The Evolution of Cryptocurrency Regulation in Serbia Prior to 2024

Prior to 2024, Serbia’s legislative environment for cryptocurrencies underwent significant developments, reflecting a shift towards legal recognition and structured regulation. The country’s approach towards digital assets evolved from a general absence of specific laws to the implementation of the comprehensive “Law on Digital Assets” (LDA).

Legalization and Regulation of Cryptocurrencies

The landmark change in Serbia’s cryptocurrency landscape occurred in 2021 with the enactment of the LDA. This legislation legalized cryptocurrency trading and mining, signaling a progressive stance towards digital assets. The LDA encouraged cryptocurrency service providers to obtain licenses and authorization from Serbian authorities to operate within the country. Although licensing was not always mandatory for advisory services related to cryptocurrency, it became a standard for operational legitimacy within the digital asset sector​

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Roles of Government Agencies

The Serbian Securities Commission (SSC) and the National Bank of Serbia (NBS) were designated as the principal regulatory bodies overseeing the cryptocurrency industry. Under their supervision, financial institutions were prohibited from investing in, providing services related to, or recognizing digital assets as a security. The LDA made exceptions for certain activities such as cryptocurrency mining, electronic money transactions, and digital transactions accepted as a form of loyalty or reward without transfer or sale possibilities​

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Classification of Digital Assets

The LDA defined digital assets as a digital record of value that can be digitally bought, sold, exchanged, or transferred and used as a medium of exchange or for investment purposes. There were two types of digital assets under the LDA: virtual currencies and digital tokens. Virtual currencies, not issued and whose value is not guaranteed by the central bank or other public authority, were categorized separately from digital tokens, which varied in form and function​

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Requirements for Cryptocurrency Companies

Serbia’s LDA imposed several significant requirements on cryptocurrency companies. These included having a physical presence in Serbia, subject to prior authorization from the National Bank of Serbia, adhering to capital and governance standards, and implementing robust IT systems to mitigate cyber risks. Cryptocurrency issuers were required to publish a detailed white paper and submit to the supervision of Serbian authorities. To become a registered digital asset provider, firms had to meet certain capital requirements and adhere to prudential and organizational standards​

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Taxation of Cryptocurrencies

In terms of taxation, Serbia made amendments to its tax law to address cryptocurrency specifically. Transferring cryptocurrency into cash was exempt from Value Added Taxes (VATs), and corporations facilitating cryptocurrency transactions were subject to a 15% capital gains tax. For individuals, capital gains taxes were applied to the profits from cryptocurrency sales, with certain exemptions for reinvested profits. Additionally, inheritance or gifts of cryptocurrency were subject to property taxes at a rate of 2.5%​

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Public Reception and Adoption

The adoption of the LDA and the progressive stance of Serbian authorities towards digital assets led to increased public interest in cryptocurrencies. By 2022, approximately 200,000 people in Serbia owned cryptocurrencies, and the country aspired to join nations with highly established markets for digital property, such as Estonia, Malta, and Cyprus. Serbia’s benevolent tax structure for digital assets and legal protection for digital property transactions positioned it as an attractive destination for cryptocurrency investors and companies​

In summary, Serbia’s approach to cryptocurrency regulation prior to 2024 was characterized by a significant legal evolution. The country transitioned from a relatively unregulated digital asset environment to a more structured and legally recognized space with the implementation of the Law on Digital Assets. This legislative framework aimed to provide legal protection, foster financial inclusion, and position Serbia as a leader in the digital asset market in Europe.