The Law is not, and should not be a static set of norms, eternal laws that apply infinitely, it must grow and develop in accordance with the dynamics of the development of certain areas that are subject to the regulation.

One of the areas that had a strong impact on the legislation and had seriously shaken justice systems in the past few years are cryptocurrencies.

According to data from web site, on November 6th, 2018 there are 2,448 cryptocurrencies in circulation, and the total value of the whole market is 216,388,375,998 USD (for comparison – the GDP of the Republic of Serbia in 2017 was 41,430,000,000 USD).

Given that there are disagreements with regard to the definition and qualification of the cryptocurrencies, it is currently the most desirable to focus on their use. For the sake of simpler and clearer exposure, we will speak about the Bitcoin, the most important cryptocurrency in the world market at this time.

Bitcoin is a virtual currency. Virtual currencies are a form of unregulated digital money that is not issued by a central bank and it does not guarantee its value. Virtual currencies, such as Bitcoin, are purchased for conventional currencies (euro, pound, dollar, etc.) directly from another person or via the internet platform, after which they are transferred to a personalized Bitcoin account (the so-called digital wallet) and used for the purchase of certain goods and services or convert to conventional currencies. The value of Bitcoin on these platforms is not guaranteed, it is very variable and determined by supply and demand for that virtual currency.


Bitcoin is created in 2009, by an individual or a group of people under the pseudonym Satoshi Nakamoto. Since its inception, Bitcoin has been used to realize various payments on the Internet, and such use has led to a huge jump in Bitcoin’s value. Namely, from a price of about 200 USD for one Bitcoin in mid-2015, Bitcoin suddenly gained the value that at the end of 2017, 1 Bitcoin was worth about 17,500 USD.

Mechanisms of functioning

In a nutshell, Bitcoin represents a digital currency whose transactions are protected by cryptographic, as well as the broadcast of Bitcoin itself. This and such digital currencies are under decentralized control based on cryptography, and this system is called blockchain. It is a technology that represents a series of records that are bound to one another in such a way that it is impossible to change this records (blocks) independently, that is, in order to change one block, all the others must be changed. Because of its way of functioning, Bitcoin is not under the direct control of any central bank nor state and manipulation and Bitcoin frauds are almost impossible.

Comparative regulation

Many world countries, due to the nature of Bitcoin, failed to regulate it in the manner required to make such a creation become a valid currency in the financial system of a country. Japan went farthest in the implementation of the Bitcoin in the financial system, where Bitcoin and some other cryptocurrencies are used in everyday traffic, and they can buy consumer goods.

The biggest problem is that blockchain technology allows anonymous transactions, which, from the point of view of tax authorities, is such a big problem that the famous IRS, or the Internal Revenue Service of United States, has a problem with this, Schrodinger’s currency – because at the same time it functions as an asset and as a currency. For example, the IRS came to the conclusion that Bitcoin in an asset.

Taxation of cryptocurrencies operations in Serbia is problematic, as elsewhere in most of the rest of the world, primarily because tracking blockchain is a major challenge for methods still used by tax authorities.

The European Union treats crypto-currency transactions as a financial transaction, following a decision in the case of the EU Court of Justice C-264/14, in which the Court has decided that transactions with unconventional currencies, or non-official ones, if accepted by the contracting parties as an alternative to official currencies and have no other purpose other than the intention to be a means of payment, are considered to be financial transactions.

Domestic regulations

The RS Laws does not recognize Bitcoin, or any other, cryptocurrency, which means that Bitcoin in Serbia cannot be used as an official means of payment.

The National Bank of Serbia, in its statement of 02.10.2014. warns on the nature of Bitcoin itself and the incompatibility of regulation and centralization, and has been declared in accordance with the statement of the European Central Bank in which this institution declares that Bitcoin does not meet the necessary conditions in order to be considered electronic money. In this release, the NBS draws attention to the very important segment of the regulation, which is that the Foreign Exchange Act regulates exchange transactions as purchasing transactions from individuals and selling them an effective foreign currency and checks on foreign currency. Also, the Decision on the types of foreign exchange and foreign currency that are bought and sold on the foreign exchange market has been prescribed that banks and authorized exchangers can buy and sell effective foreign currency only if the currencies are specified in that decision. Accordingly, Bitcoin cannot be subject to purchase and sale by banks and authorized exchange offices.

However, the RS legislation, which does not regulate any cryptocurrencies, does not prohibit them, which means that their sale is allowed, while it is accounted for in dinars or in foreign currencies, as permitted by the law regulating foreign exchange operations.

Serbian tax authorities do not stand in the EU position, which, as stated earlier, is that transactions in cryptocurrency are considered financial transactions, but the existence and type of tax that will apply in a particular case depends on all the circumstances of that particular case.

However, since none of the tax laws specifically mentions cryptocurrencies revenues as a taxable category, this type of profit could be only implicitly introduced under the current legal framework, which would put the legality of such taxation under the question due to the potential extensive interpretation of existing regulations. As to the category that, like the Schrodinger’s cat, at the same time is money and property, the challenge is to correctly and sustainably define the way in which revenues from such a category could be taxed. Bearing in mind the NBS’s announcement that Bitcoin cannot be considered as money, and, if it were considered to be property, transactions in crypto-currencies could be subject to the rules of the Value Added Tax Act, which is normally applied to the circulation of goods and services. However, given that the EU Court decides that Bitcoin is not subject to paying VAT, it is likely that the Republic of Serbia, as a country in the process of EU accession, will take this position.

Revenue from cryptocurrency transactions can also not be classified decisively either under capital gains or capital gains tax, because for these types of taxes are exactly defined transactions from which they can arise. For this reason, only the provision of Article 85, paragraph 1, point 16 of the Law on Personal Income Tax could apply to such income, which says that as “other income” will be taxed “all other non-taxable income basis or are not exempt from taxation under this law. ”

However, legal entities that earn profits in dealing with cryptocurrencies, which are recorded on their business account and in business books, are obliged to pay tax on such profits according to the law governing corporate income tax.


From all of the foregoing, we see that the whole world, except for Japan, is behind a schedule with legislative for the development of legal and tax mechanisms governing blockchain and cryptocurrencies. The complexity and decentralization of these technological solutions, the possibility of anonymous transactions, and the inability to achieve a wider consensus on the legal nature of the cryptocurrencies themselves, prevent the legislative organs from adopting unified regulations, not only in Serbia but also in the EU, but also on a global level.

Therefore, although it is not explicitly forbidden, except for banks and authorized exchanges, the trade in Bitcoin and other cryptocurrencies is not strictly regulated by the laws of the RS, and it is necessary to be cautious because it is still not clear whether such trade is subject to certain restrictions or enjoys legal protection such as, for example, other economic or financial transactions.

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