Legal guide for crypto in Serbia

STATT Crypto Serbia
The growing popularity of crypto in Serbia has prompted the establishment of a comprehensive legal framework to regulate digital assets and cryptocurrencies. Since the adoption of the Law on Digital Assets in December 2020, Serbia has implemented structured supervision by the National Bank of Serbia and the Securities Commission. These efforts are paving the way for a transparent and secure digital asset market. Therefore, this guide delves into Serbia’s crypto regulations, focusing on issuance, trading, pledges, fiduciary rights, taxation, and supervision. It serves as a valuable resource for businesses and individuals navigating the Serbian crypto landscape.
Introduction: The Growth of Cryptocurrencies
In recent years, the cryptocurrency market has grown significantly in both trading volume and value. Consequently, its importance has increased on a global and local scale. For example, Bitcoin, the most recognized cryptocurrency, recently hit a historic high of $58,000 per coin. Similarly, other cryptocurrencies like Ethereum, Litecoin, Tether, and Bitcoin Cash have experienced substantial value increases.
Acknowledging these modern trends, the Republic of Serbia has proactively regulated cryptocurrencies and digital asset transactions. As a result, the National Assembly of Serbia adopted the Law on Digital Assets (Official Gazette of RS No. 153/2020) on December 17, 2020, establishing a legal framework for digital assets in the country.
Constitutional Basis and Purpose of the Law
Legal Foundation
The Constitution of the Republic of Serbia serves as the foundation for the adoption of the Law on Digital Assets. Specifically, Article 97, paragraph 1, items 6 and 7, grants the state the authority to regulate the legal status of economic entities, oversee economic activities, define property relations, and protect all forms of property.
Objectives of the Law on Digital Assets
The Law on Digital Assets aims to establish a secure and innovative framework for crypto in Serbia, addressing multiple key goals:
- Market Regulation: The law seeks to promote the development of the digital assets market while preventing its misuse for criminal activities.
- Investment Facilitation: It enables financing opportunities through the issuance of investment tokens, providing a new avenue for capital.
- Capital Market Development: By leveraging digital technologies, the law aims to modernize and expand Serbia’s capital market.
- Fraud Prevention: Strengthened measures aim to combat money laundering, terrorism financing, and abuse in the digital assets market.
These objectives reflect Serbia’s commitment to fostering innovation while ensuring compliance and transparency in the growing digital asset ecosystem.
What Are Digital Assets?
Definition of Digital Assets
Under Serbian law, digital assets—commonly referred to as virtual assets—represent digital records of value. They can be:
- Bought, sold, or exchanged electronically.
- Transferred between individuals or entities.
- Used as a medium of exchange or for investment purposes.
However, it is important to note that the law excludes digital records that qualify as legal tender or financial assets regulated by other legislation. This distinction ensures a clear regulatory scope for digital assets within the framework of crypto in Serbia.
Types of Digital Assets
Digital assets fall into two main categories:
- Virtual Currency
Virtual currency is a type of digital asset that:
- Is not issued or guaranteed by a central authority.
- Lacks legal status as money or currency.
- Functions as a medium of exchange, accepted by individuals or businesses.
- Can be bought, sold, exchanged, and stored electronically.
- Digital Token
A digital token represents intangible property rights in digital form. It may include rights to certain services or other property rights associated with the token.
Implementation Timeline
The Law on Digital Assets officially came into effect six months after its adoption, providing service providers with ample time to adjust to the new regulations. This transitional period allowed companies to align their general acts and operational procedures with the law’s provisions, ensuring smooth implementation across the ecosystem of crypto in Serbia.
Issuance of Digital Assets in Serbia
Who Can Issue Digital Assets?
Both domestic and foreign individuals, legal entities, and entrepreneurs are eligible to issue digital assets in Serbia. This process does not require a special license from state authorities, provided the issuer complies with the provisions outlined in the Law on Digital Assets.
However, the issuance of digital assets may fall under the Law on Capital Market if the assets qualify as financial instruments. This regulation applies unless the following conditions are met:
- The digital assets lack characteristics of shares.
- They are not interchangeable with shares.
