The New Crypto-Legal Playbook | ETHSofia 2025

[Music] Thank you for being here. I know it's very early but it's also very late in a sense for this discussion because it's going to be predominantly about Mika at least that's what's uh been announced but with Mika we are already a bit late because it's already applicable uh and first of all I also want to thank uh this wonderful opening speech it's really it never happens that such a high level um person from the local supervisor opens a crypto conference. So this is absolutely a first extremely important and it's not just that we will also have a workshop with participants from the uh national competent authority later on. So please join that and perhaps this panel will serve as an inspiration for even more questions during during this discussion. I hope.

Um so let's dig straight in. Um so it was announced that we're going to discuss Mika. So I would suggest we start with Mika and see where this conversation takes us. So with this wonderful wonderful set of panelists. I think it would be great to start with maybe uh the Austrian experience with Mika with Mika licensing and then see what other experiences we have here.

Share it among the panelists. So Gork if you if you can share a bit more about what what you do and what your experience with Mika has been so far.

Gladly um I'm the CEO of Eladvent. We are in um still the licensing stage for becoming a um crypto asset service provider uh for crypto advisory. Now a quick rundown about Austria and Nika. It all pretty much started with bit. Uh of course Austria in Austria Bitb is the elephant in the room.

Bitbund is the first unicorn out of Austria. Austria has um a very I would say touchy history with regarding to fintech and crypto. Why remember back in 2010 2012 and N26 was founded N26 was founded in Berlin in Germany. Austrian founders and the Austrian founders back then said well forget Austria, forget Rihanna, forget Central Europe. We go to Germany, we go to Berlin, we we uh set up N26 in Berlin.

Now what happened with Bitbounder is actually we have at least one German founder who moved to Austria to found uh Bitbunder as a crypto exchange in Austria and with that along came with it uh unicorn status of Bitbunder and then the financial regulator had a lot to learn with Bitbunder. Bitbind is now the one of the most I would say regulated crypto platforms out out there worldwide. They have a e-money license. They have a crypto license. They have an BSD, a payment service provider license.

So effectively you can do fiat transactions with Bitbunder. And what happened was that a lot of people at the financial regulator got trained by Bit Bunder. Effectively they moved to the private sector. They were at Bit Bund. They were at Kraken.

And now I'm moving back. Uh now we're moving back to to Austria and we're stuffing the uh crypto team at the Austrian financial regulator with the effect that two things are happening. Now our own licensing process takes now a very long time since uh 7 months now because the other side I mean they are they could be you know um you know being the audience right they are very deep into crypto by themselves they understand it in and out and they process licensing processes in and out so it's a very very thorough process and secondly biter and this this perceived and wellreceived adoption of crypto in Austria led to the fact that a lot of international crypto platforms are now looking at Austria as a as a European crypto hub. Most and predominantly Bipit is now also the second cusp in Austria and now others are following. One out is I can name because it's out in the media already.

KCoin is also now setting up in in Austria. So that's a little bit happening. Um just to give you a little bit of a rundown on from my perspective what is the most important point and that's why I want to highlight that once again that the chair of the Bulgarian NCA um is having the opening speech here and the workshop later today that it's all about education and bridging adoption between let's put it that way the technical frontiers and everyday usability and everyday usability is in legal language transferred to law and regulation or translated to law and regulation and that is happening and that we are lingual about it is a very good step and I think that's the most important point. Thank you so much for this and yeah I will continue by picking something that you just said which is basically the Austrian experience that is very much based on what has been what were the circumstances what what and what companies you had but that differs as we very well know across the EU across the different member states. So perhaps now we can share more about specific examples that are also based on deciding which NCA to approach currently with Mika and I know that uh Vadimir has some experience with that particularly with drafting white papers.

So I know that you chose the Dutch correct me if I'm wrong

yeah they don't charge any fees. So that was the Okay, if we can if we can create like a top three reasons why you choose an NCA currently, what would that be? So don't charge fees.

Uh they don't read the white papers and just publish them.

Okay.

And they speak English.

Okay. So any any anything you would want to add when choosing?

I mean speaking English is amazing. Of course I add that. Um,

second is you mean I mean I mean being web free native, right? I mean understanding what you actually I mean don't know whether they read it or not but at least you know pretend to understand what what you're handing in was the second point. And the third point is you know being responsive after all right I mean um look at the Germans don't shouting out anybody but if you file something or send an email to Buffin you'll get an answer by 2028 I guess. Um, I think that's um mo one of the most uh important ones.

Ellie, anything you would want to like picking an NCA doesn't have to be necessarily for publishing a white paper, but also for like CASP licensing. What would be the top three criteria you would be looking at?

