Crypto License in Bulgaria

The legality of cryptocurrency business in Bulgaria

Cryptocurrency businesses in Bulgaria are legal and widely unregulated, provided that the services performed do not fall into the regulation of other financial services.

Concretely speaking, this means that most activities touching fiat currency will require additional licensing: payment services, investment funds, etc.

A cryptocurrency company in Bulgaria is free to offer services to exchange crypto currencies and to provide wallet custody services to its clients, as these activities do not enter the legislation of other existing rules.

Cryptocurrency regulation in Bulgaria

There are no explicit regulations pertaining to cryptocurrency in Bulgaria. The so-called crypto license in Bulgaria is rather an authorization to perform crypto related services under the frame of the AML and CFT laws, in force in Bulgaria.

These laws directly derive from the European Union directives on Money Laundering and Financing of Terrorism Prevention.

The obligations of crypto businesses are duly described in a set of three laws edited by the Financial Intelligence Directorate of the State Agency for National Security:

• Law on the Measures Against Money Laundering, promulgated in 2018 and last amended in 2020;
• Law on the Measures Against the Financing of Terrorism, promulgated in 2003 and last amended in 2020;
• Rules on the Implementation of the Law on Measures Against Money Laundering, applied by decree in 2018 and also amended last in 2020.

These three texts form the basis of the cryptocurrency regulation in Bulgaria, though it does not directly target virtual asset services providers.

Bulgaria Virtual Cryptocurrency Registry

The Unified Trade Register of the Bulgarian Chamber of Commerce and Industry lists all the companies registered in Bulgaria. This includes Bulgarian virtual cryptocurrency companies.

The register doesn’t sort companies by activity, therefore there is no way to produce a list of all the companies engaged in crypto activities in Bulgaria. Moreover, the business activity field isn’t standardized, meaning that different companies with similar activities may have registered under different business activities.

The public registry can provide the following information on crypto companies in Bulgaria:

• Company name
• Registration number
• Date of registration
• Representative person
• Address
• Phone number

Crypto-authorization process in the Bulgaria Virtual Currency Registry

The process to start operating under a crypto authorization in Bulgaria is straightforward. Basically, a company willing to register as a virtual currency company in Bulgaria simply has to demonstrate compliance with the AML and CFT laws.

Naturally this implies putting in place the necessary documents, policies and procedures, within a company that is registered in Bulgaria and has a legal address in the country.

Once the crypto company can demonstrate it fulfills the obligations laid out in the Law on the Measures Against Money Laundering and the Law on the Measures Against the Financing of Terrorism, the green light is issued by the regulator, that will also indicate the necessary contact points for reporting suspicious transactions.

The registration of Bulgaria Company in Register of crypto currency companies

Crypto currency companies in Bulgaria typically register as Limited Liability Companies (OOD - druzhestvo s ogranichena otgovornost). This company form is the simplest to set-up, especially for non-residents.

A Bulgarian Ltd company needs to have a legal address in Bulgaria and a share capital of 2 BGN, which approximately converts to 1 USD.

There are no residency requirements for shareholders and directors of a Bulgarian limited liability company.

The registration is fairly simple, taking only 3 days after providing the necessary certified documents.

Governmental Statements on Crypto in Bulgaria

The Financial Supervision Commission in Bulgaria has not issued explicit legal guidance on the matter of cryptocurrency.

Though the matter is named in the AML-CFT laws, explicitly defining the concepts of “virtual currency” and “custodian wallet provider”, there are no governmental statements on the topic of crypto so far.

This emphasizes a stance of giving room to crypto entrepreneurs in Bulgaria. Crypto businesses in Bulgaria have been growing consistently in the past years, with domestic entrepreneurs not feeling any need for another jurisdiction.

Requirements for companies engaged in crypto activities in Bulgaria

To successfully respond to the requirements for engaging in crypto activities, a Bulgarian company shall focus its efforts on implementing the AML-CFT rules described by Bulgarian law. These rules are largely based on the European AML directives, which are then applied by decree in Bulgaria, subsequently updating existing laws by amendment.

These requirements are broken down into 8 elements in the law:

• Conducting customer due diligence and enhanced due diligence when necessary;
• Collecting and preparing documents or other information on customers and transactions;
• Retention and safeguarding of the aforementioned documents and information;
• Risk assessments;
• Reporting suspicious operations, transactions and customers;
• Reporting other informations as may be required;
• Internal control;
• Communicating with the Financial Intelligence Directorate of the State Agency for National Security (as well as Financial Intelligence Units of other states and jurisdictions).

It is noteworthy that, unlike in the vast majority of jurisdictions where a crypto license can be obtained, there are no requirements for an AML officer. Anybody in the organization can perform and manage the obligations listed above.

The process of setting up a company for a cryptocurrency business in Bulgaria

Company formation for a cryptocurrency business in Bulgaria is a simple process. The registration takes less than a week once the necessary documents are ready.

A limited liability company is the preferred form of legal entity for a cryptocurrency business in Bulgaria. It has the benefits of necessitating a very low share capital (2 BGN, that is about 1 EUR), no resident shareholders or directors, and allows for remote digital signature of company documents.

The company doesn’t necessarily need to explicitly register as a crypto business. The registry of crypto companies in Bulgaria includes authorized companies whose business object is set as “financial services” or even “other activities”. What matters most down the line, is the communication with the financial authorities.

Taxation for cryptocurrency companies in Bulgaria

Bulgarian companies are taxed at a corporate rate of 10%. This is one of the lowest tax rates in Europe and makes the country one of the most attractive jurisdictions for a crypto business.

The withholding tax rate (dividends) is also advantageous, being a standard rate of 5% for non-EU/EEA countries. The rate is 0% when a profit is distributed to a resident of another European country.

Finally, it is worth noting that crypto services are not subject to VAT in Bulgaria. The VAT rate is 20%.

Obligations for crypto companies in Bulgaria

Bulgarian crypto companies have the obligation to follow the AML and CFT laws at all times, and to fulfill the requirements described in the legal texts.

Those obligations pertain to the European AML directives. An example of such measures are, for example, the application of customer due diligence before establishing a business relationship and whenever carrying out a transaction whose value is above 15.000 EUR.

Another example of a typical obligation for crypto businesses in Bulgaria is the production of risk assessment grids, defining the level of risk that can represent a customer, depending on his nationality for example.

All these obligations respond to the same logic, that is to carefully monitor client activity on the services provided. Any suspicious activity shall be reported to the Bulgarian authorities. Therefore, the company has an obligation to maintain communication with the Financial Intelligence Directorate at all times.

Sanctions for violating Bulgaria crypto-business obligations

A company found guilty of breaching the AML-CFT laws, on purpose or not, will be liable to sanctions of various kinds. Violating the legal obligations can for example lead to the removal of the crypto authorization, that would consequently end the activity of the crypto business in Bulgaria.

Violation of the Laws on the Measures Against Money Laundering & Against Terrorism Financing can lead to administrative penalties, in the form of fines, from 1.000 BGN to 10.000.000 BGN depending on the gravity of the offense and the nature of the perpetrator (natural or legal person).

Repeated violations or inability to fix an observed breach will inevitably lead to more important fines and penalty, and can lead to the company being forbidden to exert its activity, in addition to potential financial sanctions and suing individuals whose personal responsibility may be involved.