Law on crypto assets will regulate their trade in Bulgaria

The Bulgarian Ministry of Finance has drafted a Law on Crypto-Asset Markets to regulate the trading of this type of financial instrument. The initiative comes in response to the European Markets in Crypto-Assets Regulation (MiCa) coming into force this year, which Bulgaria must transpose.

The proposed bill is the first of its kind in Bulgaria. Until now, there has been no regulatory framework related to crypto-assets in the country.

However, according to MiCa, EU member states must introduce some specific rules. One of them is to designate a competent authority responsible for compliance with the European regulation. The bill stipulates that in Bulgaria this will be the Financial Supervision Commission (FSC). In addition to monitoring the implementation of MiCa, the FSC will supervise the activities of the various entities in the market and will be able to issue or refuse to issue licenses for their activities.

The FSC will also be able to impose sanctions on violators.

The European Central Bank (ECB) and the Bulgarian National Bank (BNB) are designated as banking supervision authorities, as per the draft law. In this role they will deal with:

• extending the scope of a credit institution's license with activities of issuing asset-backed electronic money tokens, including electronic money tokens, and/or providing crypto-asset services, at the request of the credit institution;
• withdrawal of permission of a credit institution to carry out the activity of issuing tokens, secured by assets, of electronic money, including tokens for electronic money and/or activity of providing services for crypto-assets, on its own initiative or at the proposal of the FSC;
• issuing approvals for the acquisition of qualified equity participation, as well as approvals for holding a position in the management bodies of a credit institution that is an issuer of asset-backed tokens, electronic money, including electronic money tokens

MiCa - The world's first comprehensive crypto framework

The European regulation was adopted in April 2023 and is practically the first comprehensive regulatory framework with a set of rules to regulate the crypto industry. The need for legislation came amid the sector's tremendous growth over the past dozen years.

Crypto-assets have become popular digital instruments – both for investment, as a venue and as a means of payment. However, they are issued or guaranteed by a central bank or other public institution, and given the dizzying growth in their use, authorities have begun to look at how to control their use.

One of the main loopholes that MiCa is trying to solve is the lack of a central registry of crypto issuers and service providers.

Crypto service providers were given 18 months to synchronize their activities with the new rules and obtain the necessary licenses.

Translated by Tzvetozar Vincent Iolov