A broad range of services related to virtual assets have been regulated by an amendment to the Croatian AML Act, which was adopted at the very end of 2022 and came into force on 1 January 2023.
The amended AML Act applies to providers of the following services related to virtual assets:
- the custody and administration of virtual assets;
- the operation of trading platform for virtual assets;
- the exchange of virtual assets for fiat currency that a legal tender;
- the exchange of virtual assets for other virtual assets;
- the execution of orders for virtual assets;
- the implementation of the offer or sale of virtual assets;
- the reception and transmission of orders for virtual assets on behalf of third parties; and
- providing advice on virtual assets.
These newly regulated services match the categories of crypto-asset services expected to be regulated by the EU Regulation on Markets in Crypto-assets (MICA) currently in the proposal stage.
Before starting to provide any of the listed services in Croatia, providers will now need to register with the Croatian regulator – the Croatian Financial Services Supervisory Agency (HANFA). Bylaws specifying the details of application and registration are still being finalized and should be adopted by July 2023.
This is a significant change compared to the previous approach, in which providers of custody or exchange services related to virtual assets just needed to notify HANFA of its activity.
Providers of virtual asset services will now also need to be incorporated in Croatia and effectively operate in Croatia. The only option for the cross-border provision of services will be available to providers that have already been granted matching approval from the competent authority or have already been registered with the appropriate register in their domicile jurisdiction. Proof of such approval or registration will need to be submitted to HANFA before providing services in Croatia.
All of these requirements are in addition to the enhanced AML obligations, whereby providers of virtual asset services will be obliged to conduct an in-depth analysis for each transaction over EUR 1,000. Details of risk assessment procedures for providers of virtual asset service will be regulated by additional bylaws, expected by July 2023.
While the amended AML Act is already in force, certain obligations will become effective only after required bylaws are adopted, with the registration requirement coming into force within 2 to 18 months (depending on the service) from the moment bylaws on registration become available.
These amendments to the AML Act introduce several novelties and enhanced requirements for the provision of services related to virtual assets. Many details on how they will be applied are still missing, some of which will hopefully be clarified by the expected bylaws. Remaining uncertainties and ambiguities will need to be resolved in practice. It will also be interesting to see further developments regarding MICA and how will they tie in with the system introduced by the amended AML Act. In any case, with increased regulatory activity regarding virtual assets and related services, stakeholders should keep a close watch on how these regulations develop.