Board of the Financial Supervision Authority (AMF) approved last week "On the licensing of entities operating as a DLT Exchange". 

DLT exchanges are markets where assets that rely on distributed ledger technology or cryptoassets can be traded. 

In support of the law "On Financial Markets Based on Distributed Ledger Technology", DLT exchanges will have three categories of licenses: category A license, where only service digital tokens, digital asset tokens and payment digital tokens can be traded; category B license, where in addition to the activity allowed for category A, FIAT money and virtual currency can also be traded and category C license, where in addition to the activity allowed for category A and B, digital land of titles can also be traded . 

The DLT Exchange is prohibited from trading on its own account and trading based on the principle of compliance. Licensing of cryptocurrency trading exchanges will be based on detailed documentation requirements related to company organization and business plan and requirements related to reputation and source of capital. 

After receiving the licensing request and the package of documents, the responsible authorities (FSA and ANA) set up a joint commission that will review and evaluate them in accordance with the provisions of this regulation and the legislation in force. The rules for the operation and organization of the commission are determined by a joint order of the responsible authorities. In any case that it deems necessary, the commission can also call representatives from other institutions for an opinion. 

The regulation stipulates that the authority bases its decision-making on the principles of protecting the interests of investors and the public interest, promoting the stability, transparency and reliability of financial markets, ensuring compliance with the law, the security of systems and the security of protection against cyber attacks. 

During the process of examining the request for licensing, the Authorities evaluate the documentation submitted by the requesting entity, taking into consideration the fulfillment of the criteria for suitability and ability of the shareholders, the administrator, the members of the board of administration, the supervisory board, as well as the key personnel according to the requirements of of the law and regulation and the capacity and ability of the requesting subject to maintain and fulfill in the future the general conditions and special criteria of the law and regulation. 

The responsible authorities may reject the application for licensing in cases where they judge on reasonable grounds that the requesting entity has submitted false, inaccurate or incomplete documents or information, when they judge on reasonable grounds that the documents submitted by the requesting entity are insufficient or the requesting entity does not fulfill the conditions and criteria for licensing, or when they judge on reasonable grounds that the requesting entity will not be able to fulfill the conditions and criteria for licensing in the future. Completing the regulatory framework for cryptocurrencies was one of the tasks left to the AMF for this year by the Assembly of Albania. In the resolution for the assessment of the activity of the AMF for 2021, the Assembly requests that this institution approve within 2022, regulatory acts in implementation of the law "On financial markets based on distributed ledger technology", as well as to intensify cooperation with the authorities international regulatory for obtaining the best experiences for this market. 

The law "On financial markets based on distributed ledger technology" entered into force on September 1, 2020. However, its full implementation has not yet been possible, precisely because of the lack of all the necessary bylaws . 

In November of last year, the AMF Board approved the first two regulations in implementation of this law, "On capital adequacy and own funds of entities operating in financial markets based on distributed ledger technology" and "On licensing of subjects that exercise the activity as a digital token agent". 

Entities operating in financial markets based on distributed ledger technology must ensure a sufficient level of regulatory capital, which must at all times be at least the highest value between the minimum capital level determined in the law for entities operating in the cryptocurrency market, (which include the Digital Token (TD) broker, DLT exchanges and third-party portfolio custodians), or as much as a quarter of the previous year's general fixed expenses, of reviewed annually. 

Capitalization can be met through the entity's own funds or an insurance policy for professional liability coverage.

Each DLT exchange (for trading stocks based on distributed ledger technology) must prove that it has a minimum initial capital of 20 million, up to 90 million ALL, depending on the license category. 

(Source: Monitor)