National Assembly of the Republic of Serbia adopted the Law on digital assets (hereinafter “the Law”) on December 21st 2020.
There is no unique regulation of this legal and commercial area, in the European Union, even though the question of regulation of digital assets, in the first place crypto and blockchain regulative, has risen multiple times in the last years, especially with the growing value of crypto currencies, Bitcoin in the first place. For now, in the EU, just a few countries are considered as crypto – friendly – Estonia, Denmark, Slovenia, Germany and Switzerland.
The Law defines the basic terms of digital assets, including digital assets itself, virtual currency, digital asset-related service provider, user of digital assets, white paper and similar.
Also, the scope of the Law is defined as regulation of issuance of digital assets and secondary trading in digital assets in the Republic of Serbia, provision of services related to digital assets, lien and fiduciary right on digital assets, the competence of the Securities Commission and the National Bank of Serbia as bodies which are responsible for supervision on the provisions of this Law.
Maybe the most interesting definition is the definition of user of digital assets, which is defined as physical person, entrepreneur or legal entity which uses or used as service connected with digital assets or addressed the digital asset-related service provider for usage of this service. In this way, users are awarded certain rights and obligations in the situation when they use the services of digital asset-related service provider, which can be compared with the legal regime and protection that consumers enjoy when buying goods and services with special reference to concluding contracts online.
The Law also defines the owner of digital assets as a user of digital assets, but also as a person who acquired digital assets regardless of the business relationship established with the provider of services related to digital assets or transactions performed through that provider. The Law here refers to mining of crypto currencies as a way of obtaining it without a business relationship with the provider of services. The Law explicitly allows mining, however, also explicitly states that the Law is applicable to it only if it is managed through the digital asset-related service provider.
The Law regulates crowdfunding, which maybe represents the most important feature of the Law, since it can be seen as an innovative way to obtain capital for SMEs. The Law states that, for obtaining capital, issuers can issue digital tokens that do not have the characteristics of stocks, nor are they exchangeable for stocks, provided that the total value of issued tokens for one year does not exceed the amount of 3,000,000 euros. However, this presumes the existence of a crowdfunding platform, and in Serbia there is only one, so for the actual crowdfunding, further development is necessary.
It is foreseen that a register of digital asset-related service providers will be established.
The supervisory bodies for the application of the Law are National Bank of Serbia, for the scope of the Law related to crypto currencies as a type of digital asset, and Securities Commission, for digital asset that has the characteristics of financial instruments.
The Law provides for the constitution of lien on digital assets, as well as fiduciary right on digital assets, which surprising in the light that fiduciary right as security instrument was unknown in the legal system of Serbia, and unrecognized as a legal institute by other laws. The Law defines the contract of fiduciary of digital assets the contract which obliges the fiduciary debtor to the fiduciary creditor to transfer the right of ownership over digital assets to him, for the purpose of securing claims, and the fiduciary creditor undertakes to return the received or equivalent collateral to the fiduciary debtor upon execution of the secured claim, ie simultaneously with that execution. The fiduciary creditor, unless otherwise agreed, has the right to use and dispose of the digital asset that is the subject of the fiduciary contract, including the right to its disposal.
The Law enters the possibility of enforcement creditor in the enforcement procedure to collect from the digital assets of the enforcement debtor in the same way as any other movable or immovable property, whereby the debtor is obliged to provide information and provide all data necessary for the collection of digital assets, including the means by which digital assets are accessed (eg cryptographic keys without which digital assets cannot be used effectively).
Finally, it is worth the mention that the Law prescribes fines for not adhering to its provisions and/or subsequent bylaws, in the amount from 100.000 RSD to 5.000.000 RSD.
The (physical and legal) persons providing services related to digital assets have a six-month deadline from the day the Law enters into force to harmonize their business and general acts with the provisions of the Law and bylaws adopted on the basis of the Law and to submit an appropriate request for permission to the National Bank of Serbia or the Securities Commission within six months. The Law itself begins to be applied after the expiration of 6 months from the day of its entry into force, ie on June 29, 2021.
In conclusion, it can be said that the new Law on digital assets represents a step in the right direction, however, it will remain to be seen how it will be applied in practice.
Jelena Bajin, attorney at law