- The total value of issued digital assets by a single issuer does not exceed €3,000,000 within a 12-month period.
These rules ensure that the issuance process maintains a clear regulatory framework while fostering growth within Serbia’s digital asset market.
The Role of the White Paper
What Is a White Paper?
A white paper is a crucial document that provides detailed information about:
- The issuer of the digital assets.
- The nature of the digital assets being issued.
- Associated risks to help investors make informed decisions.
Is It Mandatory?
Issuers in Serbia can legally issue digital assets without producing or obtaining approval for a white paper. However, advertising such offerings is strictly regulated to ensure transparency and protect investors.
For example:
- Advertising without an approved white paper is permitted only under specific conditions, such as limited issuance or targeted offerings to a small number of investors.
Advertising the Initial Offering of Digital Assets
Without an Approved White Paper
Advertising an initial offering without an approved white paper is generally prohibited. Exceptions are permitted only in the following cases:
- The offering targets fewer than 20 individuals or entities.
- The total number of issued digital tokens is fewer than 20.
- Individual investments exceed €50,000 (in dinar equivalent).
- The total value of issued digital assets within 12 months does not exceed €100,000.
With an Approved White Paper
When advertising with an approved white paper, issuers must clearly state that the document has been published or will be published. They must also provide information on how investors can access the white paper.
Steps to Approve a White Paper
Issuers or authorized representatives must submit an application for white paper approval to the supervisory authority. The authority reviews the application and issues a decision within 30 days of receiving a complete application. If the application is incomplete, the issuer has 20 days to correct it.
The authority may reject the application if it finds discrepancies or missing information. Upon approval, issuers must begin the registration and payment process for digital assets within 30 days.
Reporting the Initial Offering Outcome
Once the initial offering concludes, issuers must publish an outcome report on their website within three working days. This report must include details about the offering’s results, with specific guidelines for its form and content provided by bylaws.
Secondary Trading in Digital Assets
What Is Secondary Trading?
Secondary trading in digital assets involves buying, selling, or exchanging digital assets. In Serbia, this type of trading is permitted, reflecting the evolving landscape of crypto in Serbia. It is allowed regardless of:
- Where the digital asset was issued (in Serbia or abroad).
- Whether the issuance was accompanied by an approved white paper.
How Does Secondary Trading Occur?
Secondary trading takes place on licensed Digital Asset Trading Platforms, which are integral to the development of crypto in Serbia. These platforms can only be operated by companies that have obtained a license from the supervisory authority.
Licensed companies, as well as other legal entities, entrepreneurs, and individuals, can participate in trading through these platforms.
Digital Asset Service Providers
Legal Forms for Service Providers
Digital asset service providers in Serbia must operate as companies registered under the Law on Companies (Official Gazette of RS No. 36/2011, 99/2011, 83/2014, 5/2015, 44/2018, 95/2018, 91/2019). This requirement ensures a structured and legally compliant foundation for crypto in Serbia. Acceptable legal forms include:
- Partnership.
- Limited partnership.
- Limited liability company.
- Joint-stock company.
Services Related to Digital Assets
According to Serbian law, digital asset service providers can offer a wide range of services, supporting the growing ecosystem of crypto in Serbia:
- Receiving, transmitting, and executing orders for buying or selling digital assets on behalf of third parties.
- Buying and selling digital assets for cash, electronic money, or scriptural money.
- Exchanging digital assets for other digital assets.
- Safekeeping and administering digital assets for users.
- Offering and placing digital assets with or without firm commitment underwriting.
- Maintaining a register of pledges on digital assets.
- Facilitating digital asset acceptance or transfer services.
- Managing digital asset portfolios.
- Operating a digital asset trading platform.
Minimum Capital Requirements
The minimum founding capital for service providers depends on the services offered:
- €20,000 (in dinar equivalent) for services 1–6.
- €50,000 for services 7 and 8.
- €125,000 for operating a digital asset trading platform (service 9).
If a platform is created for trading digital tokens of only one issuer, the minimum capital requirement is €20,000. At least half of this capital must be in cash, ensuring financial stability within the crypto in Serbia framework.
