector, capitalizing on the opportunities presented by Bulgaria’s progressive approach to cryptocurrency regulation.