The State of Crypto Adoption in Bulgaria
Source: Freepik
Bulgaria has positioned itself as an emerging player in the cryptocurrency landscape. The government and financial institutions have started to pay more attention to blockchain technology, although there is still a level of regulatory uncertainty.
While it’s not one of the leading nations in Europe for crypto adoption, interest and investment in digital currencies have been growing.
The country has a surprisingly high level of awareness about crypto, partly due to Bulgaria’s involvement in a major cryptocurrency case a few years ago.
In 2017, Bulgarian authorities seized a large quantity of Bitcoin during a criminal investigation, which significantly raised awareness among the population. Due to this operation, Bulgaria holds the second-largest amount of Bitcoins globally. The government owns at least 213,000 Bitcoins, valued at over $804 million at current rates.
According to Statistica, the user penetration rate is projected to be 13.82% in 2024 and is expected to reach 18.72% by 2028.
Bulgaria stands out as an appealing destination for cryptocurrency businesses due to its relatively lenient regulatory environment compared to other countries.
This European nation has also emerged as a leading destination for cryptocurrency mining due to its low energy costs and favourable regulatory environment.
Crypto Laws in Bulgaria
Source: Pexels
Several national laws in Bulgaria affect how crypto companies operate and provide guidelines on transactions, advertising, and data protection.
Money Laundering Law
Bulgaria’s Measures Against Money Laundering Act (MAMLA) is a key piece of legislation that regulates crypto businesses. It establishes guidelines to prevent the use of illicitly obtained funds. MAMLA partially adopts the EU’s 5th Anti-Money Laundering Directive (5AMLD), focusing on financial crimes such as money laundering and terrorist financing.
MAMLA introduced the official definition of virtual currencies, reflecting the growing use of digital payment methods. According to the law, virtual currencies are digital assets that aren’t backed by any central authority but are widely accepted as a means of exchange. Crypto wallet providers are also recognized under this law. They are defined as entities offering services to safeguard private cryptographic keys for storing and transferring virtual currencies.
For all companies in Bulgaria, including crypto businesses, there’s a requirement to declare the ultimate beneficial owner. This involves disclosing individuals or entities who control a company, ensuring transparency around ownership.
MAMLA requires businesses to follow strict know-your-customer (KYC) and customer due diligence (CDD) procedures. This includes verifying clients’ identities, collecting relevant data, and maintaining proper records. Companies must perform detailed checks, especially for transactions exceeding 30,000 BGN (approx. 15,000 EUR). If transactions or activities appear suspicious, they must be reported to the Financial Intelligence Directorate.
Consumer Protection Law
The Consumer Protection Act in Bulgaria plays an important role in regulating business-to-consumer relationships. Although its application to crypto assets depends on whether the assets are being used for non-investment purposes.
Key obligations for crypto companies under Bulgarian consumer protection laws include:
- Pre-Contract Information: Crypto companies must provide detailed, easy-to-understand information to customers before offering services. This includes publishing the information online and ensuring it is delivered to customers in a format they can comprehend.
- Fair Terms and Practices: Businesses are prohibited from using unfair terms or misleading practices. For example, contracts must be fair, and crypto companies cannot falsely claim to hold a license or include clauses that allow them to terminate agreements without valid reasons.
- Clear Marketing: All promotional materials must be identifiable, accurate, and contain the provider’s name. Unsolicited advertising is only allowed with prior consumer consent.
- Right to Withdrawal: Customers have the right to withdraw from a contract within 14 days without any penalty or cost. This right must be communicated before the contract is concluded.
- Contract Amendments: If a crypto business amends its terms and conditions, it must inform customers within seven days. Customers can either agree, cancel the contract without fees, or stick to the previous terms.
- Dispute Resolution: Consumers must be informed about their right to file complaints with the Bulgarian Commission for Consumer Protection or use alternative dispute resolution methods, with clear contact information provided.
Transactional Laws
Consequently, trades involving cryptocurrencies are regulated by the Obligations and Contracts Act and the Commerce Act. According to these rules, a sale transaction obligates the seller to transfer ownership or another right to the buyer in exchange for a pre-agreed price.
For individuals purchasing cryptocurrencies, the Commerce Act clarifies that these transactions aren’t considered commercial. This means disputes over such transactions are handled under the General Claims Procedure instead of the Commercial Disputes Procedure within the Bulgarian Civil Procedure Code.
Advertising and Competition Law
Beyond transactional laws, crypto companies must adhere to regulations concerning advertising and competition. The Protection of Competition Act prohibits misleading or comparative advertising that harms competitors. This ensures that market activities, including those involving crypto assets, don’t distort competition.