I think I think I I mean I think I agree with um probably both of you guys speaking English is quite important. Um, I think probably my second would be a degree of pragmatism from a regulator. So, some regulators are more pragmatic than others. Um, and some have been in the crypto game longer than others. So, I'm just going to pick Malta as an example, right?

Malta had a little bit of bad press recently because apparently they're being a little bit too too nice um to crypto firms.

We can have nice things. But you know, you know, when you look at the multis regulator, they've actually been in crypto for a long time. They had a regime for a while. They really, you know, they they, you know, they understand it. They have people inside who really know what they're doing.

So I think that that makes the whole process of actually dealing with them much easier, much cleaner, much simpler, and that's why a lot of firms are choosing them. I don't think that their stands standards are necessarily any lower. Um, and I think that the sort of second point that Gorg made, which I think is really important if you're running any kind of licensing process or you're a business wanting to do something in a regulated space, is communication and time frames. I mean, like, how are you supposed to stand up a business if you if you don't know when the regulator is going to ever respond to you or if they're going to take 18 months to approve your license? So I'm going to make one more comment on that because you know I spent a long time living in London in the UK and I've also the last three years been working with a lot of UK firms.

Um so much as I love the FCA in the UK I think one area where they've been really called out by the industry there in direct contrast to Mika is the licensing process. So there isn't a proper licensing process yet for crypto firms, but you can get this um kind of anti-moneyaundering registration, right? And in order to get one of these registration, it takes I don't know about 18 to 24 months. Um and something like I can't remember the exact percentage, but like 83 to 85% of applications are declined. So, this has been a massive sticking point in the UK because it's just, you know, obviously the industry there has felt like the FCA just doesn't just don't really want to license anyone.

Um, that's going to change, but that's that's the kind of regulatory approach you don't want, right? Spend a lot of money, take a lot of time, and in the end you're like, oh, you've got nothing. Um, so yeah, I think there's a whole spectrum that you'll see even in the EU. But I think also looking at other jurisdictions, you also really see quite a spectrum of approaches to this kind of thing.

True. Yes. Uh so something that I'm asking this question very with a very specific idea in mind because it's currently one of the hottest questions in Europe. I think most crypto asset service provider wannabes have already answered this for themselves but some are still choosing picking and choosing a jurisdiction where to license themselves. So um and particularly right now it's very important because um we also obviously need to consider how to get the license, how to passport it in the more efficient way.

But then again it's also going to be the main supervisor. So in a sense um that's something that needs to be acknowledged particularly because now that the licensing process is ongoing it's going to finish at least like the the most intense part will finish soon and then there's going to be the opportunity for NCAs to go more into the details such as for example what is sufficiently decentralized what is what is defy and what is outside of mika so this is also something that I want to discuss with you and I'll start with what what deir

yeah just wanted to clarify that this was a joke. We like the Dutch authority and uh we chose them because of their experience and they asked questions they read the white paper. Uh but yeah going back to uh sufficiently decentralized and I guess this is a question what is DeFi and how is DeFi regulated under the EU regulatory framework and um I would start by saying first I think and this my firm believe that like staking and liquid staking should be outside of this because they are not finance.

You are paying for an IT infrastructure service. This is not finance. So you cannot call it decentralized finance. Then we go into lending. Lending is currently outside the scope of Mika.

So if the service is not regulated I guess if the way you provide it the shape or form whether it's sufficiently decentralized it doesn't matter because the service itself is not regulated then we go to token swaps like unis swap for example um not pointing fingers uh and it's it becomes tricky it becomes more tricky because um then we get into uh further discussions uh how is this provided what is the backbone what is infrastructure what is the client facing thing and we might end up with the most earthbound thing which is the interface whether the interface is charging fees where it's a passive or an active interface that just shows information or actually helps the transaction happen in the real world get broadcasted get picked by RPC nodes or whatn not like uh whether you're charging fees how are you charging those fees uh with custody without custody there are many nuances but there is it can get murky there like you you might need a license if you're doing token swaps and then I guess we go into the votes or uh yield farming. Um those are I would say it's difficult to fit those into uh the framework of Mika even like portfolio management maybe custody because uh uh I mean they are managed on a consolidated basis. they might be another form of security or like collective investment schemes and alternative funds whatever but they are definitely not fitting neatly into micica unless with the custody

so uh I guess it's it's interesting I don't think we have a clear answer right now uh it's still a developing field uh the thing is even if you provide a service that is like regulated like token swaps which is the most clear example if you provide it in a sufficiently decentralized manner without an intermediary if that is even possible So u I guess then you are uh outside the scope of Mika and I guess it is possible like if you think an example we are exchanging tokens me and you if we do an atomic swap uh there is no no person in the middle so whoever wrote the software for or prepared our transactions whatever maybe even charging some fees

