Cryptocurrency exchange license in Bulgaria

With a progressive view of technology and business, Bulgaria has become an excellent place for crypto entrepreneurs and newcomers to this niche, facilitated by the Bulgaria crypto license. The country’s government is actively working on licensing protocols to guarantee transparency, security, and compliance with the law. This demonstrates a commitment to the development of digital currencies, the protection of all parties involved, and the impact on economic growth.

How to Divide Crypto Licenses in Bulgaria

Companies have the right to operate without a separate crypto license in Bulgaria. The FSC (Financial Supervisory Commission) does not issue licenses or regulate virtual currency operations, as there is no legal framework.
If the company’s activities involve operations with fiat money or financial instruments and not just virtual currency, obtaining a classic financial FSC license will be necessary.

What Activities Will Become Available with the Bulgaria Crypto License

Working with a crypto license in Bulgaria, the company opens up opportunities for working with various cryptocurrency operations. Below is a brief overview:

Cryptocurrency exchanges

The crypto exchange license in Bulgaria provides an opportunity to create a platform for trading digital currencies for fiat money or other cryptocurrencies.

Asset custody services

Companies can ensure the safety of wallets and private keys by securely storing and managing clients’ crypto assets.

Wallet services

The license allows you to provide services for the secure management and storage of digital assets.

Payment services

Businesses can simplify payment transactions using digital currencies, including exchanging cryptocurrencies for fiat money.

Advisory services

Recommendations on market trends, investment strategies, and compliance in the crypto sphere.

Cryptocurrency Regulation Framework in Bulgaria

In Bulgaria, the approach towards cryptocurrency regulation aligns with European Union policies but lacks specific legal definitions for cryptocurrencies under the law on Bulgaria’s crypto license.

Bulgaria doesn’t officially classify cryptocurrencies as financial instruments, thereby not requiring a specific cryptocurrency license Bulgaria.

There needs to be a distinct law governing crypto assets in the country.

In 2018, the National Bank of Bulgaria highlighted the risks associated with cryptocurrencies, citing their volatility and potential price bubble characteristics. They emphasized that cryptocurrencies are unregulated and not suitable for investment or savings.

Bulgarian authorities haven’t designated financial regulators for crypto-assets nor recognized them as electronic money or financial instruments.

Contrary to the Central Bank’s stance, the National Revenue Agency views income from crypto transactions as akin to profits from financial assets. Thus, such income should be declared and taxed accordingly.

Cryptocurrencies fall under the “Anti-Money Laundering (AML) Act” purview, providing some indirect regulation.

Despite not being issued or guaranteed by the central bank, individuals and entities can use and accept virtual currencies for exchange and storage.

Cryptocurrency Laws

According to the Bulgarian Anti-Money Laundering Act, cryptocurrency companies must obtain licenses. In addition, comprehensive anti-money laundering and financial crime prevention processes must be implemented.

Payment services related to cryptocurrencies, which establish guidelines for service providers, are regulated by the Law on Payment Services and Electronic Money.

The Currency Control Act controls digital currency transactions, detailing reporting requirements and restrictions on foreign transactions.

Bulgaria is a part of the EU and complies with the Union’s cryptocurrency regulations, such as the EU Anti-Money Laundering Directive (AMLD). 5AMLD (the Fifth Anti-Money Laundering Directive) has had a significant impact on shaping Bulgaria’s position. Virtual currencies are a digital representation of value, independent of central banks or legal tender status, but recognized as a medium of exchange.

According to the Directive, there will be:

Customer due diligence at various levels, applying complex procedures for transactions over BGN 30,000.
Detailed records of cryptocurrency transactions, including customer information.
Standard internal checks for potential money laundering, terrorist financing, and other illegal activities.
Reporting to the Financial Intelligence Unit on any transactions exceeding BGN 30,000.
Reporting unusual customers and suspicious transactions to the Financial Intelligence Directorate of the State Agency for National Security.

These regulatory requirements are essential for organizations planning to apply for cryptocurrency licenses in Bulgaria, as they ensure that they operate in a secure and legally compliant environment.

