The legal framework for the regulation of digital property in the Republic of Serbia is the Law on Digital Property (“Official Gazette of RS”, No. 153/2020), which entered into force on December 29, 2020. year, and applies after the expiration of six months from the date of its entry into force, i.e. from June 30, 2021, and tax regulations and regulations governing the prevention of money laundering and terrorist financing and general rules, such as e.g. laws governing obligations and companies.
The provisions of the Law on Digital Property (“Official Gazette of RS”, No. 153/2020) regulate:
- 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 property
- The competence of the Securities Commission and the National Bank of Serbia
- Supervision over the application of this Law.
Exclusions from the scope of application of the Law on Digital Property (“Official Gazette of RS”, No. 153/2020)
The provisions of the Law on Digital Property (“Official Gazette of RS”, No. 153/2020) do not apply to:
- transactions with digital assets if those transactions are performed exclusively within a limited network of persons who accept those digital assets (e.g. use of digital assets for specific products or services, as a form of loyalty or reward, without the possibility of their transfer or sale)
- to acquirers when acquiring digital assets by participating in the provision of computer confirmation services for transactions in information systems related to specific digital assets (so-called mining of digital assets)
- issuing electronic money and providing services related to electronic money
- the issuance of digital assets that have all the characteristics of a financial instrument and the secondary trading and provision of services related to such digital assets. Exceptionally, the law governing the capital market does not apply to the issuance of digital assets that have all the characteristics of a financial instrument, nor to the secondary trading and provision of services related to such digital assets, if all the following conditions are met:
– digital assets do not have the characteristics of shares;
– digital assets are not exchangeable for shares;
– the total value of digital assets issued by one issuer during 12 months does not exceed the amount of EUR 3,000,000 in dinar equivalent at the official middle exchange rate of the dinar against the euro determined by the National Bank of Serbia on the day of issue, i.e. during the direct sale.
The provisions of the law governing the provision of payment services and the issuance of electronic money shall apply to electronic money and the provision of services related to electronic money.
The law regulating the capital market shall be applied to the issuance of digital assets that have all the characteristics of a financial instrument, as well as to secondary trading and providing of services related to such digital assets unless otherwise prescribed by the Law on Digital Assets (“Official Gazette of RS”, No. 153/2020).
The concept of digital property
The Law on Digital Property (“Official Gazette of RS”, No. 153/2020) defines digital property as a digital record of value that can be digitally bought, sold, exchanged or transferred and which can be used as a means of exchange or investment purposes, where digital assets do not include digital currency records that are legal means of payment and other financial assets regulated by other laws, except when otherwise regulated by the Law on Digital Assets (“Official Gazette of RS”, No. 153/2020).
It is essential to note the definition itself does not contain a reference to blockchain technology or distributed databases, which means that it is technologically neutral, i.e. to apply to all digital assets regardless of the specific technology digital assets are based.
The Law on Digital Property (“Official Gazette of RS”, No. 153/2020) also defines two types of digital property, virtual currency and digital tokens, and this division is important because they (in certain situations) are subject to various legal regimes.
Virtual currency is a type of digital property that is not issued and whose value is not guaranteed by the central bank or other public authority, which is not necessarily tied to legal means of payment. It has no legal status of money or currency, but individuals or legal entities accept them as means of exchange. It can be bought, sold, exchanged, transmitted and stored electronically.
A key feature of virtual currency is that natural or legal persons who accept it can exchange virtual currency as a means of exchange, in the sense that virtual currency can be exchanged for goods or services. The most important virtual currency is bitcoin, and there are many others.
A digital token is defined as a type of digital asset that means any intangible property right that in digital form represents one or more other property rights, including the right of the digital token user to be provided with certain services.
The line of demarcation between virtual currencies and digital tokens is not drawn, i.e. many forms of digital assets will simultaneously have the characteristics of both virtual currencies (natural or legal persons accept them as a means of exchange) and digital tokens (representing another right).
Such digital assets are colloquially called hybrid, and both the legal framework prescribed for virtual currencies and the legal framework defined for digital tokens will apply to it.
In addition to the notion of digital property, the key terms defined by the Law on Digital Property (“Official Gazette of RS”, No. 153/2020) include white paper, subsequent white paper and smart contract.
The White Paper is a document published when issuing digital assets following the Law on Digital Property (“Official Gazette of RS”, No. 153/2020), which contains data on the issuer of digital assets, digital assets and risks associated with digital assets and which allows investors to make an informed investment decision. By its nature, it resembles a prospectus that is published in the traditional capital market.
The Law on Digital Property (“Official Gazette of the RS”, No. 153/2020) also recognizes the term subsequent white paper, which is similar to white paper but published when the digital property has already been issued.
A smart contract is defined as a computer program or protocol, based on distributed database technology or similar technologies, that, in whole or in part, automatically executes, controls, or documents legally relevant events and actions following an already concluded contract whereby that contract can be completed electronically through that program or protocol. It follows from the definition that the term “smart contract” primarily refers to the execution of a contract.
Types of services related to digital assets
Article 3 of the Law on Digital Property (“Official Gazette of the RS”, No. 153/2020) prescribes the following services related to digital property:
- receipt, transfer and execution of orders related to the purchase and sale of digital assets for the account of third parties
- services of purchase and sale of digital assets for cash and/or funds on the account and/or electronic money
- digital asset exchange services for another digital asset
- storage and administration of digital assets for the account of users of digital assets and related services
- services related to the issuance, offer and sale of digital property, with the obligation of its purchase (sponsorship) or without that obligation (agency)
- keeping a register of liens on the digital property
- digital property acceptance/transfer services
- digital asset portfolio management
- organizing a platform for digital trading assets.
The safekeeping and administration of digital assets on behalf of users of digital assets and related services includes control over how digital assets are accessed (e.g. cryptographic keys) and associated services (e.g. administration of collateral).
Digital asset portfolio management (from now on: portfolio management) means the administration of individual portfolios of digital assets based on approval from a particular contract concluded with the user of digital assets.
Sponsorship means a service related to the offer and sale of digital assets with the obligation to purchase those assets by the show’s sponsor.
Agency means a service related to the offer and sale of digital assets without the obligation to purchase those assets by the broadcasting agent.
Digital Asset Acceptance/Transfer Service means a service provided by a digital asset-related service provider to a trader within the meaning of the law governing trade by accepting from the consumer the appropriate value of the digital asset, corresponding to the price of goods sold and/or services provided to that consumer. for the proper amount of legal tender and transfers that amount to the appropriate merchant account.
Services for the purchase and sale of digital assets for cash and/or funds in the account and/or electronic money and services to exchange digital assets for other digital assets may also be provided using cryptocurrencies.
A provider of digital asset-related services is authorized to provide those services after obtaining permission from the supervisory authority to provide digital asset-related services. In addition to digital asset-related services, a digital asset-related service provider may perform only those jobs and services directly related to digital asset-related services.
Exceptionally, legal entities licensed by the Commission to perform a broker-dealer company or market organizer’s activities following the law governing the capital market may provide services related to digital assets following the Law on Digital Property (“Official Gazette of RS” No. 153/2020) upon obtaining a permit from the supervisory authority to provide services related to digital assets.
Digital asset advisory services include investment advice, capital structure advice, business strategy, digital asset issuance and similar issues, and other digital asset advisory services.
Investment advice is to provide a personal recommendation to a digital asset user regarding one or more transactions involving digital assets.
An investment recommendation is a research or other information intended for the public in which an investment strategy related to digital assets is explicitly or tacitly recommended or proposed.
Among the services related to digital assets, only advisory services can be provided without permission.