Crypto License in Bulgaria

General information about the Bulgarian crypto license

Bulgaria shines as one of the most crypto-friendly countries for business. Though it recognizes virtual currencies in its anti money laundering law, the Balkan jurisdiction doesn’t regulate crypto assets.

The crypto license in Bulgaria is then about complying with the AML-CFT laws of Bulgaria, which directly derive from the European directives on the matter:

• Law on the Measures Against Money Laundering
• Law on the Measures Against the Financing of Terrorism

These laws are enforced by the Financial Intelligence Directorate (FID) of the State Agency for National Security (SANS). These laws have been updated and put in line with the European regulations in the past decade, meaning that they hold no surprise to crypto projects familiar with EU rules.

Crypto companies in Bulgaria typically form as limited liability companies (OOD) and register to the authorities, provided they are compliant with the AML-CFT laws. Such companies are required to hold a minimum share capital of 2 BGN, that is about 1 EUR. Additionally, there are no requirements for local personnel, nor for an AML officer.

Crypto is not considered legal tender in Bulgaria. The tax rates surrounding crypto businesses are fairly low, especially for a European jurisdiction. This makes the Bulgarian crypto framework a popular option. It is worth noting that, unlike in many other countries, Bulgarian crypto entrepreneurs all chose to register in their own country.

Bulgaria Crypto License: Process and Duration

The process for obtaining a crypto license in Bulgaria is the simplest one can get in a European jurisdiction. The whole process takes about 2-3 months and is entirely streamlined.

Initially, a crypto project shall settle in Bulgaria by forming a limited liability company. A legal address is required to form the legal entity, but there are no residency requirements for the shareholders and the directors of the company. One person can simultaneously be the single shareholder and single director of a Bulgarian crypto company.

Then, the crypto business shall prepare for crypto authorization by complying with the AML-CFT laws of Bulgaria. This means having policies and procedures in place for customer due diligence, risk monitoring, supervision of operations and reporting to the Financial Intelligence Directorate.

The laws provide a clear framework of what should be structured before applying for the crypto authorization. It is worth mentioning that a Bulgarian crypto company is not required to appoint an AML officer. The monitoring and reporting obligations can be performed by any company member.

A VASP company in Bulgaria can open a bank account, usually in an electronic money institution.

The different types of crypto licenses in Bulgaria

Legally speaking, the Bulgarian crypto framework is not a license but an authorization, under requirement that the company complies with AML and CFT regulations.

There is a single type of authorization that does not have a specific denomination. However, the law makes it clear that an authorized crypto company in Bulgaria can only provide two kinds of services:

• Exchange services;
• Wallet services.

Other, more elaborate services, are subject to additional licenses as they fall under financial laws.

To successfully respond to the requirements for engaging in crypto activities, a Bulgarian company shall focus its efforts on implementing the AML-CFT rules described by
Bulgarian law. These rules are largely based on the European AML directives, which are then applied by decree in Bulgaria, subsequently updating existing laws by amendment.
These requirements are broken down into 8 elements in the law:

• Conducting customer due diligence and enhanced due diligence when necessary;
• Collecting and preparing documents or other information on customers and transactions;
• Retention and safeguarding of the aforementioned documents and information;
• Risk assessments;
• Reporting suspicious operations, transactions and customers;
• Reporting other informations as may be required;
• Internal control;
• Communicating with the Financial Intelligence Directorate of the State Agency for National Security (as well as Financial Intelligence Units of other states and jurisdictions)

It is noteworthy that, unlike in the vast majority of jurisdictions where a crypto license can be obtained, there are no requirements for an AML officer. Anybody in the organization
can perform and manage the obligations listed above.

Company formation for a cryptocurrency business in Bulgaria is a simple process. The registration takes less than a week once the necessary documents are ready.
A limited liability company is the preferred form of legal entity for a cryptocurrency business in Bulgaria. It has the benefits of necessitating a very low share capital (2 BGN, that is
about 1 EUR), no resident shareholders or directors, and allows for remote digital signature of company documents.
The company doesn’t necessarily need to explicitly register as a crypto business. The registry of crypto companies in Bulgaria includes authorized companies whose business
object is set as “financial services” or even “other activities”. What matters most down the line, is the communication with the financial authorities

Bulgarian companies are taxed at a corporate rate of 10%. This is one of the lowest tax rates in Europe and makes the country one of the most attractive jurisdictions for a crypto
business. The withholding tax rate (dividends) is also advantageous, being a standard rate of 5% for non-EU/EEA countries. The rate is 0% when a profit is distributed to a resident
of another European country. Finally, it is worth noting that crypto services are not subject to VAT in Bulgaria. The VAT rate is 20%.

Bulgarian crypto companies have the obligation to follow the AML and CFT laws at all times, and to fulfill the requirements described in the legal texts.
Those obligations pertain to the European AML directives. An example of such measures are, for example, the application of customer due diligence before establishing a business
relationship and whenever carrying out a transaction whose value is above 15,000 EUR. Another example of a typical obligation for crypto businesses in Bulgaria is the production of
risk assessment grids, defining the level of risk that can represent a customer, depending on his nationality for example. All these obligations respond to the same logic, that is to
carefully monitor client activity on the services provided. Any suspicious activity shall be reported to the Bulgarian authorities. Therefore, the company has an obligation to
maintain communication with the Financial Intelligence Directorate at all times.

A company found guilty of breaching the AML-CFT laws, on purpose or not, will be liable to sanctions of various kinds. Violating the legal obligations can for example lead to the
removal of the crypto authorization, that would consequently end the activity of the crypto business in Bulgaria. Violation of the Laws on the Measures Against Money Laundering &
Against Terrorism Financing can lead to administrative penalties, in the form of fines, from 1,000 BGN to 10,000,000 BGN depending on the gravity of the offense and the
nature of the perpetrator (natural or legal person). Repeated violations or inability to fix an observed breach will inevitably lead to more important fines and penalty, and can
lead to the company being forbidden to exert its activity, in addition to potential financial sanctions and suing individuals whose personal responsibility may be involved.