Introduction

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On 4 August 2020, Bulgaria issued an update to its Measures Against Money Laundering Act to bring virtual asset service providers (VASPs) into the scope of anti-money laundering and countering the financing of terrorism (AML/CFT) requirements. The updated Act indicated that virtual currency providers were required to register with the National Revenue Agency (NRA) and that registration requirements would be defined separately in Ordinance No. H-9 (the Ordinance) issued by Bulgaria’s Minister of Finance.

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In October 2023, in line with Financial Action Task Force (FATF) Recommendations, Bulgaria’s Measure Against Money Laundering Act was amended further, and the definition of virtual currency provider was expanded to include the transfer, storage or offer to the public of virtual assets and crypto-to-crypto exchange (in addition to service providers undertaking fiat-to-crypto and crypto-to-fiat transfers).

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After a period of public consultation that closed for responses in January 2024, Bulgaria’s Minister of Finance released an update to the Ordinance outlining registration requirements for VASPs that came into force on 22 March 2024. The updated Ordinance mandated that all VASPs registered in Bulgaria re-apply for registration, subject to enhanced requirements, prior to the 22 May 2024 deadline.

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Bulgaria’s enhanced registration requirements

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Prior to Bulgaria’s publication of the updated Ordinance, VASPs were only required to electronically submit applications containing basic information to register as virtual currency providers. A data quality assessment of these registration records conducted by VASPnet indicated that many service providers had likely input false or incomplete information. Many records in the register listed URL domains belonging to top centralised exchanges, but the legal entity had no affiliation or relation to the exchange itself, and no domain related to the legal entity could be identified.

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The amended Ordinance required VASPs to re-apply to the register and input more detailed information into the application, including the specific virtual asset activities the entity intends to carry out, the address or addresses of performance of the activity, and the name, address and proof of no prior criminal record for all natural and legal persons on the senior management team. Based on this and other data collected, the NRA is now obliged to assess whether such persons are qualified to carry out the positions in question and whether to grant a VASP admission to the register.

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Impact on the number of registered VASPs in Bulgaria

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Over 200 VASPs previously registered in Bulgaria had until 22 May to reapply to the register with consideration to the new requirements. By 22 August 2024, Bulgaria’s NRA had removed 88 VASP registrations from its register, over 40% of the total records. The majority of the ex officio deleted registrations were legal entities located in Bulgaria and Estonia. 100 of the previously registered VASPs re-applied to the regulator with the additional information requested.

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Based on the Ordinance’s updated requirements, VASP entities are now required to indicate the address(es) from which the virtual asset activities are being carried out. More than 9% of registered VASP entities indicated they operate outside of Bulgaria, in Latvia, Brazil, Germany, Chile, the United Kingdom, Estonia, the United States, Austria or Dubai. Only one of the aforementioned VASP entities also holds the appropriate license or registration to be operating in the specified country.

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Since Bulgaria’s updated Ordinance came into force in March 2024, 29 new VASP entities have registered with the NRA in compliance with the new registration process. As of 25 September 2024, there are 139 total registered VASP entities in Bulgaria.

Bulgaria after MiCA

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As one of the 30 Member States in the European Economic Area, Bulgaria is required to implement the EU’s Markets in Crypto-assets Regulation (MiCAR) before the end of 2024. On 20 August 2024, the country released its draft law implementing MiCAR provisions and the travel rule.

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VASPs on the NRA’s current register will benefit from a 12-month grandfathering period. Crypto-asset service providers (CASPs), issuers of asset-referenced tokens (ARTs) or other crypto-assets seeking a MiCAR authorisation in Bulgaria will be regulated by Bulgaria’s Financial Supervision Commission, not the NRA. The Bulgaria National Bank will be responsible for the licensing of issuers of e-money tokens.

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