I would say they just gave us some software which facilitated our trading they were not providing a regulated service but uh uh anything after that uh uh like slippage, me protections, you start to adding uh it becomes a little less clear and also there is the question like is it a software license here is software as a service because software as a service is more likely to get called uh this is my personal view as a regulated uh uh service. It's an evolving uh uh thing. uh I think we are yet to see some more clear guidance especially yeah what is a sufficiently decentralized and people are still uh trying to figure out how to decentralized interfaces which is really interesting with IPFS or just running them in decentralized manner we'll see

yes thank you for this uh great overview uh it's particularly timely because that's going to as I mentioned that's going to be the next big thing in Europe in the EU um And there are already some national competent authorities uh publishing papers. So we have at least some sort of an understanding of what the train of thought is currently particularly uh as you mentioned front ends interfaces um as being the kind of the obvious um way to determine whether or not it's centralized or decentralized.

Well, imagine doing a banking service which is heavily regulated. Like if you run an interface, you're probably also a bank. like it doesn't matter that

yes uh but are there any other indications Gork I'm looking at you because I know that you're also working quite a lot on taxation and when it comes to taxation there might already be some other interpretations because

yes I mean speaking regarding me speaking regarding financial regulation I mean the obvious is that we as lawyers and regulators and builders can trust on financial regulation in the sense that we have a legal text. So form is over substance. Let's put it that way. There is a formal indication on whether you are applicable to financial regulation. Yes and no.

Now my interpretation is now that the process involves that taxes is driving the financial u the financial regulation again there in Europe and globally.

There is one I would say I was example on how that was kicking off. I'm not telling any names but it was a chief legal from a major foundation um talking about DeFi after Mika was incepted uh presenting their tax stack and um their setup to all European regulators. probably maybe the the the honorable um chair of our um NCA policy knows which which education it was and it was very well understood along the lines what you were just saying if it is defi true defi along uh applicable technology stack that fundamentally differs from um financial regulation from maker there is the lending exception there's fundamental infrastructure services like staking and all I would say derivatives to staking. That is clear. And then the last question was I think from the Italian regulator and now were you texted and the answer of that very educated and experienced CLO was nowhere and it was obvious to everybody in the room that it probably cannot be because this co is on someone's payroll right so here we are um and this is the let's put it that way true and fair view we have in global taxation as a paradigm example so that the question now is and I think that is not driving the agender a little bit and that's going forward is who has or which intermediary has a significant control and influence over transactions um smart contract transactions in DeFi whether they are true defy or not true I'm not I don't want to shout out anybody here but look at hyperlid I mean hyperlquid I think is the story a little bit of the last I would say couple of months but hyperlquid operates a centralized order book

so is the true defi I live the answer to all of you and here we are right. So do we have to regulate hyperlquid again? Maybe we take this to the workshop later on. And I think that is now a little bit driving. I mean and now in taxes I mean taxes are subject to n to national jurisdictions anyway.

But in international crypto tax reporting, the OECD is now clearly stating if there is a party who has a significant control over the transfer of funds over transaction processing, that entity is required to report all transactions to the the national tax authority. So that is pretty straightforward. So I'd be interested to see on who's the reporting party within the hyperlquid ecosystem. I think I have an idea on who's that going to be but um that's again maybe subject to the to the to the workshop later on but I think that is driving that is driving the agender and it's getting even more interesting on where we are with regarding to infrastructure services regarding staking right and then with regard to I would say loopholes I mean in the grand scheme of things I think it is not completely understandable why lending like lending against the counterparty and not um decentralized lending is not covered by uh by Miker but I can leave that open for discussion. It's just my personal view.

I think that is the big picture here and that's where we are going down the road in the next I would say two or three years.

Thank you for this. Any any uh hot opinions about taxation defy that you would want to add? probably not on taxation which I think Got is Got's kind of baby and I think it's really interesting what you said about the tax analysis actually in some ways driving you know driving the actual regulatory analysis. I think that's such a precient point and in fact it probably will end up being the basis for how this is regulated and a lot of jurisdictions in the world if not everywhere. I think I just wanted to add a little bit on um kind of what's happening in the UK and the US for the audience because I think it'll be quite interesting for them because obviously the EU was first in crypto with Mika like the EU is you know is always a front runner in regulation.

It does a good job in

in stiff link innovation.

Yeah. But you know but you know they're regulated first and obviously DeFi is outside the scope of it if it's truly decentralized. So, you know, I think one quite interesting point that I just want to make is that because the EU was the first mover, other jurisdictions have obviously been sitting there and watching what's happening um and coming up with their own kind of regulatory frameworks with the benefit of seeing what's happened since came into force. And I think DeFi is a really interesting space for that because neither the UK nor the US have properly regulated DeFi yet. I mean leaving aside in the US the Securities and Exchange Commission being as aggressive as it has been with enforcement now it's obviously kind of calmed down um you know the the DeFi regimes in the EU and the UK are being written right now right in the UK the FCA issued a discussion paper it's been consulting with people behind the scenes and also done some public consultations on you know with you know with you know with the industry with actually D5 projects um in the US as we know there's a huge amount of work going on on the market structure um regime.

