Albania’s Legal and Regulatory Framework Regarding DLT-Based Financial Markets and Main Responsible Institutions – Finance and Banking
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As the use of DLT-based financial services is rapidly transforming the entire financial market for market investors and market infrastructure providers (payment systems, exchanges, trading venues, securities depositories, issuing companies), these raise specific challenges for both regulators. and market players because of the uncertainty as to how the existing regulatory framework can be applied to these innovative services.
The main institutions responsible for the application of Law n ° 66/2020 of 21.5.2020 “On financial markets based on distributed ledger technology” (the “Law”) are the Financial Supervisory Authority (“AMF” ) and National Agency for the Information Society (“AKSHI”). The law regulates the conditions of licensing, control and supervision of entities that issue, market or store virtual assets, as well as the rules of licensing and supervision of the activity of virtual asset agents. . In addition, the law defines cases of abusive practices and the corresponding penalties.
1. Distributed ledger technology, digital tokens and virtual coins
The law defines DLT as: “… a decentralized database, in which information and / or data is securely stored, consensually verified and distributed in a synchronized manner via a multiple network of nodes or other technical means, in accordance with the definition of an innovative technology agreement and where all copies of the distributed database are considered originals … “
Regardless of the literal meaning _mot a mot_ given by the law, the Albanian legislator does not aim to define the technology as such, but rather to define the decentralized databases which are activated thanks to this technology meeting certain criteria. (i.e. Blockchain, etc.), as DLT.
Despite the wide range of possibilities DLT might offer in the future, to date it is widely used for transactions, including DTs and VCs. DTs and VCs are types of virtual assets, mostly dependent on DLT, which give users the right to own them or can be used as payment instruments or utilities in the process of purchasing products or services.
The law classifies TDs and VCs as follows:
“DT” is a digital marker which:
- mainly depends on DLT; and
- is included exclusively in one of the categories of DT such as:
- TD of payments (any TD used as a medium of exchange, payment instrument, unit of calculation or store of value and which is not included in the TD for securities and the TD for services);
- TD of securities (any TD that represents the value, similar to other defined securities, according to the legislation in force for the capital markets, based on Blockchain technology, confirmed by a competent national authority, which are freely transferable and confer on the owner of the monetary rights or property rights in the project, or if it has profit-sharing characteristics, or a predetermined right, or confers decisive power on the owner in the issuer’s project);
- DT of services (any DT, which provides access to an application, service or product and does not provide any value, service or applicability outside of the DLT platform on which it is issued);
- TD of assets (any TD not included in the TD categories above).
VC is one of the virtual tools which stands for digital representation of value, which is used as a medium of exchange, payment instrument, unit of calculation or reserve value and which:
- is not a TD within the meaning of the Act;
- has not been issued or guaranteed by a public body;
- is not necessarily tied to a legally regulated currency;
- is not a currency and therefore has no legal exchange rate, but is accepted by natural or legal persons as a medium of exchange;
- is issued on a special DLT platform; and
- can be transferred, deposited and traded electronically.
2. Licenses of centralized and decentralized DLT exchange, DT agents, innovative service providers, third-party portfolio custodians and automated DT collective investment firms.
Licenses provided for by law can be further classified as (1) centralized and decentralized DLT exchange (type A, B and C), (2) DT agent license, (3) innovative service provider license , (4) the license of third-party portfolio custodians and (5) the license of DT automated collective investment firms.
The licenses will be valid for an indefinite period, except revocation by the owner or deletion by the AMF and / or AKSHI.
Any granting entity must prove, directly or through the DT agent (as the case may be), that:
- they have paid the corresponding application fee for the required license;
- they are duly registered in Albania as a joint stock company;
- they have appointed the board of directors or, where applicable, the supervisory board and certify, by self-declaration:
- their respective members have a good professional and personal reputation, have sufficient knowledge, skills and experience, have sufficient time to perform their duties and are able to fully understand the type of activities and the risks associated with them. and
- the requesting entity will allocate sufficient financial and human resources to the training of the members of the board of directors or, where applicable, of the supervisory board;
- the innovative technology agreement complies with the provisions of the law. (except for DT agents);
- appointed a person responsible for the prevention of money laundering at administrative / management levels at the head office and in each representative office, in accordance with the law on the prevention of money laundering;
- meets the criteria of being “fit and fit” to carry out relevant activities – in accordance with applicable capital markets legislation (applicable to any shareholder holding more than 10% of the shares, any member of the board of directors / of supervision and any person entitled to the functions of administration, management or control over the legal person);
- the company has adopted internal operating regulations, which contain:
- measures and policies to prevent money laundering and the financing of terrorism, in accordance with the Law on the Prevention of Money Laundering;
- effective measures and policies to identify and manage conflicts of interest;
- effective measures and policies to prevent fraud and market abuse.
The AMF and AKSHI may adopt more detailed rules, concerning general conditions, specific criteria or other additional criteria, in their area of competence.
The law also provides for the procedures for entities to follow in order to obtain a license, for which the responsible authority takes a decision within 60 calendar days from the date of filing of the application and supporting documentation by the requesting entity itself or through Agent DT. After obtaining approval, each licensee must pay the AMF and / or AKSHI the annual approval fee. The license holder’s annual fee, as well as the terms of payment, remain to be determined by sub-legislative or regulatory acts for each responsible authority.
Licenses cannot be transferred without the prior consent of the competent authority (AMF, AKSHI or both, depending on the specific license). In addition, any license holder must be entered in the relevant register of competent authorities.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.
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