1.  How is crypto regulated?
  2. What are the steps taken by the regulator to adopt MiCAR? 
  3.  Are the following activities regulated or unregulated in your jurisdiction? ―  Direct sales of tokens by issuers Exchange (buy/sell) ― Custody (hold) ― Borrowing/lending ― Yield/staking service —Staking on proof of stake consensus mechanisms (please indicate if NFTs are treated differently from fungible cryptoassets for each activity)
  4. Can offshore business provide services to local customers on either active solicitation or reverse solicitation basis? 
  5. How long would establishing a cryptoasset business/obtaining a license in your jurisdiction take?
  6. What would be the approximate overall cost of obtaining a licence?
  7. What is the probability (%) of success in obtaining a licence?
  8. What other limitations are there in your jurisdiction when looking to set up a cryptoasset business? E.g., Compliance requirements and physical presence

jurisdiction

Croatia

Disclaimer: This chapter was last updated on 7th November 2024 and does not reflect any subsequent developments. The information provided is intended for general informational purposes and should not be construed as legal advice.

1. How is crypto regulated?

AML RegulationAny other regulation

Crypto is currently regulated under the umbrella of AML regulation.

Under AML regulation, entities providing certain services in relation to virtual assets are required to carry out KYC proceedings and apply other relevant provisions of the Croatian AML Act.

Every company seated in Croatia that intends to perform respective crypto services is obliged to register with the Croatian Financial Services Supervisory Agency (HANFA), which supervises the implementation of AML obligations. If company is seated in EU and duly registered in it’s home country, then only notification to HANFA is required.

There are no other special licenses or other regulatory approvals required before establishing a crypto asset business. Such business is usually established as a limited liability company (in Croatian: društvo s ograničenom odgovornošću (d.o.o.)). After establishment of the company, registration with HANFA must be done in accordance with AML obligations.

Due to developments in the forms and design of crypto assets in the recent years, it cannot be excluded that certain activities related to crypto assets may, in particular cases, fall within existing financial regulations.

2. What are the steps taken by the regulator to adopt MiCAR? 

Act on Implementation of the Regulation (EU) 2023/1114 has been passed. However, certain bylaws which need to regulate details of the licencing process are not yet in place, so certain details of the licencing process are yet unknown. The regulator plans to pass these bylaws by the end of year 2024, and requesting MICA license will be possible from 1 January 2025. Since details of the licencing process are not yet clear and MiCA license request currently cannot be submitted, it is not possible to assess whether licenses will be available easily.

3. Are the following activities regulated or unregulated in your jurisdiction? ―  Direct sales of tokens by issuers Exchange (buy/sell) ― Custody (hold) ― Borrowing/lending ― Yield/staking service —Staking on proof of stake consensus mechanisms (please indicate if NFTs are treated differently from fungible cryptoassets for each activity)

Croatian AML Act covers crypto asset services in the same scope they are defined in MiCAR, and they include custody and administration, operation of trading platform, exchange, placing of crypto assets, reception and transmission of orders, as well as providing advice, portfolio management or transfer services for crypto assets. Current local regulations do not cover direct sales of tokens by issuers, borrowing/lending, yield/staking services or staking on proof of stake consensus mechanisms.

NFTs are expressly excluded form virtual assets to which Croatian AML Act applies.

4. Can offshore business provide services to local customers on either active solicitation or reverse solicitation basis? 

Only companies established in Croatia or in EU can provide services on the basis of active solicitation. Offshore businesses can provide services to Croatian customers only on basis of reverse solicitation, and only if they fully comply with certain additional conditions set out in the Croatian AML Act.

5. How long would establishing a cryptoasset business/obtaining a license in your jurisdiction take?

Establishing a company typically involves a time frame of approximately 2 to 5 weeks. Registration with HANFA at this point may take more than 6 moths.

6. What would be the approximate overall cost of obtaining a licence?

Starting up a company costs approximately EUR 3,500, consisting of the following fees:

  • court fees approx. EUR 50;
  • notary fees approx. EUR 350;
  • translation fees approx. EUR 30 for common languages, such as English; and
  • advisory cost approx. EUR 3,000.

Advisory costs for registering with HANFA depend on complexity of the case and number of external factors. There is no administrative fee for registration with HANFA.

7. What is the probability (%) of success in obtaining a licence?

Registration with HANFA has been made available in July 2023 and introduced as a requirement in September 2023. Since then, 19 crypto assets service providers have submitted applications for their registration, with 8 having been registered, and 11 with still pending procedures.

8. What other limitations are there in your jurisdiction when looking to set up a cryptoasset business? E.g., Compliance requirements and physical presence

Croatian banks are usually very rigid and not very keen to open bank accounts for companies that intend to perform crypto services. Usually, banks refuse to open accounts for such companies based on their general terms and conditions. We strongly advise to check this matter with the bank before initiating any other activities.

Crypto asset service providers need to be established in Croatia or can alternatively provide services on a cross border basis provided they are licensed by another EU regulator and notify HANFA.

Croatian tax of planned activities should be considered in advance as a crypto asset business would need to assess its corporate profit tax base, comply with mandatory tax reporting, and apply the correct VAT treatment on its supplies.

While Croatian tax implications on the crypto based incomes of individuals is in most part defined (the Croatian Tax Authority has released several official opinions), please note that certain ambiguities exist around the accounting and tax treatment of crypto based income of corporates. Our tax experts can provide support with all the above.