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Companies and projects have increasingly relied on the sale of digital assets, or tokens, as a means of fundraising. These tokens generally do not grant the holders an ownership interest in the issuing company or project, but may provide governance rights, access rights or other utility. This has been conducted through public sales known as initial coin offerings (ICOs), proliferation through token generation events (TGEs) or private sales, among other mechanisms. While showing characteristics of traditional methods of fundraising, there are a range of unanswered questions related to the legal classifications of such products. As ICOs and TGEs will usually be distributed online and internationally, there is usually no single legal framework applying to such transaction, and the legal framework of each market in which the tokens may be offered or sold needs to be considered.
Introduction
Attitude of the country towards ICOs/token sales
Since a lot of the ICOs have performed poorly or turned out to be fraudulent in the past, investing in them is considered to carry serious risks. There have been cases of a few ICOs succeeding in Bulgaria, but not enough to make them very attractive to investors. However, with MiCA and the establishment of a legal framework regarding crypto assets, including the national Markets in Crypto-assets Act, it is possible that ICOs will gain popularity once again.
Legal affairs
Presence of any explicit regulation on ICOs and the issuance of token/coins
Compliance with MiCA and Bulgaria’s Markets in Crypto-assets Act is necessary, as ICOs and tokens fall within the scope of the newly introduced legal framework. Other relevant Bulgarian legislation includes Tax legislation and AML legislation, consisting of the Measures on Anti-money laundering Act (MAMLA), the Regulations for the Implementation of the MAMLA and the Terrorist Financing Measures Act.
Presence of any explicit restrictions on ICOs or the issuance, distribution and/or transfer of token/coins
All crypto assets service providers must conduct KYC and comply with AML/CFT. Travel Rule applies: Information about originator and beneficiary must travel with the transaction (mirroring FATF standards). Unhosted wallets (self-custody) may be subject to reporting and due diligence requirements when interacting with CASPs.
MiCA does not directly ban peer-to-peer transfers of utility tokens or crypto-assets. However, authorized stablecoin issuers must prevent or limit usage as a means of payment if the scale of usage threatens monetary policy or financial stability (especially relevant for EMTs). Marketing and promotion of crypto-assets to the public must follow fair, clear, and not misleading standards.
Obligations and requirements to issue token/coins
Whitepaper Requirement - For public offerings of crypto-assets (excluding ARTs and EMTs), Issuers must publish a whitepaper and notify it to the competent authority (but do not need prior approval). The Whitepaper must include: