BULGARIA Law and Practice Contributed by: George Chisuse, Ivelin Vassilev, Stephany Valcheva and Daniel Kolev, VC Law
Setting up a DeFi structure in Bulgaria requires a careful perimeter analysis before incorporation. The founders should identify who operates the front end, who controls the smart contracts and whether any part of the model involves custody, exchange, order execution or token issuance. These details determine whether the project can be structured as a technology or development business, or if it needs to be treated as a regulated financial or crypto-asset business. 5.3 Liability Bulgaria does not yet have a developed body of case law or public enforcement practice specifically addressing liability for harm caused by DeFi protocols. There is also no separate statutory liability regime for DeFi. Accountability would be assessed under exist- ing Bulgarian civil, commercial and consumer rules. If a protocol is genuinely decentralised, with no opera- tor, promoter or controlling party, enforcement may be difficult. If, however, there is a front-end operator, packaging access to the protocol, Bulgarian authori- ties and courts could focus on that person’s actual role. Liability may arise where users are misled, risks are not properly disclosed and client assets are mishan- dled. A firm cannot avoid responsibility simply by say- ing that the underlying infrastructure is decentralised if the firm itself selects, promotes or manages the client- facing product. There have not been notable Bulgarian DeFi-specific enforcement actions to date. The more likely near-term trend is that DeFi-related issues will be addressed through MiCA perimeter analysis, market abuse rules and general civil liability, rather than through a dedi- cated DeFi enforcement framework.
properly valued, accounted for and taxed in euro or another fiat currency. The position is different for employment remuneration. Under the Bulgarian Labour Code, base employment remuneration must be paid in money, so crypto-assets should not be used as a substitute for the employee’s ordinary salary. Yet, additional benefits or incentive arrangements involving crypto may be possible in limited cases, but they require careful labour, tax and social-security analysis. A practical VAT point is that payment in crypto does not change the nature of the underlying transaction. If the underlying sale is taxable, for example a sale of goods or taxable services by a Bulgarian VAT-reg- istered business, VAT should still be charged even if the customer pays in crypto-assets. The taxable amount should be converted into euro at the relevant time. By contrast, the exchange of crypto-assets for fiat currency, or fiat-for-crypto, is generally treated as a VAT-exempt financial transaction following the CJEU’s Hedqvist case. The distinction is important: crypto used as payment for goods or services does not automatically remove VAT, while crypto exchange activity may be exempt but can affect the right to 6.2.1 Fiat Currency and Algorithmic Stablecoins Yes, a distinction is made between fiat-referenced sta- blecoins and algorithmic stablecoins, mainly through MiCA. The Bulgarian statue follows the EU framework. A token that seeks to maintain a stable value by refer- ence to one official currency will usually be analysed as an e-money token, while a token referencing a bas- ket of assets, currencies or rights may fall within the asset-referenced token regime. These categories are subject to specific issuer, reserve, governance, dis- closure and supervisory requirements. deduct input VAT. 6.2 Stablecoins Algorithmic stablecoins are more difficult because they are not treated as fiat currency and do not auto- matically qualify as e-money tokens solely because they aim to track the value of a currency. If the stability mechanism depends on an algorithm or another cryp- to-asset, the classification will depend on the struc- ture of the token and the rights granted to holders.
6. Payments and Stablecoins 6.1 Payments
Payments in crypto-assets are not prohibited in Bul- garia, but crypto-assets are not considered a legal tender. They may be used as a means of payment where the parties agree to this, mainly in commercial or civil-law relationships. The transaction must still be
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