As the European Union unifies its digital asset regulations under the Markets in Crypto-Assets (MiCA) framework, Bulgaria is actively aligning its national policies to meet these new standards. Set to take full effect across the EU by December 30, 2024, MiCA is reshaping how crypto businesses operate—especially in member states like Bulgaria, where a transitional regulatory environment is paving the way for comprehensive oversight. This article explores Bulgaria’s evolving cryptocurrency landscape, from licensing requirements and tax policies to innovation initiatives and key challenges.
Historical Development of Crypto Regulation in Bulgaria
Bulgaria has steadily built its crypto regulatory foundation over recent years, responding both to EU directives and domestic market needs.
- 2018: Bulgaria implemented the EU’s Fifth Anti-Money Laundering Directive (5AMLD) through the Measures Against Money Laundering Act (MAMLA), mandating that crypto exchanges and custodians register with the National Revenue Agency (NRA).
- October 6, 2023: Amendments to MAMLA expanded the definition of Virtual Asset Service Providers (VASPs) and introduced stricter suitability criteria for senior management.
- March 22, 2024: A Ministry of Finance decree came into force, requiring all VASPs listed before this date to reapply by May 22, 2024, with full compliance disclosures.
- August 20, 2024: The draft Crypto-Assets Act—Bulgaria’s transposition of MiCA—was published for public consultation.
- December 31, 2024: The government submitted the bill to parliament, proposing joint supervision by the Financial Supervision Commission (FSC) and the Bulgarian National Bank (BNB), along with a 12-month grandfathering period.
- 2025 Outlook: The final legislation is expected to pass by mid-year, enabling full MiCA licensing processes to begin.
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Regulatory Framework: Three-Tiered Oversight
Bulgaria’s current regulatory system operates on three interconnected levels:
1. MAMLA Registration
All entities involved in transferring, trading, storing, or issuing crypto assets must register with the NRA. They are required to implement customer due diligence, maintain transaction records, and report suspicious activities.
2. MiCA Alignment
The proposed Crypto-Assets Act designates the FSC as the primary regulator for crypto firms. It introduces MiCA-style license categories, including:
- Crypto asset trading
- Custody services
- Order execution
- Portfolio management
- Investment advice
- Underwriting and placement
Applicants must demonstrate:
- Minimum own funds ranging from €50,000 to €150,000 depending on service type
- Robust internal controls and risk management systems
- Incident response plans
- Segregated client wallets
3. BNB Oversight for E-Money Tokens
Stablecoins backed by fiat currencies—classified as electronic money tokens—are regulated under Title III of MiCA and Bulgaria’s Payment Services and Payment Systems Act, supervised directly by the Bulgarian National Bank.
Additionally, anti-money laundering rules impose enhanced scrutiny on crypto cash transactions exceeding 16,000 BGN (~8,000 EUR), with reporting required within 14 days.
Legal and Tax Status of Cryptocurrencies in Bulgaria
Legal Recognition
Cryptocurrencies are legally recognized as intangible digital assets—not as legal tender. While holding and trading crypto is permitted, invoices must be issued in Bulgarian lev (BGN) or other approved fiat currencies.
Taxation Policy
- Capital Gains: Both individuals and corporations are subject to a flat 10% tax rate on realized gains from crypto sales.
- Loss Offset: Losses can only offset other taxable income—not other crypto gains.
- VAT: Spot trades are VAT-exempt. However, using crypto to purchase goods or services triggers standard VAT obligations.
Mining Regulations
No specific mining license is required. However, high electricity costs and grid stability regulations limit large-scale mining operations. Future environmental disclosure rules under MiCA may further impact energy-intensive activities post-2026.
As part of the transition, only VASPs that successfully reapply and eventually obtain an FSC license will be allowed to continue operating beyond December 31, 2025. As of September 2024, just 139 entities remained registered with the NRA—a significant reduction from earlier numbers.