So what a disclosure is going to look like, what a crypto issuance is going to look like, how are intermediary is going to be regulated and DeFi isn't directly included in that. But the one a couple of interesting things that have happened there in the last few months is first Trump's presidential working group actually issued its report on crypto regulation in July. It is really worth a read just the summary of it if nothing else for people who are interested because it really because what that report says will end up somehow being implemented in the US I think and they do talk about DeFi and they go quite a I think they go further but you can tell me if you disagree than the actual draft legislation in front of Senate does in that they say you know we want DeFi to actually be a part of the financial system we want to ensure people can have self-custodial wallets we we want to make this part of finance somehow without too much detail on how that will happen. Right? So that's being left to the SEC and the CFTC, but there's a lot of consultation and a lot of work being done behind the scenes off the back of that.

Right? Um so that's actually that's actually quite I think quite a big thing. And the other thing that I think is worth watching for its impact on DeFi is a few days ago you would have seen the US and the UK um announced a joint um task force on capital markets. No one knows the detail of this but what I think will happen is that they will try and harmonize these regimes and sort of create create a bridge between two of the fi biggest financial services markets in the world and defy will definitely have a role to play in this. So I don't know if what your thoughts are on that.

Yeah know I agree and uh I think in the US there was like something which said that defy interfaces had to rat on their clients and this was repealed in the US as far as I know. This was a a gift that kept giving from uh the previous administration and uh thank god it's it's gone now and I know there is a lot of policy work going on in the US from some of the biggest VCs like A6Z they are pushing for a defy safe harbor actually and they want to make sure that u first developers are protected they

they are not scared after what happened with tornado cash they want to make sure that if you're a developer you're just writing code you're not going to go in Uh and the other one is they want to make sure that if it's just an interface or just something helping uh I mean the transactions happen potentially you're you're not on the hook. Uh there are different ways to regulate uh uh crypto but I guess uh regulating or targeting interfaces is just the lowhanging fruit. It's it's just the easiest way but it doesn't mean it's it's the best way. Like there are other ways to to target the app level and and whatnot.

Maybe you can share some of those other ways. Uh I don't think we have enough time.

Okay.

Control keys. So control keys. Who have the control keys?

Yeah. Most of the smart contracts I guess nowadays they're not oified. Like if you think about it probably some developers have way more control and influence than they would like to admit. The other one is if you are saying you're sufficiently decentralized. Uh I mean if I was to think about it in an anecdotal way like if the website goes down who do I call?

So there is always someone that picks up the phone and makes the thing go back online.

Uh by the way, you also have the chance to ask questions to this wonderful panel by scanning the code. Yeah, this is how we're doing this this year. And then I'm going to read them out, filter them of course. So don't get too crazy uh and read them out out at the end. Um but basically what we're also touching upon upon here is something quite interesting which is interpretation of defi interpretation in general interpretation of services of control of governance all those things.

So would you say and this is a bit of a I maybe a spicy question currently but would a a centralized supervision solve that? What do you think? because and there is a reason why I'm asking and I'm looking at you Gork because you're um at least uh from the same country I wouldn't say representative but uh the same country of one of the three authors of a recent paper uh by three supervisors calling for a centralized control of significant CASPs Austria France and Italy so this is currently a discussion but what's your take would that solve it

yeah I mean if we talk platform platform business

probably yes and would be maybe also more efficient right we are talking the 10 biggest uh platforms in the world um that probably is in terms of resources a reasonable approach and by the way um I can just speak for the Austrians now it is the opinion of the Austrian regulator not the opinion of the Austrian government and it's the Austrian government who represents Austria in the European Council not the Austrian regulator so that is also an important footnote here. So this is really a regulators game here. What's interesting just as a I mean as a side note there is just because we had the DRAI report just recently everything which is coming from Europe tends to be a lot in terms of paperwork right and I think what all three um regulators are acknowledging here is that at some point there needs to be a stop right we a back stop a back stop in terms of we have level one we have the regulation text and there are tons of papers on level two on RGS's on any form of guidances in in the in the Mika rule book which just makes ma enormous animal to read and to digest even for the regulator

and acknowledging that and putting that to a to a to a central level is just reasonable and makes it efficient for all parties involved. So that part I think we can um agree on everything with regard to DeFi we just need to be aware of where is the pretty straightforward determination what is true defi and what is defi in name only and everything what is out of defi is basically not regulated or not to be regulated

we never ever going to regulate bitcoin right I mean everybody in here will subscribe that immediately so and everything what is happening with bitcoin and in bitcoin is not to be regulated because bitcoin is a fundamental question of freedom uh in a in a globalized world and I think that's the question here but As soon as we are starting towards providing financial integrated services aka um financial services which are not decentralized in the sense as we adhere to the bitcoin principles peerto-peer we are not talking technology anymore we are talking an intermediate business then that should be regulated and I think that is the question and I think the US is now taking here sensible step along that route and it's very good that tornado cash is now pushing it forward so so nobody should send Satoshi Nakamoto for putting Bitcoin and the Bitcoin code out there to jail. But of course, we need to understand everybody who is building businesses on Bitcoin and builds effectively a web two or a platform related business model has to be regulated after all. I think that is the that the clear outline here.

I see you have the urge to add something or was

Yeah, I mean I have a stronger view.

Go on. We love stronger views.

I mean we were not able to scare business away with Mika. So now let's create a new agency in Paris on Frankfurt. Hire some more people to basically do some more supervision. I mean this is going to invite business in Europe and we're going to flourish. If you look at the trading volumes on exchanges in Europe, uh it's extremely low compared to other jurisdictions.

Like imagine people still wanted to do business in the US with the hostile Gary Gensler there and not come to Europe. Like how bad it can be. It's uh and you want to create central supervision like and also have you tried to create a startup in in Germany to do your uh seed rounds you would need to go to a notary and sp spend hundreds of uh euro on signatures and it would take you like 18 months or something like this is not how you create startup culture this is not how you grow businesses here this is not how you I mean and then they adopted the AI act and whatn not like it's it feels like we're shooting ourselves in the foot constantly with a machine Please to add Yeah. Uh so the Frankfurt agency is uh uh focused on Yeah. anti-moneyaundering.

There isn't going to be a new uh agency focused on CASPs. Don't worry. It's it already exists. It's in Paris. Um but yeah, so sorry.

Go on.

No, I was going to say I I broadly agree with you, Vlad and but but I'm just going to say, you know, Europe Europe does like paperwork. It's a different legal system. If you I come from a common law I mean I'm Bulgarian but actually studied common law, right? So the common law system is much less paperwork heavy just even the laws themselves and the way that it functions and it is much easier to set up a company in the UK or the US you just go you can do it in a day right so I think I think that's that's completely fair but one I mean maybe one reason why they wanted to create this this this agency is when you look across Europe people who are not European they come to Europe and they will come and get a license and go to a regulator and they think everywhere you know every regulator in every country is the name um and it doesn't matter which one they go to and some crypto projects as we discussed yesterday have been stung exactly by this right by going to the wrong regulator. So it shows that there is actually inconsistency in the approach across Europe between different regulators and actually if you're trying to run a European business across lots of jurisdictions that's actually quite costly right we're not as we're not as harmonized as we really want to be and I'm not sure how efficient that is for for the you know for capital markets in Europe for the economy in Europe generally so I think that's my sort of

yeah but on the other hand like you you really need foreign shopping in the European Union and I'll tell you why this is a good thing this competition basically.

It's uh Yeah, they're going in motor. All of them. Yeah. Okay. Well, the regulator is friendly.

They have experience by the way. It's not just that they are very friendly and there are good reasons for that. I mean, if they don't go to MOA, they would go to Panama and the Cayman Islands. So, we're competing with Cayman Islands and BVI and Panama with zero tax rates there and with very light uh regulation compared to uh Micah. How are we going to attract business?

I mean, of course, if someone wants to service the EU market, they're going to go uh the the easiest way. Like, this is how companies do business. Like, it's almost mandatory if I'm a director of a CASP, it's almost mandatory because I have fiduciary duties to choose the most lenient regulator.

True.

Great. Uh, I'll now pick some questions so they don't get unanswered. Um, I'll go with the top voted one. Yes, you can also vote on questions. So, you can Yes.

Arbitress. Yes. Um, one of the mikestos states that the issuer is the entity that has control over the creation of the crypto assets. What is your interpretation on control?

Uh, me? Yeah, sure. I have an opinion on that one.

Yes, of course you do. Go on.

Opinion on everything.

Share your opinion.

Okay. Yeah. Actually, I wouldn't care. It's the short answer. I mean, unless you are issuing like a stable coin.

Uh, the issuer is not regulated under Mika. Typically, it's not. I mean you have to pinpoint who is the issuer in the in the Mika white paper and if you get it wrong there is uh uh liability if you lie and also that's by the way something interesting when we're choosing about the white paper if you publish your white paper in Ireland they make you sign an affidavit that everything you say is true and there is potential criminal liability so that's why no one is giving the white papers in Ireland uh yeah anyway uh it's uh yes sorry can you repeat the question

it was about control but you can

sidetracked Yeah. Yeah.

