Laws and definitions
On September 1, 2020, the Law “On Financial Markets Based on Distributed Ledger Technologies” (hereinafter referred to as the Law) came into force in Albania, which regulates legal relations in the field of cryptocurrency circulation in Albania.
The Albanian legislator has determined that its purpose is to regulate the issuance of digital tokens / virtual currencies, licensing, monitoring and supervising organizations engaged in the activities of distribution, trading and storage of digital tokens / virtual currencies, as well as agents of digital tokens, providers of innovative services and automated measures collective investment.
However, it is more important to understand how the legislator defines and differentiates between the concepts of “virtual currency” and “virtual asset”. For this, one should also refer to the AML legislation.
Law “On Financial Markets Based on Distributed Ledger Technologies” defines “Virtual currency” as one of the virtual assets, which is a digital representation of value used as a medium of exchange, means of payment, unit of account or store of value.
Law “On Prevention of Money Laundering and Terrorist Financing” on the other hand, describes
“Virtual Asset” as a digital representation of value that can be digitally traded or transferred and that can be used for payment or investment purposes, including but not limited to cryptocurrencies. However, this definition does not include digital representations of fiat currencies officially issued by central banks, securities and other financial assets provided for by applicable law.
As can be seen from the comparison above, Albanian legislation defines virtual currencies as a form of virtual asset, which is hard to disagree with, since the modern development of digital technologies makes it possible to single out other types of virtual assets, in addition to cryptocurrency.
In accordance with the Law “On Financial Markets Based on Distributed Ledger Technologies”, virtual currency has several characteristics that it must meet. So, virtual currency:
- is not a digital token (as defined in the Law);
- not issued or guaranteed by a central bank or other government agency;
- not necessarily tied to an officially established currency,
- is not fiat money and therefore does not have the legal status of a currency or money, but is accepted by individuals or legal entities as a medium of exchange;
- was released on its own DLT; and
- may be transmitted, stored and sold electronically.
Regulation of tokens
In the field of cryptocurrency regulation, it would also not be superfluous to mention digital tokens, as well as their regulation. The Law “On Financial Markets Based on Distributed Ledger Technologies” defines the following categories of tokens:
- digital asset token;
- digital payment token;
- digital security token;
- digital utility token.
It should be noted that the specific characteristics of each of the tokens are not contained in the law, since they are determined on a “from particular to general” basis. Thus, according to paragraph 21 of Article 3 of the Law “On Financial Markets Based on Distributed Ledger Technologies”, it is determined that “digital asset token” means any digital token that is not included in any of the other categories. That is, the concept of “digital asset token” is the broadest of all and the most vague.
The definition of “digital payment token” is contained in paragraph 22 of Art. 3 of the Law and means a digital token that is used as a medium of exchange, means of payment, unit of account or reserve of value and is not a security or utility token.
Paragraph 23 of Article 3 of the Law defines that “digital security token” means a digital representation of value similar to other securities defined in the applicable legislation “On Capital Markets”, based on blockchain technology, confirmed by the competent national authority, when they meet the following criteria:
- ‘they are freely transferable;
- they give the owner any monetary or property rights to the project, or, if it has signs of profit participation, or a predetermined right, or give the owner decisive power in the issuer’s project.
Any digital token that combines the characteristics of a digital security token with one or more other categories of digital token is considered a digital security token within the meaning of this law.’
Guided by paragraph 25 of Article 3 of the Law, we can see that “digital service token” means that:
- provides access to an application, service or product; and
- does not offer any services, services or applications outside of the DLT Platform on which it was released.
As we can see, Albania has identified the main types of tokens that investors and other cryptocurrency users have to deal with. In addition, the Albanian legislation contains quite clear requirements for ICO and STO, but we will not touch on them in this article.
Analyzing the information provided, we can see that Albania has managed to develop a good system of legislation in the field of cryptocurrencies. However, it should also be taken into account that Albania has the status of an EU candidate, which suggests that its legislation may be subject to significant changes, since Albania has obligations to adopt and implement EU legislation in its national. Although, processes are now taking place in the world, as a result of which significant changes can occur in the field of cryptocurrencies, which can lead to unpredictable consequences.
The content of this article is intended to provide a general guide to the subject matter, not to be considered as a legal consultation.