Cryptocurrencies: Regulation under the Albanian legal framework

Lately, terms like bitcoin, or forex exchange are stealing the spotlight, you can hear about them on internet platforms, news, and even everyday conversations but what are these terms, how can they both affect the market with their constant tire fluctuations, and most importantly what does the legislation say about this tumultuous of the electronic currencies? 

What is cryptocurrency?

A cryptocurrency is a form of payment that can be exchanged online for goods and services. Many companies have issued their own currencies, often called tokens, and these can be traded specifically for the good or service that the company provides. Think of them as you would arcade tokens or casino chips. You’ll need to exchange real currency for the cryptocurrency to access the good or service.

Cryptocurrencies work using a technology called a blockchain. Blockchain is a decentralized technology spread across many computers that manage and record transactions. Part of the appeal of this technology is its security.

How many cryptocurrencies are there? What are they worth?

More than 10,000 different cryptocurrencies are traded publicly, according to CoinMarketCap.com, a market research website. And cryptocurrencies continue to proliferate, raising money through initial coin offerings, or ICOs. The total value of all cryptocurrencies on May 27, 2021, was more than $1.7 trillion — down from April high of $2.2 trillion, according to CoinMarketCap.com.  The total value of all bitcoins, the most popular digital currency, was pegged at about $735 billion — down from April’s high of $1.2 trillion.

If these figures have convinced you to invest in bitcoin or manage it and if you want to do this in Albania you also have to be aware of the regulations that the Albanian legal framework has about cryptocurrency.

But what does the Albanian legislation say about cryptocurrencies?

Albania has become one of the first countries in Europe to adopt a regulatory framework for cryptocurrencies. Bitcoin and about 2,000 other cryptocurrencies, although legal even earlier in the country, are now subject to new rules, which protect consumers from the risks of fraud and impose fines in cases of abuse.

Legal framework:

Albania regulates cryptocurrencies with Law No. 66/2020 “On Financial Markets based on Distributed Registry Technology” – which specifically regulates the licensing of entities operating in the field of distribution, trading of virtual currencies / digital tokens.

And in order for you to exchange or manage crypto, you will need to be equipped with a Relevant license from the Bank of Albania.

There are many licenses related to certain activities.

Types of licenses approved by the authorities responsible for carrying out the activities provided in this law are:

a) TD agent license, which is issued by the AMF for a legal entity, after completion of the general conditions and special criteria provided for in Articles 9 and 29, of this law;

b) DLT scholarship license, which is issued by AMF and AKSHI for a legal entity, after meeting the general conditions and special criteria

c) the license of the innovative service provider, which is issued by AKSHI (without the inclusion of a TD agent) for a legal entity after meeting the general conditions and special criteria, provided in articles 9 and 63, of this law;

ç) The license of the third-party portfolio custodian, issued by AMF and AKSHI for a legal entity, after meeting the general conditions and special criteria provided in articles 9 and 77 of this law;

d) DT Collective Investment Automated Enterprise License, issued by NAIS for a collective investment undertaking. 

The application for a DLT exchange license and/or third-party portfolio custodian must be submitted through a licensed TD agent, who is appointed by the requesting entity to carry out all licensing procedures.

Confirmation through the collection mandate of the payment of the license application fee. (Bylaws regulating application fees are missing). 

A certificate that the entity is registered in Albania as a joint-stock company.

Certificate of appointment of the board of directors or the supervisory board:

To prove through a self-declaration that they possess the necessary professional skills and will undergo continuous training.

To certify, through certification by AKSHI, that the innovative technology agreement is in accordance with the provisions of this law.

Certify that he has appointed a person responsible for the prevention of money laundering at administration/management levels at the head office and at each representative office.

Certify that he meets the criteria of being “fit and suitable” for the exercise of relevant activities.

To certify that the company has adopted internal operating regulations.

Specific criteria for third party portfolio custodian

Prove, by making available supporting documentation, that it has approved and taken the necessary measures regarding the establishment of an internal system to prevent and withstand cyber-attacks, as well as to offer customers a means of recourse in case of fund loss.

Prove, by making available copies of the supporting documentation it has approved, a comprehensive risk management program, which should also include measures taken in the context of cybersecurity.

Prove, by making available copies of supportive documentation that it has adopted the appropriate measures to ensure the separation of clients’ funds from the funds of the custodian of third-party portfolios.

Prove, through supporting documentation, that he has a minimum initial capital of the company of 18,000,000 (eighteen million) ALL.

After completing the application form, the requesting entity submits it to the authority responsible, in accordance with the provisions of Article 8 of this law, attaching all probationary documentation for the fulfillment of the general conditions and criteria of special, as well as any other requirements of this law. Application for licensing and documentation Tests may also be submitted electronically, in accordance with the rules laid down by AMF, which may also provide for the application of registry technology distributed.

After licensing, each licensee pays the AMF and AKSHI the annual fee of the license holder.

The annual fee of the license holder, as well as the payment procedures, are determined by acts by-laws or regulators for each responsible authority.

Conclusions

In conclusion, to be licensed as a cryptocurrency exchanger the requesting entity must meet the general conditions and special criteria mentioned above, complete the application through a TD agent, and have a license from the Bank of Albania. (The bylaws for determining the typology of this license and the fees that the subject must pay are in the procedure).

Upon obtaining the License to be registered in the special register kept by the AMF.

Without excluding other criteria set by special laws such as:

– Foreign entity to open a business or branch in Albania,

– To be registered in the QKB,

– To be provided with a work/residence permit.

Author: Elona Baçe, Manager/ Attorney at Law at ARS Legal & Financial Services