1.  How is crypto regulated?
  2. What are the steps taken by the regulator to adopt MiCAR?
  3.  Are the following activities regulated or unregulated in your jurisdiction? ― Direct sales of tokens by issuers Exchange (buy/sell) -Custody (hold)-Borrowing/lending Yield/staking services-Staking on proof of stake consensus mechanisms (please indicate if NFTs are treated differently from fungible cryptoassets for each activity)
  4. Can offshore business provide services to local customers on either active solicitation or reverse solicitation basis? 
  5. How long would establishing a cryptoasset business/obtaining a license in your jurisdiction take?
  6. What would be the approximate overall cost of obtaining a licence?
  7. What is the probability (%) of success in obtaining a licence?
  8. What other limitations are there in your jurisdiction when looking to set up a cryptoasset business? E.g., Compliance requirements and physical presence

jurisdiction

Bulgaria

Disclaimer: This chapter was last updated on 23rd May 2024 and does not reflect any subsequent developments. The information provided is intended for general informational purposes and should not be construed as legal advice.

1. How is crypto regulated?

AML RegulationAny other Regulation

Crypto is regulated through the Fifth Money Laundering Directive (5MLD) which sets out a requirement to maintain a register of crypto asset service providers which provide exchange services between virtual currencies and fiat currencies, virtual assets transfer or exchange services, virtual assets safekeeping and administration services enabling control over virtual assets and virtual assets public offering services.

The 5MLD was transposed into Bulgarian national law via Measures Against Money Laundering Act (MAMLA), which is the main AML law in Bulgaria. MAMLA sets out a single compliance regime for all 5 of the above-mentioned crypto service providers.

At present cryptocurrencies do not fall under the scope of any other regulation. The legislators are currently in the process of drafting a new legal act on markets in crypto-assets which will address, among others the provisions of MiCAR.

2. What are the steps taken by the regulator to adopt MiCAR?

Bulgaria will adopt a Markets in Crypto-assets Act which is planned for promulgation by the end of June 2024. Amongst others, it shall authorize a national competent authority and detail transitional provisions as required by MiCAR.

3. Are the following activities regulated or unregulated in your jurisdiction? ― Direct sales of tokens by issuers Exchange (buy/sell) -Custody (hold)-Borrowing/lending Yield/staking services-Staking on proof of stake consensus mechanisms (please indicate if NFTs are treated differently from fungible cryptoassets for each activity)

AML RegulationAny other Regulation

Generally, persons who, on a professional basis, provide exchange services between virtual currencies and fiat currencies, virtual assets transfer or exchange services, custody and virtual assets public offering services are required to apply the Bulgarian AML legislation. Other activities such as lending and staking are not specifically regulated, however, tax implications are still to be considered. NFTs are not treated differently from fungible cryptoassets.

Entities are required to ensure AML compliance, as well as apply to be entered in a public register which is kept and maintained by the National Revenue Agency (the “Authorisation procedure”).

There are currently around 200 entities registered in this register.

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4. Can offshore business provide services to local customers on either active solicitation or reverse solicitation basis? 

AML RegulationAny other Regulation
MAMLA does not regulate reverse solicitation and it is not prohibited. N/A

5. How long would establishing a cryptoasset business/obtaining a license in your jurisdiction take?

AML RegulationAny other regulation

No specific license is required. The Authorisation procedure takes up to 14 days considering a Bulgarian entity is already established.

Such business is usually established as a limited liability company (in Bulgarian: дружество с ограничена отговорност (ООД)), which is then entered into the public register of the National Revenue Agency. The timing for establishing a Bulgarian entity depends on the timeframe for opening a domestic bank account. This could vary depending on the chosen management to be appointed e.g., whether it is a local or foreign person.

With respect to the Authorisation procedure, an application is submitted to the National Revenue Agency, which contains information including explanations on the activity the applicant intends to carry out; countries in which the applicant intends to offer its services, as well as payment accounts opened in Bulgaria and abroad. The application and attached documents shall be processed within 14 days of receipt.

Therefore, the overall process can take between 3-6 weeks.

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6. What would be the approximate overall cost of obtaining a licence?

AML RegulationAny other regulation

Starting up a company costs approximately EUR 2000, consisting of the following fees:

  • register fees approx. EUR 50;
  • notary fees approx. EUR 100;
  • translation fees approx. EUR 150 for common languages, such as English;
  • advisory cost approx. EUR 1700;
  • bank account opening approx. EUR 50 excl. advisory costs.

The Authorisation procedure including advisory costs approx. EUR 3000.

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7. What is the probability (%) of success in obtaining a licence?

AML RegulationAny other regulation
In our experience the Authorisation procedure itself has 100% success rate considering all the prerequisites were successful too. The most important of which would be successfully establishing a Bulgarian entity, opening payment accounts, supply of declarations, criminal records and other AML related documents on behalf of the managers. If any of the prerequisites are not complete, the NRA will issue instructions and provide a remedy period. Withdrawing the application is not an option, however, the entity could apply again if the application was rejected. N/A

8. What other limitations are there in your jurisdiction when looking to set up a cryptoasset business? E.g., Compliance requirements and physical presence

AML RegulationAny other regulation

Some Bulgarian banks may be reluctant to open bank accounts for entities that intend to provide crypto services and this usually translates into prolonged periods. Further, KYC procedures must also be kept in mind.

Foreign managers of the Bulgarian entity must apply for a registration number with the National Revenue Agency, however, this can still be done remotely.

The KYC officer appointed by the Bulgarian entity is recommended to be a Bulgarian speaker.

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