For some time now, we have been witnessing the presence of something completely new in line with the modern development of the world. At the beginning it was quite incomprehensible. Later on, people paid more attention to it and as time passed the same people looked at it as an opportunity to make money. We are talking about something that threatens to take over the market – digital asset.

But what is digital asset?

The Serbian Parliament answered to that question by adopting the new Law on Digital Asset (the “Law”). The Law came into force on 29 December 2020 and will start applying six months later. Providers of services related to digital property are obliged to harmonize their business with the Law within this period.

According to The Law digital assets are defined as a digital record of value that can be digitally bought, sold, exchanged, or transferred and that can be used as a medium of exchange or for investment purposes, where digital assets do not include digital currency records that are legal tender and other financial assets that are regulated by other laws.

Why was this Law adopted?

The digital asset has so far been considered a legal gap and the matter needed to be legally regulated. The essence of this Law is aimed at regulating the digital property market in order to improve it. The Law primarily focuses on providers of services related to digital assets, and not on individuals who trade in their own name and for their own account. Also, the Law laid down the legal basis for taxation by the relevant tax laws (The Law on Personal Income Tax and the Law on Corporate Income Tax).

What is regulated by this Law?

  • Issuance of digital assets and secondary trading of digital assets in the Republic of Serbia;
  • Providing services related to digital assets;
  • Pledge and fiduciary right to digital property;
  • Jurisdiction of the Commission and the National Bank of Serbia;
  • Supervision over the enforcement of this Law.

Issuance of digital assets in Serbia is permitted, irrespective of whether the so-called white paper for such asset has been created and/or approved. However, the restrictions apply to advertising of digital assets, i.e. their initial sale, as the Law prescribes that advertising of the initial offer is possible without the white paper only under exceptions provided by the Law and in accordance with the act of supervisory body.

Prior to issuing digital assets, the issuer may create the white paper which contains all the necessary information that, given the specific characteristics of the issuer and the digital assets offered, allows investors to make an investment decision and assess the risks associated with investing in digital assets.

Secondary trading of digital assets is also permitted, regardless of whether the digital property was issued in the Republic of Serbia or abroad, and regardless of whether a white paper was approved for it. Secondary trading in digital property is performed through the OTC platform as well as through the so-called smart contracts.

As in every segment of law, the legislator prescribes measures to prevent abuses, especially of a criminal nature (e.g. money laundering, financing terrorism).

Also it is interesting that the Law allows mining, but at the same time puts it outside its scope.

If we look at the characteristics of this Law, we come to the conclusion that the Law itself takes a neutral position in the technological sense which means it applies to every type of digital asset regardless of the technology on which it is based, including stable digital assets. Also, the Law insists on transparency, both in terms of supervisory bodies and in terms of users.

Who are supervisory bodies?

The competent authorities prescribed by the Law are the National Bank of Serbia and Securities Commission of Republic of Serbia.

On one hand, the National Bank of Serbia is competent for issues regarding the decision-making in administrative procedures, adoption of bylaws, supervision over the performance of activities and realization of other rights and obligations of the supervisory body in the part related to virtual currencies as a type of digital property.

On the other hand, the Commission is competent for issues regarding the decision-making in administrative procedures, adoption of bylaws, supervision over the performance of activities and realization of other rights and obligations of the supervisory body in the part related to digital tokens as a type of digital property as well as the part related to digital assets that have the characteristics of financial instruments.

At the end, it is good to finally have a law like this. However, the time will show if this new regulation will improve the market. Of course, BOPA remains at your service for any additional information in this regard.