October 2020 – On 13 October 2020, a draft Law on Digital Assets (the “Draft”) was published in Serbia for public consultations, which will be open until 28 October 2020. Below is a preliminary overview of the main provisions of the Draft. A more detailed analysis of the Draft will follow.
The Draft is quite elaborate and regulates, inter alia, the issuing of digital assets and secondary trading with digital assets in Serbia; the provision of services connected to digital assets; pledge law over digital assets; special AML measures related to digital assets; and initial public offerings of digital assets in Serbia. The Draft is technology-neutral and applies to any digital assets regardless of the technology upon which the digital assets are based.
The Draft defines a digital asset as a “digital record of value that can be digitally bought, sold, exchanged or transferred and that can be used as a medium of exchange or for investment purposes, whereas digital assets do not include digital records of currency that are legal means of payment and other financial assets regulated by other laws”. Virtual currency and digital tokens both fall under the definition of digital assets.
A virtual currency is defined as “a type of digital asset that has not been issued and whose value is not guaranteed by a central bank or other public authority, which is not necessarily tied to legal means of payment and has no legal status of money or currency, but is accepted by natural or legal persons as a medium of exchange to buy, sell, exchange, transmit and store electronically”. A digital token is defined as a “type of digital asset and means any intangible property right that in digital form represents one or more other property rights, which may include the right of the user of the digital token to be provided with certain services.”
The Draft does not apply to transactions with digital assets if such transactions are performed within a limited network of persons who accept such digital assets (e.g., the use of digital assets for specific goods or services, as well as for a loyalty award or prize, without the possibility of its transfer or sale), nor does it apply to the so-called “mining” of digital assets.
According to the Draft, services connected with digital assets—including the sale and purchase of digital assets for cash and/or funds transferred to an account and/or electronic money; the storing and administering of digital assets for the account of the digital assets' users and related services; and services related to the receipt/transfer of digital assets—may be provided only by an entity that is locally licensed to provide services connected with digital assets. In addition, activities related to organising a platform for trading in digital assets may be performed only by a locally licensed entity.
According to the Draft, it appears that the request for the issuance of such a license is submitted to the National Bank of Serbia, if the provision of services relates to virtual currency; if the relevant services relate digital tokens, the SEC will be the competent body. The entity applying for the relevant license must have minimum registered capital of EUR 20,000 to EUR 125,000, depending on the type of service it will be providing.
The Draft further explicitly provides that the secondary trading of digital assets that are issued abroad is allowed, regardless of whether the so-called “white paper” for such digital assets was approved locally or not. However, based on the Draft, it is not clear whether the white paper must be locally approved for digital assets issued abroad, and what would be the relevant procedure in this respect. The Draft explicitly states that only locally licensed entities may trade with digital assets via a platform for trading in digital assets.
The Draft also regulates the initial public offering of digital assets in Serbia. Under the Draft, a precondition for an initial public offering of digital assets in Serbia is preparation of a white paper, containing all the data on the issuer and the digital assets necessary for investors to decide whether they will invest in such digital assets. The white paper must be approved by the competent body. However, if the digital assets have the characteristics of financial instruments, their issuing, secondary trading and the services connected to such digital assets are governed by the Law on Capital Markets unless the following conditions are met: (i) the digital assets do not have the characteristics of shares; (ii) the digital assets cannot be exchanged for shares; (iii) the total value of digital assets issued by one issuer in a period of 12 months is not higher than EUR 3 million.
Originally published by Kinstellar, October 2020
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