Yeah. You can you can spin off.

Yeah. Control. It's a very difficult question. Uh who pressed the key and it has different implications for the European Union. No one cares.

For Cayman Caspaw, they care because whoever is the isser and is selling newly issued tokens in an ICO for example has to get a license from SEMA in the Cayman Islands. And it's also interesting if you look at the US perspective because who is the issuer of securities is a separate topic. So if you try to uh uh check who is the issuer, you can get different answers in different uh jurisdictions. Uh in Europe, it's I guess the person who pressed the mint button, literally the the development company that did this and most of the projects I've worked with or the bigger ones, they have a typical setup. This is a Cayman Foundation ownerless and they have a BVI subsidiary and this is how they issue the tokens.

And typically it's the BVI subsidiary that uh issues uh uh those tokens and this has to be papered properly because if you just issue the tokens but it was done on the instruction of someone else I would say the control shifts to the person who told you press the mint button.

It's it depends.

Of course it depends. It's a legal panel after all. If you get anything out of it it's that it depends. But

and my free advice is get paid consultation. two things. Anything else that you would want to add about control and about issuance? No pressure.

No, the only thing I'll add is that you know Vlad is right like issuer itself under Mika doesn't really have any obligations. The only thing you've really got obligations and respect of is the white paper, right? Don't lie in the white paper. That's probably my my one thing like make sure that what you say in the white paper is correct. There aren't any obvious lies.

And by the way, you also have an obligation to update it

um if things change. And no one really knows actually what that means in practice because there's no real guidance on that. So seek advice on that too because yeah

there is an interesting aspect to that like yeah don't lie in the white paper because actually it's not just the entity that prepared the white paper that is on the hook. It's also the management body and the management body has an extremely broad definition which covers shadow directors. So if you have like a founder who is way too involved in the independent foundation they can be liable for the white paper. It's an interesting aspect no one talks about but yeah TLDDR don't lie in the white paper.

Great great advice. Um so let me read another one. So we have this very we are going back to the supervision. I love it. Why do CASPs are why are CASP discussing uh jurisdictions such as Lithuania and Austria but not Bulgaria?

What are the main problems with the licensing procedure here? So uh perhaps we can also talk about more general problems. I will add uh and again come to the workshop which is right after this panel. You can ask all your questions to the lovely uh representatives from our national competent authority. But there is something else that is also quite relevant and uh it is yes we have Mika we have the regulation but what then we have to see an application this law this regulation interpreted into national law.

So unfortunately in Bulgaria this took longer than anticipated. Um which is part of the reason why things are moving also slower. Uh which for a business dynamic such as crypto is usually a bad thing. So this is my part of the answer. I don't know if you want to share.

Oh I see you want to share. Go on.

We also need a website in English language explaining the procedure very clearly and potentially a guidance in English language. Uh I was working for electronic money institutions and payment service providers back then and we after Brexit we went and tried to get a license in Belgium. Big mistake but uh uh why we did that is because there was guidance in English. Literally they had a a fairly well-drafted guidance in English language. So this is what is attracting business from abroad.

We really need a web page and guidance in English. Bulgaria is great jurisdiction because of the 10% flat tax rate. Like that's unbeatable anywhere. So if the tax is not enough, I don't know what it is. Uh definitely the other issue I guess is right now, I don't know if you have heard this, but a lot of lawyers are crying out.

If you try to open a create a new company in Bulgaria for a foreigner, it's a nightmare. The banks don't want to do that. Some of the banks are asking the foreigner to come in with their passport in in a face-to-face meeting basically to show their passport to open an account. And to open a company in Bulgaria, you need a bank account. Even if it is to put 1uro inside, you need to come here, show your your passport, and then give them the one or whatever, it's it's a nightmare.

Like, it's very difficult. And um that's why lawyers have to be creative like create a company and sell it, but then maybe they need a license under the regulations and stuff. So, it's there are a lot of things. And also in Bulgaria, it's the same like if you start the seed round, you're probably going to need a notary. Imagine going with a notary reading like all the spas and and and stuff.

And some of the notaries are going to say, "Oh, I'm not working with English language or whatever." We need a certified translator. Like there are a lot of bureaucratic things that if we sort out, I think the the 10% tax rate can make all the difference. And also there is an abundance of talent here.

Yeah. Uh absolutely agree. what Lithuania and Austria did in particular, they published a road map back last year already where they invited um applicants or interested parties to do actually um road show basically with the regulator and that helped a lot that provided a lot of legal certainty and if you seek something in in building especially uh in that in that in that sector it is certainty provided by the regulator you you carve and that's actually what Lithuania and Austria provided. Um, and that's basically the reason for it. If you look for example to Portugal, right, Portugal is more or less also perceived as a little bit of a web free hub.

