The trading of the new form of currency (Cryptocurrency) in Romania and by Romanian companies has until recently been an area where there were many uncertainties and confusion. The increase in interest has been shown as we have been asked to examine and advise on the position in Romania both for local companies as well as companies from countries where there are established markets and trading. Romania has gone some way to clarifying the position having transposed into the Romanian legal system the Fifth Money Laundering Directive by virtue of Government Emergency Ordinance no. 111/2020 (“GEO”) which came into force on 15th July 2020.
The GEO amended the Romanian Anti Money Laundering legislation and regulated for the first time the definition of virtual currency and the providers of digital wallet as well as the providers of exchange services between virtual currencies and “normal” accepted currencies. The adoption of the regulation has been welcomed as allowing an expansion of the use and trading of cryptocurrencies in Romania especially as since 2019 the Romanian Tax Code did provide a new category of taxable income namely the virtual currency transfer income.
According to the GEO in order to provide virtual currency exchange services in Romania the entities carrying out these services must be registered or authorised by the Romanian National Authorities. The law expressly forbids the carrying out the activities of being a provider of cryptocurrency exchange services as well as a provider of digital wallets without having such authorization. Failure to comply with these obligations is punishable either by a fine or imprisonment. The authorised entities will also become reporting entities in accordance with the Anti Money Laundering legislation and will have the obligation to report any suspect or suspicious transaction to the National Office for Preventing and Combating Money Laundering.
At a first glance the requirements of the GEO seem to discourage potential Romanian providers of this type of services as it establishes the obligation for them to register and obtain a specific authorisation in respect of these services. The authorisation is to be granted only if a favourable technical opinion is provided by the Romanian Digitization Authority and paying a tax in respect of such opinion.
In our view these requirements are favourable for the beneficiaries of the services as it will confer protection against scams and frauds, and in our opinion, it will bring benefits to the providers as well. As investing in cryptocurrencies appears to be an easy method for earning income the number of investors both foreign and Romanians who make or intend to make such transactions is constantly increasing. Many of them have nonetheless been sceptical about investing in cryptocurrency as no protection was offered to them by Romanian legislation. Investors have traded cryptocurrencies on suspicious platforms where the owner or the person who operated them could not be identified and now, they are in the position of having their cryptocurrency accounts frozen and not being able to exchange them to other currencies and cash in the benefits of the investment. This is why we believe that the obligation to register and to obtain the authorisation will also benefit the cryptocurrency exchange services providers because as long as they comply with the legal conditions the confidence of the potential investors will increase knowing that they have a protection after investing their money in a virtual currency.
The GEO provides that the procedure for obtaining the authorisation will be elaborated by the Ministry of Public Finance together with the Romanian Digitization Authority and the Office for Preventing and Combating Money Laundering and given by a Government Decision. The Government Decision should have been issued within ninety days from the issuing of the GEO has entered into force, the 15th July 2020. Even though the deadline is more than four months overdue the procedure has yet to be issued. According to a recent communication of the Romanian Digitization Authority the drafting of the Government Decision on the procedure is still a work in progress.
Therefore, despite the provisions in the law regulating the obligation for the cryptocurrency exchange services providers to register with the national authorities are in force they cannot comply with this obligation as the procedure for obtaining the authorisation has not yet been issued. The GEO also stipulates that the providers of digital wallets and cryptocurrency exchange services have the obligation to register or be authorised within twelve months from the date of entering into force of the GEO. One interpretation of this provision is that it can be understood that Providers will be allowed to operate in Romania without being registered or having obtained the authorisation during the twelve month period after the government decision on the registration procedure comes into force. However, the provisions which prohibit carrying on such activities without being registered or having an authorisation are already in force and there is no express exception from this rule. Therefore, a conflict has been created between the rules which raises the question whether cryptocurrency exchange activity is allowed in Romania until the publication of the registration procedure.
Given the above we await clarification from the authorities in respect of these issues considering that the procedure for registration and authorisation has not been issued even though seven months have passed since the publication of the GEO. and there are Romanian companies currently providing crypto currency exchange services and digital wallets.
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