Innovation and Blockchain Development in Bulgaria
Despite regulatory tightening, Bulgaria remains a hub for blockchain innovation:
- Payment Platforms: Local developers are embracing mobile-first solutions like BoroPay and Phyre, which integrate instant payment links.
- Academic Research: Blockchain labs at Sofia University and Plovdiv University are piloting applications in land registry digitization and agricultural supply chain traceability.
Regulatory Sandbox Projects: Two FSC-approved sandbox initiatives are exploring:
- A BGN-backed stablecoin for municipal fee payments
- A tokenized green bond platform to promote sustainable finance
Industry events such as the Sofia Crypto Conference serve as informal accelerators for startups aiming to leverage EU passporting rights once licensed.
👉 Explore how blockchain innovation is thriving under regulated environments.
Key Challenges Facing the Bulgarian Crypto Sector
Despite progress, several hurdles remain:
Banking De-Risking
Commercial banks frequently freeze accounts linked to crypto activity due to strict AML checks. This forces many VASPs to rely on overseas Electronic Money Institutions (EMIs) for banking access.
Regulatory Uncertainty
Frequent amendments to MAMLA and shifting compliance deadlines increase legal costs—particularly burdensome for small startups navigating complex requirements.
Low Consumer Awareness
Public understanding lags behind market enthusiasm. Since 2022, the FSC has issued multiple warnings about scams and market manipulation due to rising retail participation.
Data Localization Debate
The draft law proposes onshore storage of customer data ledgers—a move that raises concerns among cloud-native firms about increased operational costs and infrastructure complexity.
Emerging Trends and Future Outlook
Several critical developments are expected in the coming years:
Finalization of the Crypto-Assets Act
Anticipated by mid-2025, the law will clarify:
- Licensing procedures and fees
- Secondary rulebooks covering ICT security
- Complaint handling mechanisms
- ESG reporting obligations
Grandfathering Period
VASPs currently registered with the NRA may continue operations until December 31, 2025—or until they receive FSC approval or rejection, whichever comes first.
Travel Rule Compliance
Under EU funds transfer regulations, transfers involving Bulgarian VASPs above €1,000 require sender and recipient information—aligning with global FATF standards.
Environmental Reporting
MiCA Article 7 will empower regulators to mandate annual energy consumption disclosures for miners and CASPs starting in 2026.
EU Passporting Rights
Once licensed by the FSC, firms can offer services across the European Economic Area without additional national authorizations—a major competitive advantage.
Frequently Asked Questions (FAQ)
Q: Is cryptocurrency legal tender in Bulgaria?
A: No. While crypto ownership is legal, it is treated as a digital asset—not currency. Payments must be made in BGN or other authorized fiat money.
Q: Do crypto exchanges need a Bulgarian license?
A: Yes. Until end-2025, NRA registration suffices. From 2026 onward, FSC MiCA authorization will be mandatory for serving Bulgarian users.
Q: What capital is required for a MiCA license?
A: The draft specifies minimum own funds between €50,000 and €150,000, depending on the scope of services offered.
Q: How are crypto profits taxed?
A: A flat 10% tax applies to realized gains. Swapping one cryptocurrency for another is considered a taxable event.
Q: Must VASPs host data in Bulgaria?
A: The draft requires “adequate” local data presence. Full onshore hosting remains under discussion.
Q: Is Bitcoin mining allowed?
A: Yes. Mining is legal under general business laws, though no specific license exists. Operators must comply with energy and environmental norms.
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Conclusion
Bulgaria is rapidly transitioning from a minimal registration regime to full MiCA compliance. Companies that secure FSC licensing—alongside strong governance, capital reserves, and consumer protection frameworks—will gain access to EU-wide markets via passporting rights. Conversely, non-compliant platforms must either exit or geoblock Bulgarian users by the end of 2025.
This compliance race marks a pivotal moment for Bulgaria’s role in Europe’s digital finance ecosystem—balancing innovation with accountability in an increasingly regulated world.
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