Albania is preparing a legal framework for virtual assets

In 2017, the Albanian Central Bank issued a warning to citizens that digital currencies like Bitcoin were not under the direct supervision of the domestic banking sector regulations and that such assets carried high levels of risk.

Currently in Albania are no law providing for the regulation, prohibition or penalty in connection with virtual assets and related services. But to change that Albania is seeking to become the next European blockchain hub with a new set of laws that legalize the use of digital currencies. On May 21st, the Albanian parliament signed a new bill into law to implement a legal framework for cryptocurrencies, which is already described as “Europe’s most comprehensive crypto law yet.”

New legal framework was first introduced to Albania's Committee of Economy back in 2019 in an attempt to establish a legislation in crypto industry. Crypto regulation was approved last week with a majority of 88 votes against 16 with only 3 in absentia. The country’s parliament approved the new laws recently, leading the way for the virtual asset market to be legally recognized and regulated.

Minister of Finance and Economy Anila Denaj presented the draft law “On financial markets based on the technology of distributed registers” in the Committee on Economy. “The draft law aims to regulate the conditions for licensing, exercising the activity of operators and stock exchanges and supervising them, as well as preventing abusive practices in the market, where severe fines are stipulated for anyone who violates the provisions of the law,” said Denaj.

The draft serves to make the best use of the benefits offered by technology, but also to address a range of potential risks, such as the creation of fraudulent schemes or unauthorized schemes to provide virtual assets, the risk of using virtual assets for money laundering and market manipulation, and the draft law recognizes the risk of money laundering through the use of digital currencies. According to new regulation it is required that any virtual asset service provider put in place a risk-protected system to monitor transactions for suspicious transactions. The licensees will also have to adhere to the existing guidelines on the prevention of money laundering, including employing staff member with the necessary experience in the field.

Albania is the third country in Europe to have a comprehensive law regulating the digital currency industry. The other two are Malta and France, with the former being nicknamed the “blockchain island” for being a pioneer in the field. Malta’s friendly approach has seen many global blockchain and digital currency companies set up operations in the island.

By introducing digital assets framework into law, Albania could be aiming to establish itself as another cryptocurrency “hotspot” for companies seeking to operate within regulated environments. This seems to have worked particularly well in Malta, which eventually became colloquially known as the “blockchain island” because of the high number of cryptocurrency firms that set up shop there.

Considering previous experience, new cryptocurrency companies have avoided establishing themselves with unclear regulations due to the chance of accidentally violating the law, and being punished as a result. Therefore, a number of blockchain and cryptocurrency associations have been formed across the globe specifically for the purpose of advocating for more regulations.

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