Personal Data Law
Regarding personal data, Bulgarian crypto businesses handling client information must comply with the Personal Data Protection Act (PDPA). This includes strict rules on obtaining and maintaining copies of identity documents, large-scale data processing, and handling the data of minors.
While PDPA sets national guidelines, it cannot override the more comprehensive EU-wide General Data Protection Regulation (GDPR). This means crypto companies must align with both sets of regulations when dealing with client data.
Crypto License in Bulgaria
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There is no specific license designated for crypto businesses in Bulgaria but authorization under the Measures Against Money Laundering Act (MAMLA) is required. Without this authorization, operating in the crypto space is considered illegal.
Any crypto business, including foreign entities wishing to enter the Bulgarian market, must secure a license from the National Revenue Agency (NRA). The NRA oversees the management of taxes, social security contributions, and other state receivables.
The required documentation for approval includes:
- A detailed description of the crypto business’s website, software, and mobile application
- A comprehensive outline of the planned crypto services and products
- A list of countries where the services will be offered
- Information on cross-border activities, if applicable
To obtain the license, businesses must:
- Register a company in Bulgaria.
- Provide a detailed description of planned crypto services.
- Implement anti-money laundering and counter-terrorist financing procedures following EU directives.
- Launch a compliant business website and mobile app (if applicable).
- Pay a registration fee of 50 BGN (~25 EUR) to the NRA.
- Submit an electronic application with the necessary documents, signed with a qualified electronic signature.
Once approved, the crypto business will be listed in the NRA’s public register and issued a Certificate of Registration. This certificate, which functions as a crypto license, is issued electronically within a month, faster than in many other European countries.
Taxation of Cryptocurrencies in Bulgaria
Source: Freepik
Crypto businesses in Bulgaria are subject to the country’s general tax framework. They must register as taxpayers and pay a 10% Corporate Income Tax on profits generated from commercial activities, such as trading, exchanging, or mining crypto assets. This tax rate applies to both domestic and foreign-sourced profits of resident companies. Additionally, a 5% Withholding Tax is levied on dividends distributed to shareholders.
Crypto companies must also register their employees for social insurance. The total Social Security Contribution is 24.3%, with employers covering 13.72% and employees contributing 10.58%. Additionally, the National Health Insurance rate is 8%, split between employers (4.8%) and employees (3.2%).
If a company’s turnover exceeds 50,000 BGN (about 25,600 EUR) within 12 consecutive reporting periods, it must register for VAT. Most crypto-related activities are taxed at the standard 20% VAT rate. However, cryptocurrencies themselves are exempt from VAT across the EU, as they are classified similarly to financial services.
Crypto companies in Bulgaria also benefit from various tax reliefs, including around 70 international agreements aimed at eliminating double taxation. These agreements help businesses avoid paying taxes in multiple jurisdictions, making tax management more efficient.
Crypto Regulations in Bulgaria
Source: Freepik
Before the introduction of Markets in Crypto-Assets (MiCa), Bulgaria had limited regulations concerning cryptocurrencies. They mainly required businesses to register with the National Revenue Agency under anti-money laundering laws. However, this framework did not fully address the regulatory needs of the growing crypto market.
Markets in Crypto-Assets (MiCa)
MiCa, adopted in April 2023, represents the world’s first comprehensive regulatory framework for the crypto industry. The regulation was developed in response to the rapid growth of the crypto sector over the past decade. It aims to establish clear rules and provide greater oversight across EU member states. MiCa mandates that EU member states establish rules to ensure compliance with the European regulation.
In August 2024, the Bulgarian Ministry of Finance introduced a draft Law on Crypto Asset Markets to regulate crypto-asset trading in the country. This legislation aligns with the European Union’s Markets in Crypto-Assets (MiCa) regulation, which Bulgaria is required to adopt.
The draft law sets the foundation for crypto regulations, with the Financial Supervision Commission (FSC) and, in some cases, the Bulgarian National Bank (BNB) being granted the authority to manage licenses and oversee crypto market participants.
The FSC will monitor activities within the crypto market, issue or deny licenses, and impose sanctions on those who violate the regulations.
Banking supervision under the new law will be handled by the European Central Bank (ECB) and the Bulgarian National Bank (BNB). These institutions will manage several tasks, including:
- Extending credit institutions’ licenses to include the issuance of asset-backed electronic money tokens or crypto-asset services.
- Withdrawing permissions for such activities, either on their own initiative or at the recommendation of the FSC.
- Approving significant equity acquisitions or leadership positions in credit institutions.
DLT Market Infrastructure Regulation
In addition to MiCA, the Pilot DLT Market Infrastructure Regulation was introduced in 2022. It introduces a pilot regulatory framework for the trading and settlement of financial instruments using Distributed Ledger Technology (DLT).
