BULGARIA Law and Practice Contributed by: George Chisuse, Ivelin Vassilev, Stephany Valcheva and Daniel Kolev, VC Law
It should also be considered whether the fund is allowed to invest in crypto-assets. This depends on the type of fund, its investment policy and the rules that apply to its manager. For example, an alterna- tive investment fund may have more flexibility than a UCITS fund, but it still needs proper rules on valuation, custody, risk management, liquidity and disclosure. Using a fund wrapper also does not automatically avoid MiCA. If the fund simply invests in crypto-assets for its own portfolio, this may be treated differently from providing crypto-asset services to clients. But if the structure involves custody, exchange, execution of orders, advice, portfolio management of crypto- assets or transfer services for third parties, MiCA will remain applicable. 2.4 Token Issuance Crypto-asset issuance is viable if structured under MiCA. The first step is to classify the token. If it is an asset-referenced token or other MiCA crypto-asset, the MiCA issuance rules will apply. If the token quali- fies as a financial instrument or another regulated product, the issuer must consider the existing finan- cial-services regime instead. In most cases, an issuer or offeror selling a crypto- asset into Bulgaria or within the EU will need to pre- pare a MiCA-compliant crypto-asset White Paper. The content depends on the type of token, but it gener- ally includes information on the issuer or offeror, the project, the rights attached to the token, the technol- ogy, risks, offer terms and sustainability-related dis- closures. Standard EU templates now apply to MiCA White Papers, which makes the process more formal and less flexible than earlier ICO-style disclosure documents. Bulgaria’s national Markets in Crypto-Assets Act does not replace MiCA, but provides the local supervisory and procedural framework. The FSC is responsible for MiCA matters in Bulgaria, with the Bulgarian Nation- al Bank relevant for e-money and payment-related issues. For ordinary utility-type tokens, the White Paper is approved in advance. For ARTs and EMTs, the regime is stricter and may require authorisation or involvement of a licensed credit institution or elec- tronic money institution.
The practical position is that a token launch from Bulgaria is possible, but issuers should carry out a classification analysis, prepare the White Paper in the required EU format, align the marketing materials with the White Paper, assess whether any CASP services are being provided around the issuance, and check whether the token has features that could bring it within securities, payment services, e-money, AML, tax or consumer protection rules. 2.5 Market Abuse Bulgaria applies the EU MiCA market abuse frame- work for crypto-assets and the regime prohibits insid- er dealing, unlawful disclosure of inside information and market manipulation in relation to crypto-assets admitted to trading, or for which admission to trad- ing has been requested. The Bulgarian Markets in Crypto-Assets Act supports the application of MiCA at national level and gives the FSC supervisory and enforcement powers. The prohibited behaviour is broadly similar to tradition- al securities market abuse. A person should not trade on non-public price-sensitive information, improperly disclose such information, or engage in conduct that gives false or misleading signals about the price, sup- ply or demand of a crypto-asset. CASPs and other persons professionally arranging or executing crypto- asset transactions are also expected to have systems for detecting and reporting suspicious activity. The main difference from traditional securities regula- tion is practical. Crypto markets are more fragmented, operate 24/7, and often involve public blockchains, decentralised infrastructure, offshore venues and pseudonymous wallets. Inside information may also look different. It can include not only issuer-related information, but also information about exchange list- ings, token burns, protocol upgrades, cybersecurity incidents, reserve issues, liquidity arrangements or large wallet movements. As a result, the crypto market abuse framework borrows heavily from the traditional securities model, but its application is more technical and often harder to monitor in practice. An example for what would be considered market abuse is the manipulating of the price source used by a smart contract or DeFi protocol. If a person artifi-
134 CHAMBERS.COM
Powered by FlippingBook