The Digital Assets Act – New Tech Regulation in Serbia

Scope of the DAA

The DAA regulates all digital assets regardless of the technology on which they are based. The DAA defines a digital asset as a digital record of value that can be bought, sold, exchanged or transferred, and that can be used as a medium of exchange or for investment purposes.

The DAA recognises two types of digital assets:

• virtual currencies – defined as a type of digital asset that is not issued and whose value is not guaranteed by the central bank or other public authority, which is not necessarily tied to a legal tender and has no legal status of money or currency, but is accepted by individuals or legal persons as a means of exchange and can be bought, sold, exchanged, transmitted and stored electronically; and
• digital tokens – defined as any intangible property right that in digital form represents one or more other property rights.

The DAA also recognises the concept of digital assets mining, but this area is excluded from the scope of the DAA.

Competent authorities

The government authority with competence over virtual currencies is the National Bank of Serbia ("NBS"), while the authority with competence over digital tokens is the Serbian Securities Commission ("SEC").

The DAA makes it explicit that the Republic of Serbia, the NBS, the SEC or any other authority will not in any way guarantee the value of digital assets and will not be liable for damage that may occur as a result of digital assets transactions.

Overview of key provisions

Some of the key concepts and solutions recognised and implemented by the DAA are:

• digital assets can be issued with or without a "white paper", which is defined as a document published during the issuance of digital assets that contains information about the digital assets, the issuer of the digital assets and the potential risks;
• the advertising of initial public offerings without an approved white paper is permitted only if it satisfies certain conditions prescribed by the DAA or if it complies with the future bylaws to be adopted by the NBS and/or the SEC;
• secondary and OTC trading are allowed with or without an intermediary, and the use of smart contracts is explicitly allowed for secondary trading;
• digital assets services providers must be incorporated in Serbia and hold the appropriate NBS/SEC licences;
• a pledge may be established over digital assets, but it must be registered with the service provider specifically licensed to operate a digital asset pledge register;
• parties may enter into a fiduciary agreement for securing receivables or for other purposes.

Penalties

Penalties for non-compliance with the DAA are set to range between RSD 100,000 and RSD 5,000,000 (approx. EUR 800 – 43,000) or up to 10 % of annual turnover for the preceding financial year, whichever is higher.

If any entity or person provides services related to digital assets without a licence, they may be fined up to RSD 5,000,000 (approx. EUR 43,000) or up to 20 % of annual turnover for the preceding financial year, whichever is higher.

Individuals engaged in insider dealing or market manipulation may also be criminally liable (with a prison term of five to eight years and a fine).

author: Mina Mihaljčić