It classifies DLT-based market infrastructures into three categories:
- Multilateral Trading Facilities (MTFs) – Platforms for multiple parties to trade financial instruments.
- Settlement Systems – Infrastructure for efficient post-trade settlements.
- Trading and Settlement Systems – Integrated systems that manage both trading and settlement processes.
As of March 2023, businesses can participate in a regulatory sandbox, testing blockchain-based trading and settlement solutions under this framework.
Infrastructure and Business Adoption of Crypto
Source: Freepik
Bulgaria’s crypto landscape is steadily growing, with increasing infrastructure development and a gradual rise in business adoption. Although the regulatory framework remains limited, more businesses are exploring cryptocurrency as a viable financial tool.
Crypto ATM Network
Bulgaria hosts about 36 Bitcoin ATMs, with a significant concentration in Sofia. These ATMs facilitate the buying and selling of various digital currencies, including Bitcoin, Ether, and Litecoin. It also makes it easier for users to convert cash into crypto assets in multiple currencies such as euros, US dollars, and Bulgarian levs.
Payment Platforms and Exchanges
Bulgaria has several local and international cryptocurrency exchanges operating in the country. Many of these exchanges are user-friendly, contributing to a steady rise in individual and business crypto transactions.
Business Integration
An increasing number of businesses in Bulgaria are starting to accept crypto as a form of payment. Some of these businesses include restaurants, retail shops and tech companies. This acceptance is not yet mainstream but is becoming more common in cities like Sofia.
Blockchain Innovation
The local tech scene is exploring the potential of blockchain technology beyond cryptocurrencies. Startups are working on decentralized applications (DApps) and blockchain-based solutions for sectors like logistics, supply chain, and finance.
Challenges of Crypto Adoption in Bulgaria
Source: Freepik
Bulgaria is a country with a fast-developing tech scene. However, their journey toward integrating digital currencies is still met with some challenges. They include:
Regulatory Uncertainty
One of the main barriers to broader adoption is the lack of a clear regulatory framework. Businesses and investors are often hesitant to engage fully with crypto due to concerns about potential legal issues or future regulatory changes.
Limited Financial Infrastructure
While there is a growing interest in crypto, the traditional financial infrastructure in Bulgaria is cautious about integrating cryptocurrencies into their systems. This is often due to concerns over compliance and money laundering risks.
Lack of Education and Awareness
There is still a significant crypto knowledge gap among the general population. The misunderstandings about how cryptocurrencies work and concerns about their volatility remain barriers to wider adoption.
Risk and Volatility
Like in many countries, the high volatility of cryptocurrencies makes them a risky asset for both businesses and individuals in Bulgaria.
Benefits of Crypto Adoption in Bulgaria
Source: Freepik
Bulgaria stands to gain significantly from integrating crypto into various sectors. Some of the benefits of crypto adoption in Bulgaria include:
Financial Inclusion
Many people in rural areas of Bulgaria have limited access to traditional banking services. Cryptocurrencies can help increase financial inclusion in Bulgaria by providing banking services to those who are unbanked or underbanked. Cryptocurrencies can offer them a way to store, send, and receive money using a smartphone, bypassing the need for physical banks.
Lower Transaction Costs
Crypto adoption can mean lower transaction fees compared to traditional banking services. Businesses can reduce their operational costs by using cryptocurrencies for transactions, which typically come with lower fees compared to payment gateways like PayPal. This makes it an attractive option for both small and large enterprises.
Boost to the Tech Sector
If Bulgaria adopts crypto-friendly regulations, it could become a hub for blockchain startups. It could also attract international tech talent looking to innovate in a supportive environment. Increased focus on blockchain and crypto could lead to the creation of new jobs in software development, cybersecurity, and data analysis within Bulgaria’s tech industry.
Cross-Border Transactions
Businesses in Bulgaria can benefit from faster and more efficient cross-border transactions using crypto. This is important for a country that relies on international trade. Bulgarian exporters can use cryptocurrencies to receive payments from buyers in other countries more quickly and with lower fees than traditional banking. Tourists visiting Bulgaria could also pay for services in cryptocurrency
Conclusion
Bulgaria is gradually positioning itself as a growing player in the European crypto landscape. The country’s involvement in crypto gained traction after a 2017 Bitcoin seizure from cybercriminals.
This significant increase in crypto adoption is driven by rising interest from individuals and businesses, along with a developing regulatory framework.
Although Bulgaria does not issue a specific license for crypto operations, businesses must adhere to regulations like MAMLA and MiCa.
Bulgaria has the potential to make a significant impact in the European crypto space. However, the country needs to address its regulatory uncertainty, limited financial infrastructure, and knowledge gaps.
By addressing these challenges, Bulgaria could strengthen its presence in the European crypto space.
