BULGARIA Law and Practice Contributed by: George Chisuse, Ivelin Vassilev, Stephany Valcheva and Daniel Kolev, VC Law
sandbox where regulatory requirements are relaxed or temporarily suspended. At EU level, the closest relevant framework is the DLT Pilot Regime. It allows certain regulated market infra- structures to test trading and settlement of tokenised financial instruments using distributed ledger technol- ogy, but its scope is narrow. It is mainly relevant for tokenised securities and market infrastructure pro- jects, not for ordinary CASPs, crypto exchanges or token issuers under MiCA. 1.1.3 Regulation of Blockchain Technology Bulgaria’s approach to blockchain and crypto-relat- ed business has become more mature over the past year. The adoption of the Bulgarian Markets in Crypto- Assets Act and the implementation of MiCA show that the authorities recognise the importance and growth of the sector. This aims to bring regulated crypto- asset activities within a clear licensing and supervisory framework and make Bulgaria an attractive jurisdic- tion for obtaining a CASP authorisation and using the EU passport. The FSC is the competent authority for CASP licens- ing and supervision in Bulgaria, while the Bulgarian National Bank remains relevant for certain payment and e-money matters. Since the regime is still new, the FSC appears to be taking a relatively engaged and constructive approach, including by publishing guidance materials, FAQs and practical information intended to help market participants understand the new requirements. While the regulator is expected to remain strict on compliance, the availability of regula- tory guidance and clarifications gives serious appli- cants a better opportunity to structure their business properly before entering the authorisation process. Blockchain technology without the use of crypto- assets is not regulated in Bulgaria by a separate blockchain-specific regime. The applicable rules depend on the use case. A blockchain solution used for supply chain traceability or internal record-keeping will usually be assessed under general commercial, data protection and consumer protection rules. If the same technology is used to provide crypto-asset services, issue tokens or operate market infrastruc- ture, MiCA, the Bulgarian Markets in Crypto-Assets
Act, AML rules and Digital Operational Resilience Act (DORA) become applicable. For regulated firms, blockchain-enabled solutions should be reviewed for technical reliability, but also for operational maturity. Even if a provider has strong technology, it can still create compliance risk if it can- not show basic governance around that technology, such as staff training or continuity planning. This is often overlooked because the discussion focuses too much on whether the tool works, and not enough on whether the provider can support a regulated financial entity that remains accountable to the regulator 1.1.4 Smart Contracts Smart contracts are capable of being enforced in Bul- garia, but they are not recognised as a separate legal category. Their enforceability depends on the ordinary rules of Bulgarian contract law. If the parties can be identified, have legal capacity, have agreed on suf- ficiently clear terms, and the object of the arrange- ment is lawful, the fact that performance is automated through code should not in itself prevent enforcement. In practice the safer structure is to combine the smart contract with a written legal agreement. The agree- ment should make clear the commercial intention behind the code and deal with the situations that the code itself cannot resolve. This is especially important where the smart contract executes automatically, but the parties later disagree on what should have hap- pened, or where the outcome is affected by a coding error, oracle failure or unexpected market event. The challenge is remedial rather than conceptual. A Bulgarian court can in principle deal with claims arising from a smart contract, including contractual claims or damages. However, if a transaction has already been executed on a public blockchain, the court may not be able to reverse the on-chain result as a technical matter. For that reason, smart contract arrangements should be designed with practical controls and clear legal fallback provisions. 1.1.5 Industry and Trade Bodies Currently there are no self-regulatory organisation with formal rule-making authority over the blockchain or crypto-asset sector. Industry representation is there-
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