Key Benefits of Obtaining a Crypto Exchange License in Bulgaria

When obtaining a Bulgaria cryptocurrency license, entrepreneurs and investors receive significant benefits:

With a transparent and progressive regulatory environment, Bulgaria provides certainty and stability to the cryptocurrency business.
As it is known, this country is a member of the EU, so companies with a Bulgarian crypto license can operate in the EEA without any obstacles, having access to a large market.
The state is actively working on developing the crypto industry, showing a favorable ecosystem through initiatives and cooperation.
Cryptocurrency companies can maximize efficiency and resource allocation thanks to low transaction costs.
Bulgaria also has competitive corporate tax rates and a potential VAT exemption, offering many financial advantages for cryptocurrency businesses.
Cryptocurrency companies are well supported by easy access to qualified specialists in technology and finance.
Investor confidence is enhanced by having a Bulgarian crypto license, meeting the requirements and security.

Crypto License in Bulgaria and Other Countries

If you get a cryptocurrency license in Bulgaria, you will have a guarantee of compliance with the country’s progressive cryptocurrency legislation. In addition, companies will have stability and legal clarity. A cryptocurrency license in Bulgaria permits one to enter the European market, thanks to the EU passporting rights, receive favorable tax policy and benefit from competitive operating costs.

Nigeria, for example, provides clear regulatory rules that increase transparency and trust in the crypto industry. The license requires compliance to reduce fraud and protect deposits. Regulators are working to address the issue of decentralization by introducing safe fundraising limits to create a secure environment in this niche.

Conditions for Obtaining a Bulgarian Crypto License

Implement and maintain strong Anti-Money Laundering (AML) and Know Your Customer (KYC) internal policies.
Assign a specific employee to oversee and ensure adherence to AML and Counter-Terrorist Financing (CTF) regulations.
Establish processes for customer identification and continuous monitoring of business relationships.
Ensure compliance with global sanctions regimes.
Maintain a commitment to secure customer data storage.
Obligation to report any suspicious transactions and certain specific operations promptly.
Ensure all shareholders and senior directors have a credible business reputation and a clean criminal record.
Adopt and implement a risk-based strategy in all licensed activities, considering the national risk assessment outcomes.
Fulfill additional obligations arising from any applicable laws related to the Bulgaria license crypto.

AML/KYC Protocols for Securing a Crypto Licence in Bulgaria

In 2020, the Bulgarian government introduced critical regulation, recognizing the need for strict measures to regulate the cryptocurrency sector. Under the National Revenue Agency (NRA) supervision, the Council of Ministers introduced a regulation establishing a special register of companies specializing in cryptocurrency services. For those seeking a cryptocurrency license in Bulgaria, this initiative is aligned with broader goals to ensure compliance with AML regulations.

The Ministry of Finance has defined specific criteria and procedures for entities, and they will be entered into this state registry. This is important to reduce the risks in the cryptocurrency sector related to terrorist financing and money laundering.

Sections 10 and 4 of the Anti-Money Laundering Act are relevant for those companies that want a crypto company and a cryptocurrency exchange license in Bulgaria. According to section 4, these entities have to do customer due diligence in various situations:

Establishing a business relationship, especially when opening accounts.
Transactions over EUR 15,000.
Cash transactions over EUR 5,000.
Identification of any suspicious activity or transactions.

If a company engages in inappropriate or unusual transactional activity, companies should:

Apply robust internal policies and controls.
Closely monitor customers and report anomalies to the relevant authorities.
To avoid ambiguous transactions, ensure that all parties involved are thoroughly identified.
Regularly check affiliates and partners for any negative public information.

The customer due diligence measures and the corresponding sanctions for non-compliance are clearly defined in Section 10 of the Law.

Process of Obtaining a Crypto License in Bulgaria

The First Step is to Collect the Documents

We collect the necessary information about the client—initial documents for the power of attorney.
Preliminary analysis of the project, which includes the scope and budget.
Collection of KYC documents and business profiles.
Notarization and legalization of the power of attorney. Confirm the name of the company.
Obtaining a certificate stating that directors and shareholders have no criminal record.
Obtaining the necessary documents which can be done through a suitable delivery method.

Second Step – Establishment of a company

Translate the power of attorney and deeds of attorney into Bulgarian.
Conducting the notarial deed.
The company data will be registered in the commercial register.

As a result: Establishment of LLC/S.R.O. (Limited Liability Company). The company will be eligible to obtain a Bulgaria cryptocurrency exchange license from the Bulgarian Trade Licensing Register.

Third Step – Licensing

Additional information about the business is collected to develop an AML/KYC policy (adapted to the company’s cryptocurrency activities).
Apply to the Bulgarian authorities, ensuring continuous communication to obtain Bulgaria’s crypto exchange license.
Hire and train anti-money laundering employees. They will be instructed on regulatory compliance and reporting.
Fill out and submit the registration of anti-money laundering officers.