Licensing Process
To provide digital asset services in Serbia, companies must obtain a license from the appropriate supervisory authority. The steps include:
- Submitting the required documentation.
- Awaiting a decision within 60 days.
- Correcting any issues within 20 days if the application is incomplete.
Licenses are issued without a predetermined expiration period, allowing flexibility and long-term operation within the crypto in Serbia market.
License Revocation
A license may be revoked if:
- The service provider does not begin offering services within six months of obtaining the license.
- The provider discontinues services for six months or longer.
- There are violations of regulations related to money laundering or terrorist financing.
- The provider fails to comply with supervisory measures.
These conditions aim to maintain the integrity and transparency of crypto in Serbia.
Pledge and Fiduciary Rights on Digital Assets in Serbia
The evolving legal framework for crypto in Serbia addresses not only the trading and issuance of digital assets but also their use as collateral. The Law on Digital Assets outlines two key methods for ensuring the collection of claims through digital assets: pledges and fiduciary agreements.
Pledges on Digital Assets
What Is a Pledge?
A pledge allows digital assets to serve as collateral for securing claims. Furthermore, the constitutive effect of registration ensures legal validity by requiring licensed service providers to maintain the Pledge Register and accurately record each entry.
Information Recorded in the Pledge Register
The Pledge Register must contain the following:
- Details about the pledgor, debtor (if different), and pledgee or authorized person.
- Identification of the digital assets subject to the pledge.
- Amount of the secured claim or the maximum value of future or conditional claims.
- Information on disputes related to the pledge or pledged digital assets.
Conditions for Registration
Before entering a pledge into the register, the owner must entrust the digital assets to a licensed service provider for safekeeping and administration.
Secured Claims
Pledges can secure:
- Monetary claims in domestic or foreign currency.
- Non-monetary claims expressed in digital assets.
- Future and contingent claims as agreed upon by the parties.
Obligations of Service Providers
The service provider must:
- Prevent further disposal of the pledged digital assets upon registration.
- Ensure the pledged assets cannot be transferred until the secured claim is settled.
This prevents the pledgor from transferring assets to inaccessible digital addresses, ensuring the creditor’s security.
Rights of the Pledgor
The pledgor retains the right to:
- Use the pledged digital assets as intended.
- Enjoy any benefits generated by the assets, unless otherwise specified in the pledge agreement.
Termination of the Pledge
The pledge terminates under the following conditions:
- Settlement of the secured claim.
- Non-existence of the pledged digital assets.
- Sale of the pledged assets via public or other means.
The pledge can also be deleted from the register upon:
- A written waiver by the pledgee.
- Consolidation of the roles of pledgor and debtor into one entity.
- Transfer of ownership of the pledged assets to the pledgee.
Fiduciary Rights on Digital Assets
What Is a Fiduciary Agreement?
A fiduciary agreement involves transferring ownership of digital assets from the fiduciary debtor to the fiduciary creditor (the Fiduciary) to secure a claim. Upon settlement of the claim, the Fiduciary must return the equivalent assets to the fiduciary debtor.
Rights of the Fiduciary
Unless otherwise agreed, the Fiduciary may:
- Use the digital assets.
- Dispose of the assets, including selling them.
If the agreement serves purposes other than securing a claim, those purposes must be clearly defined.
Fiduciary Debtor in Bankruptcy
The Bankruptcy Law applies to fiduciary agreements in bankruptcy proceedings:
- For secured claims: The Fiduciary is treated as a separate creditor.
- For other purposes: The Fiduciary is considered the exclusive creditor.
So, the use of pledges and fiduciary agreements in Serbia provides a robust framework for leveraging digital assets as collateral, further solidifying the country’s position in the global cryptocurrency market. These mechanisms ensure security for creditors while allowing flexibility for asset holders, aligning with the broader legal landscape of crypto in Serbia.
Tax Treatment of Digital Assets in Serbia
As crypto in Serbia gains traction, understanding the tax implications for digital assets is critical. This guide also provides insights into the taxation of capital gains, inherited, and donated digital assets, helping individuals and businesses navigate this evolving regulatory landscape.
