The Republic of Serbia is one of those countries that have regulated the entire field of digital business by law, which is based primarily on the so-called “blockchain” technologies. The Law on Digital Assets (hereinafter: the Law) was passed in 2020, more precisely on December 21, with delayed implementation for six months from the date of adoption, which is a common principle when it comes to adopting new regulatory frameworks in areas that represent unknown to a wide circle of society.
Although still in its infancy, the “smart contracts” industry based on “distributed database technology or similar technologies, which, in whole or in part, automatically executes, controls or documents legally relevant events and actions in accordance with an already concluded contract, whereby that contract can be concluded electronically through that program or protocol “, is obviously recognized by the legislator as a growing and increasingly attractive area of business, and as such requires normative regulation.
It should be noted that the legislator left room for the provisions of this law to apply not only to legal transactions based on “blockchain” technology, created as a technological solution for the development of “bitcoin”, but also to other models through which encryption is performed, i.e. coding of digital transactions.
In addition, what is characteristic is that the Law introduces the term “white paper”, as “a document published when issuing digital assets, which contains information about the issuer of digital assets, digital assets and risks associated with digital assets and which allows investors to bring informed investment decision“, which is a kind of counterpart to the prospectus defined by the Law on Capital Market. In this regard, it should be borne in mind that the creation or approval of “white paper” is not a prerequisite for the issuance of digital property in Serbia, under certain conditions prescribed by law. It is also important to note that the supervisory body, as the legislator cumulatively calls the National Bank of Serbia and the Securities Commission, is not responsible for the accuracy and completeness of the information stated in any part of the white paper whose publication is approved.
Regarding the regulatory role of the National Bank of Serbia and the Securities Commission, their division of competencies is separated in relation to the question of whether the subject of treatment is a virtual currency or a digital token, which due to the complex nature of these two instruments may cause difficulties in delimiting competencies between these two state bodies.
Of particular importance is the fact that the legislator introduces digital assets in the field of corporate law, leaving, among other things, the possibility that non-monetary stake in companies may be in the form of digital tokens not related to services or work, with non-monetary stake in partnership and a limited partnership may also be in digital tokens relating to the provision of services or the performance of work. On the other hand, virtual currencies cannot be entered as a contribution to a company, but can be converted (exchanged) for money and paid into a company as a monetary stake. Also, we should not lose sight of the legislator’s position that transactions with digital assets are not subject to regulations governing deposit insurance or investor protection, as well as regulations governing the protection of financial service user.
In addition to the above legal solutions, the law regulates a wide range of legal issues related to performing business in the field of digital assets, from defining digital services and how to perform them, the procedure of registration of service providers related to digital assets, corporate business framework, on digital property, to the prohibition of market abuse, supervision of the business of service providers related to digital property and the prescribing of criminal offenses and criminal sanctions related to them.
In any case, the Law is the fruit of a pioneering endeavor to regulate the digital property market, whose main achievement is its adoption, i.e. putting the stamp of legality on activities that will certainly represent a revolution in our everyday life.
Filip Živanović, Attorney at Law