Step Four – Corporate Accounts and Financial Compliance

Analyze and select suitable banks or EMI institutions that comply with AML policies.
Collect the necessary documentation for opening an account, including financial flows and company details.
Start working with crypto-friendly EMIs.
Develop and implement accounting practices specific to cryptocurrencies.
Involve an accountant to get recommendations on crypto accounting standards.

Bottom line: Opening corporate accounts in compliance with tax and regulatory requirements for a virtual asset management service provider.

Starting a Crypto Business in Bulgaria

Setting up a company in Bulgaria is a straightforward and efficient process, especially for those looking to register a Bulgaria cryptocurrency license. Typically, it takes about two months to establish a new company, including document preparation and registration. However, if all documents are in order, this can be expedited to just a few days.

For a quicker route, acquiring a ready-made company is possible within a week. Our team can guide you through either process, including advice on ready-made companies.

Available Legal Business Structures in Bulgaria:

Limited Liability Company (LLC): Minimum share capital of 2 BGN (about 1 EUR).
Closed Joint Stock Company: Minimum share capital of 50,000 BGN (about 25,600 EUR).
Open Joint Stock Company: Minimum share capital of 100,000 BGN (about 51,000 EUR).
Limited Partnership: Initial capital of 4 BGN (about 2 EUR).
General Partnership: No capital requirements.
Sole Proprietorship: Initial capital of 2 BGN (about 1 EUR).

The LLC is particularly popular and can be established by any foreign natural or legal person per the Bulgarian Commercial Code.

Requirements for an LLC:

A corporate bank account in Bulgaria.
The minimum share capital is available for transfer to a Bulgarian bank.
At least one shareholder and one managing director.
A registered office in Bulgaria to secure tax resident status (a virtual office is acceptable).
Remote bank account opening is possible with a power of attorney and notarized documents. The company must have a significant presence in Bulgaria.

Documentation Needed:

Photocopies of passports for owners and managing directors.
Notarized Articles and Memorandum of Association.
Minutes of the shareholder’s meeting.
Notarized signature specimen and consent from a company representative.
Proof of initial capital deposit.
Company name certification.

Steps to Establish a Crypto Company in Bulgaria:

Reserve a compliant company name and pay state fees.
Prepare all necessary documents, including certified translations and notarizations.
Open a temporary bank account for share capital.
Deposit initial share capital into the company’s Bulgarian corporate bank account.
Pay a 55 BGN registration fee to the Commercial Register of the Registry Agency.
Apply with the receipt and documents to the Registry Agency.
Register as a VAT payer if annual turnover exceeds 50,000 BGN.
Register employees for social insurance.
Apply for a crypto license from the NRA.

Taxation

Bulgaria’s NRA Law 2018 stipulates that cryptocurrency transactions may be VAT-taxable, treating all token types as financial assets. Here’s a brief overview:

VAT and Tax Classification: Cryptocurrency activities might attract VAT, and all tokens are viewed as financial assets, making gains from crypto-assets taxable.
Individuals: They pay a 10% tax on profits from asset transactions within a year. Losses aren’t deductible.
Legal Entities: A 10% corporate tax on income and an additional 5% dividend tax apply. Salaries must be paid in fiat currency.
Foreign Companies must register and fulfill tax and social security duties if paying Bulgarian employees.

FAQ

Is it possible to submit documents in English for a Bulgarian crypto company?

No, all documents for forming a company in Bulgaria must be in Bulgarian. You’ll likely need a certified translator to establish a Bulgarian crypto company.

What is the timeframe for acquiring a crypto license in Bulgaria?

The process is relatively swift. Once all documents are correctly submitted, a crypto business can expect inclusion in the public register and receive a Certificate of Registration within a month. This is quite efficient compared to other European countries.

Should Bulgarian companies notify the national tax authority before engaging in crypto activities?

Yes, authorization from the National Revenue Agency (NRA) is a prerequisite for entering the Bulgarian crypto market.

Can a Bulgarian crypto license be used for international operations?

Indeed, holding a crypto license from Bulgaria enables international operations. However, it’s essential to comply with each jurisdiction’s specific laws and regulations where you provide services. Understanding and adhering to these local regulations is critical to ensure legal compliance and avoid potential issues.