NBS begins enforcing fines - investigation of unauthorized providing of services related to cryptocurrencies

The Law on Digital Assets has established rules of the game that apply to cryptocurrencies, digital tokens, and cryptocurrency trading. As soon as there are rules, there is state control over compliance with those rules. Regarding the rules related to cryptocurrency mining, we have dealt with the activity of cryptomats in Serbia , as well as importance of ICO in the Serbian Law on Digital Assets in previous blogs. The value of cryptocurrencies is a very important topic today. Many who have not invested in cryptocurrencies so far, now want to do so. Since buying cryptocurrencies is unclear to many, investment advice regarding cryptocurrencies can be very useful. So far, there has been no significant news regarding enforcing fines for unauthorized provision of services related to cryptocurrencies. However, several entrepreneurs whose main activity is consulting services and the providing of investment advice and recommendations regarding investing in cryptocurrencies received an unpleasant surprise. The National Bank of Serbia - the central bank - has started the control of these entities to determine whether they are engaged in providing some of the services related to digital assets without obtaining a permit from the National Bank of Serbia.

Namely, investment advice and recommendations regarding investing in cryptocurrencies can be provided by any business entity without a license, with the obligation to state on its website that it provides investment advice without a license and to note to any person advising, that such advice regarding cryptocurrencies is provided without a license. Moreover, licensed services related to digital assets are listed in Article 3 of the Law on Digital Assets and the provision of investment advice is not one of those services. Some of the mentioned services are the activities of crypto exchanges in Serbia, cryptocurrency portfolio manager services, etc. Therefore, investment advice is not one of the services that require a license in Serbia. However, the National Bank of Serbia has initiated inspection procedures against many entities who generally state on their website that they deal with cryptocurrencies, in order to determine exactly what activities they do, i.e. whether they only provide investment advice or maybe take money from clients to invest in the crypto market. Taking money from clients to place it in the cryptocurrencies, in the economic essence, enters the domain of digital asset portfolio management services (portfolio managers) or even the activity of an investment fund. Such activities require obtaining a license, a certain minimum capital, and comprehensive compliance with regulations, all in order to legally take money from clients and place that money on the market.

If the National Bank of Serbia determines that you take money from clients to invest in cryptocurrencies or any other service for which you do not have a license, you can expect a fine for legal entities in the amount of 100,000 to 5,000,000 RSD, or up to 20% of total income in a business year if that amount is higher than 5,000,000 RSD, and a fine is also prescribed for a natural person. Moreover, the unauthorized provision of services for which a license is required is also prescribed by the Criminal Code as a criminal offense punishable by imprisonment for up to two years.

Therefore, if you plan to invest other people's funds in cryptocurrencies, manage cryptocurrency portfolios, and if your business is trading cryptocurrencies that are not yours, while you bought them from the client's funds, you are obliged to license as a provider of these services. Since there are not many licensed services related to cryptocurrencies in Serbia yet, licensing and providing these services can be profitable.

On the other hand, if your activity is based on analytics, technical and fundamental analysis to determine the price of a specific cryptocurrency as well as the intrinsic value of such cryptocurrency, and placing a conclusion with clients, it is considered investment advice or investment recommendation and such activity does not require licensing or potential control. The National Bank of Serbia should not impose fines in such cases.

Crypto - digital assets lawyer in Serbia.

If the National Bank of Serbia sent you this or a similar letter or if you want to obtain a license to provide services related to digital assets, write to us at pekic@attorney.rs, fill out the contact form on the website or write to us on Linkedin or Facebook messenger.