There we have the same situation, right? They just published the Mika implementation law just just this summer. And um yeah, so the Portugal web 3 hub, let's call it that way, is is suffering from that as well. Um, and that's um that lack of legal certainty. Portugal is is hampering the Portuguese web free ecosystem clearly.

Yeah, I don't have much to add. I I can I agree with all these points also because you know language is really a barrier here. If you're not Bulgarian, it's a different alphabet, guys. Like, you know, like I brought my boyfriend here and he was like lost. Like really like he had to sign something.

He was completely lost and I had to take him to a notary office and I think his eyes were like popping out of his head because he'd never seen anything like this before. I mean, and they were very efficient and nice, but it's, you know, it's everything here actually works well. That's the funny thing, like people are efficient. Things actually work well here. But I think if you're coming from abroad, not speaking Bulgarian and not having been exposed to this, it's actually a bit scary,

you know, and if you if you take out the scare factor and you you have a clear road map, it'll do wonders. I think I I have people asking me about Bulgaria and Mika licenses all the time at the moment, actually, especially the last few months. like a lot of people.

So there is a lot of interest.

Well, if you think about it, we are winning if we are getting casps here because they are going to be paying tax here. Like why why wouldn't you want to want to have cusps? So something something that at least I keep just thinking about it over and over again is yes we have this obviously I would love to create like that Bulgaria would turn into a crypto hub that a lot of CASPs would come and register but I think yes we as a country have a lot of work to do and thank you for this basically sharing all all of this because this can already be uh created as a as a list of to-do list of sorts Uh but just yes something that I had to mention at first but this does not constitute legal or financial advice. Please don't ever send this recording to uh a governmental institution saying this very bright group of lawyers said that this is not official but we really love this discussion and having more questions from you.

Not not your lawyer opinions are mine. I don't represent my clients.

There you go. We need to maybe have it printed out on t-shirts.

Um, oh, we have a compliance question. I'm very tempted to go into the the compliance road here because we have been kind of not quite mixing but also mentioning some AML in particular compliance by you mentioning Frankfurt, this new agency that would that is now being created that would have a quite a strong focus on crypto. And we also had another question on uh unhosted wallets. So I would kind of merge them and ask okay what is happening with quote unquote unhosted wallets. We have Mika that is basically we have okay we have defy outside we have the whole um topic about like there is no control so there is not an entity that is in control and responsible but then we have the transfer of funds regulation then we have all these other frameworks that are overlapping and what what happens in practice gork I'm looking at you of course because you're also very practically involved in this topic

yeah I I would say there are three dimensions to self-hosted wallets first of all everything which is self-hosted is not regulated, right? So my self-hosted wallets here are of nobody's concern. So that's

basically it. Second question is on whether those service providers who provide self-hosted wallets aka wallet software providers are to be regulated um is the second dimension right uh I would say at the moment my personal opinion no because they simply provide software

so that is that is the most important point other than they have control keys other than they have the functionality to transfer funds and so on and so forth but the mere um let's put it that way um deployment of a software which provides the user to host um wallets um self-hosted basically on a self-hosted basis is is not regulated. So I think that is the second dimension and the third dimension is coming now from reporting requirements be it taxation or be it be it AML um that with the transfer funds regulations with the travel rule basically also transactions with regard to self-hosted wallets fall under the realm of reporting and compliance obligations be it under tax reporting or be it under AML checks. Um, I give one very basic advice to everybody who wants to have a safe, let's put it that way, um, on and offramp rail to centralized exchanges. Do your centralized exchange and yourself a favor by dedicating one self-hosted wallet you have on your mobile or wherever uh, which you permanently use with regard to an on-ramp or an off-ramp visa via centralized exchange. makes your life easier.

It makes the life of the centralized exchange way easier because the self-hosted wallet uh check and transfer funds regulations obligations are way easier in order to comply with. So maybe these are the broad three dimensions along these questions but the big question of course is as long as it's self-hosted we should fight for this. This is a fundamental right of privacy we haded yesterday that everything was happening self-hosted like cash in your pocket isn't nobody else's concern. I think that's where we have to draw a line and be very clear about it. Everything else is up to debate and I think we touched it already but I would cover it up with the three dimensions.

A wild duck 8 question just appeared so I'm going to throw it at you at the at that exact moment.

How would Duck 8 actually change? Would it change anything?

I mean I have a strong view on that as well. Right. Date and and the crypto asset reporting framework effectively provides a common reporting standard for crypto. What does that mean? That basically mean that there is a list of integrations being added to your um to your tax authority, right?

because every reporting crypto asset u um uh crypto asset service provider has to report the balances of every user um as of end of year date

and um that effectively and that's that's a one strong message I want to to bring forward here is leads up until 2030 where all jurisdictions worldwide and I think it's only North Korea and Iran who won't be participating all the others will be participating so also BVI came and all the other all the other jurisdictions well known for that. So that effectively leads to the point that we're going to have a crypto integration register, right?