Taxation of Capital Gains from Digital Assets
How Is Capital Gain Taxed?
Effective June 29, 2021, Article 72 of the Law on Personal Income Tax outlines that capital gains or losses are determined as the difference between the sale price and the purchase price of digital assets.
The tax rate on capital gains is 15%, calculated on the determined capital gain as per the law.
Tax Exemptions for Capital Gains
- Tax Reduction
Taxpayers who reinvest funds from the sale of digital assets into the share capital of a Serbian company or investment fund within 90 days can reduce their capital gains tax by 50%. - Tax Refund
Taxpayers investing the proceeds from the sale of digital assets into similar purposes within 12 months are eligible for a 50% refund of the capital gains tax already paid.
Important Note: If the company receiving the investment reduces its share capital in the same or subsequent two calendar years, the taxpayer forfeits the exemption and must file a revised tax return.
Taxation of Donated and Inherited Digital Assets
Tax Rates
The tax rate for inherited or donated digital assets depends on the relationship between the parties:
- 1.5%: Taxpayers in the second line of inheritance (e.g., siblings, grandchildren).
- 2.5%: Taxpayers in the third line or beyond, or unrelated individuals.
Tax Base
- Inheritance Tax
- Based on the market value of the inherited digital assets at the time the tax liability arises.
- Reduced by debts, costs, or encumbrances the taxpayer must settle.
- Gift Tax
- Calculated on the market value of the gifted digital assets on the date of liability, as determined by the Tax Administration.
Exemptions
- If the total value of inherited or gifted digital assets from a single individual in a calendar year is less than RSD 100,000, the taxpayer is exempt from paying taxes on the amount up to this threshold.
- First-Line Heirs
- Spouses, parents, and children (first-line heirs) are exempt from inheritance and gift taxes.
Hence, tax regulations for crypto in Serbia provide clarity and opportunities for taxpayers to benefit from exemptions and deductions. By reinvesting proceeds or falling within specific tax-exempt categories, individuals and businesses can optimize their financial outcomes.
Supervision of Digital Assets in Serbia
A robust supervisory framework is critical for maintaining the integrity of crypto in Serbia. The National Bank of Serbia (NBS) and the Securities Commission serve as supervisory authorities, overseeing the activities of service providers, issuers, and individuals involved in digital assets.
Supervisory Authorities
Division of Responsibilities
The division of responsibilities between the National Bank of Serbia and the Securities Commission depends on the type of digital asset:
- Virtual Currencies: Supervised primarily by the National Bank of Serbia.
- Digital Tokens: Supervised by the Securities Commission.
These authorities ensure compliance with the Law on Digital Assets and its by-laws.
Subjects of Supervision
The Serbian authorities supervise the following entities:
- Service Providers: Companies offering services related to digital assets.
- Issuers of Digital Assets: Entities responsible for issuing digital tokens or virtual currencies.
- Owners of Digital Assets: Current or former holders of digital assets.
Methods of Supervision
Supervision can occur through two primary methods:
- Indirect Supervision
- The authorities collect and analyze reports, documentation, and data submitted by supervised entities.
- They also review additional information related to the operations of these entities.
- Direct Supervision
- The authorities conduct on-site inspections of business records, books, and other documentation.
Actions for Non-Compliance
If a supervised entity violates the law or associated regulations, the supervisory authority may take one or more of the following measures:
- Recommendation: Non-binding guidance to rectify minor issues.
- Written Warning: Formal notification to address compliance concerns.
- Orders and Corrective Measures: Mandatory steps to eliminate identified irregularities.
- License Revocation: For severe or repeated violations, the authority can revoke the entity’s license to provide digital asset services.
Serbia’s approach to crypto regulation is a testament to its commitment to fostering innovation while ensuring compliance and market integrity. With clear rules for issuance, trading, and taxation, as well as robust supervisory mechanisms, Serbia offers a secure environment for digital asset activities. Whether you are an investor, service provider, or entrepreneur, understanding these regulations is essential for success in the growing Serbian crypto market. For tailored guidance, consult legal or financial experts specializing in crypto in Serbia.