Be aware of that. That's very fundamental. Um and that is a very strong message here that effectively um going to uh be coming from 2030 onwards.

Very important. Yes. Keep keep those things in mind. It's not just Mika. Um, so we have to wrap this up and usually last year I was ending all the panels with what are you most optimistic about but this is a new year so now I will end it with what keeps you up at night what you worry about the most currently is it decade in your case I'll start with you

no it is it is the fight for privacy I would say we have the fight for privacy in a lot of domains not only taxation reporting we have it alongside DeFi true DeFi services We have it with regards to the act. We have it regard to uh deployment of of of of software smart contracts. We have it everywhere. So the fundamental right to privacy on chain and in digital realm I think is the most important fight of our age.

Privacy yes is something that we at the UCI also work quite closely on. So and Gork has been a great um supporter of this. So I definitely add privacy on top of my list. But let's go on with more strong opinions here. I can sense them.

Boy,

uh, the legal backlog keeps me up at night [Laughter]

and something more I don't know macro oriented.

Yeah, more macro is the ever evolving legislation and that it is extremely difficult to catch up to the point that I think at some point it's almost going to be impossible. Like it's uh it's so hard already. it doesn't need to get harder like we we need to find a way to make it easier maybe harmonize between different jurisdictions or something but otherwise it becomes almost unmanageable at some point like and so many um legal frameworks uh uh I mean we need welldevised laws that solve problems not create uh administrative burden or uh 70 pages white papers which uh you just do to basically cover your own risks so that you don't get sued like if you look at the white papers they have everyone copy paste so all all the same risks and they exclude liability for that how is that helping the consumer and is the consumer reading that like we really need something that is well thought through and is working uh not creating more work and I guess that's that's what keeps me up at uh night trying to stay on top of things which is very difficult and uh making sure my my clients make money

the story of the crypto lawyer's life just there's too much going on. Ellie, anything what what apart from your boyfriend getting lost in Bulgaria?

Um I I would agree with both of you guys. I mean big picture I think privacy is really important and it is it is going to be data actually you know your your data is going to be the the battle of the future because when you add what's going on in crypto to what's going on in the AI world and how data feeds into that I think we have really we have a big fight on that coming up short term I you know what keeps me up at night I literally to try and just keep up with what's going on in crypto in the market

regulatory developments legal developments I am I'm sitting there scrolling through my phone through like Telegram and LinkedIn like two hours a night. I realized at one point I was like this is so inefficient because everyone because there's nowhere to find anything other than those channels, right? People just people will put something on Telegram or someone will put something on LinkedIn. That's actually how you keep up with what's going on and it's constant. I don't have time to there's so many discussion papers and documents and pieces of legislation that have come out in the last 12 months particularly for lawyers.

I don't even have I mean I barely have time to read the summaries of these things. like I'm like, "Oh, there's another 180 page document tomorrow." So that's I I think one thing that I'm actually quite excited about though I'm going to tell end on that note is which also keeps me up at night but in a good way is I think I think capital markets like traditional capital markets is in a lot ways broken right like it's it's very manual. We're still relying on these rules from like a hundred years ago in fact almost 100 years ago. Everything is very paperbased.

I'm not sure that really to your point Vlad like the current rules actually protect and I'm not sure if they're appropriate for your kind of Gen Z investor right and I'm not sure they're doing their job anymore. So I think what is really interesting which I can see happening is the capital markets is going on chain and that's going to be that could really open up like a lot of markets a lot of opportunities in the next 5 to 10 years. I think that's a super exciting thing actually.

Yeah. Yeah. And there would be no more like cases like made of or cases uh like naked shorts with GameStop and stuff like this because if everything is on chain it's verifiable like you yeah you in you invest there is a record there like it's uh it's not like uh don't worry your money are being invested zero risk uh it's all good just don't ask questions or

don't Google us. Yeah. Um that's a brilliant note not note to end this. Let's not forget why we're in this space. Why why are we building on blockchain because it's recreating the system in a better way.

Let's hope. And with this, I want to thank this lovely group of lawyers, which is a sentence that you don't hear often, I guess. Um, and invite you all to continue the legal discussion in the next room starting in 14 minutes. um for those of you who are interested in this topic and for the rest enjoy this and yes don't forget to um check all those telegram channels and what is going on and what's the new taxation regime and if that doesn't work for you uh you can always follow the EUI we do this kind of sum versions or just follow any of those brilliant minds here so

and don't open questionable Zoom links Never. Thank you for this and enjoy the rest of the conference. [Applause]