Albania -- Securities Classification Regulatory Overview

Albania was one of the first countries globally to adopt a comprehensive legal framework specifically for virtual assets and DLT-based financial markets, predating the EU's MiCA regulation. The cornerstone of this framework is Law No. 66/2020 "On Financial Markets Based on Distributed Ledger Technology," which came into force in September 2020. This law categorizes virtual assets and defines which ones fall under the existing securities regulatory regime.

Legal Test Used (Functional Approach)

Albania does not employ a direct "Howey test equivalent" in the U.S. sense. Instead, it adopts a functional approach to classify cryptocurrency tokens. This means that a virtual token is classified based on its characteristics, rights, and purpose, and then mapped to existing financial instruments defined under Albania's traditional securities law, Law No. 9879/2008 "On Securities" (as amended).

The core principle is: If a virtual token grants rights or has characteristics equivalent to a financial instrument defined in Law No. 9879/2008, it is considered an "Investment Virtual Token" and falls under the securities regulatory framework.

Law No. 66/2020 categorizes virtual assets as follows:

1. Virtual Currency: Defined primarily as a digital representation of value that is not issued or guaranteed by a central bank or public authority, is not necessarily attached to a legally established currency, and does not possess the legal status of currency or money, but is accepted by natural or legal persons as a means of exchange and can be transferred, stored, and traded electronically. (Similar to Bitcoin, Ethereum primarily as payment/exchange).
2. Virtual Token: A digital representation of value that is not a virtual currency. Virtual tokens are further divided into:
   • Investment Virtual Tokens: These are the security tokens. They grant rights and obligations analogous to traditional financial instruments (e.g., shares, bonds, derivatives).
   • Utility Virtual Tokens: Provide access to a good or service.
   • Hybrid Virtual Tokens: Combine features of both investment and utility tokens.

The "test" is therefore to assess if the token, irrespective of its technical form, functions as a security under existing Albanian law. The Autoriteti i Mbikëqyrjes Financiare (AMF - Financial Supervisory Authority) is the primary regulator responsible for this classification and oversight.

Which Tokens Are Considered Securities (Investment Virtual Tokens)

Under the Albanian framework, tokens are considered Investment Virtual Tokens (i.e., securities) if they:

• Represent ownership rights in an entity (e.g., a share in a company).
• Represent debt claims against an entity (e.g., a bond or debenture).
• Grant rights to a share in future profits or revenues of an enterprise.
• Confer voting rights or other corporate governance rights.
• Are transferable and give rise to an expectation of profit from the efforts of others, similar to traditional investment contracts.
• Derive their value from, or represent rights related to, traditional financial instruments (e.g., a tokenized derivative, a token representing ownership of physical gold but traded like a security).
• Are offered to the public as an investment opportunity with the expectation of a return.

Essentially, any token that mirrors the characteristics, rights, and obligations of the financial instruments listed in Law No. 9879/2008 will be classified as an Investment Virtual Token and subject to securities regulation.

Registration/Exemption Requirements for Token Issuers

Issuers of Investment Virtual Tokens must comply with stringent requirements:

1. Compliance with Securities Law (Law No. 9879/2008):

   • Prospectus Requirement: For any public offering of Investment Virtual Tokens, the issuer must publish a detailed prospectus. This prospectus must be approved by the AMF and contain comprehensive information about the token, the issuer, the underlying project, risks, and the rights associated with the token.
   • Information Disclosure: Ongoing disclosure requirements similar to those for publicly traded securities.
   • Market Abuse Rules: Prevention of insider trading and market manipulation.

2. Licensing under Law No. 66/2020: Entities providing services related to Virtual Assets (including issuance, offering, trading, exchange, custody, portfolio management) must be licensed by the AMF. This applies to entities dealing with Investment Virtual Tokens as well. They need to demonstrate:

   • Adequate capital.
   • Robust internal governance and risk management systems.
   • Qualified management.
   • Compliance with Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) regulations (Law No. 110/2019 "On Preventing Money Laundering and Terrorism Financing").

3. Exemptions: Standard exemptions from prospectus requirements under Law No. 9879/2008 may apply (e.g., small offerings below a certain threshold, private placements to qualified investors, offerings solely to existing shareholders in certain circumstances). However, these exemptions would be interpreted in the context of virtual assets by the AMF.

Secondary Trading Rules

Secondary trading of Investment Virtual Tokens is also strictly regulated:

• Licensed Platforms: Trading of Investment Virtual Tokens must occur on platforms licensed by the AMF. These platforms are considered "DLT-based trading facilities" and are subject to rules akin to traditional regulated markets or multilateral trading facilities (MTFs).
• Investor Protection: Platforms must implement measures to ensure fair and orderly trading, transparency (pre- and post-trade transparency rules), investor protection, and market integrity.
• AML/CTF: All transactions on these platforms are subject to AML/CTF obligations, including customer due diligence (KYC), transaction monitoring, and suspicious activity reporting.
• Supervision: The AMF has supervisory powers over these platforms, including the ability to conduct inspections, request information, and impose sanctions.

Enforcement Examples

Due to the relatively recent implementation of Law No. 66/2020 and the size of the Albanian financial market, specific public enforcement actions directly targeting the unregistered issuance or illicit trading of security tokens are not widely publicized.

However, the AMF's enforcement efforts have generally focused on:

• Licensing and Registration: Ensuring that virtual asset service providers (VASPs) obtain the necessary licenses to operate, particularly those dealing with virtual currencies and utility tokens. There have been public announcements by the AMF warning against unlicensed entities operating in the crypto space.
• AML/CTF Compliance: Significant emphasis is placed on compliance with anti-money laundering and counter-terrorist financing rules across all types of virtual asset services.
• Investor Protection Warnings: The AMF frequently issues public warnings to investors about the risks associated with virtual assets, particularly those offered by unlicensed entities or those lacking transparency.

While direct examples of action against an unregistered security token offering might be scarce, the regulatory intent is clear: should an entity issue or facilitate trading of Investment Virtual Tokens without adhering to the prospectus, licensing, and other securities law requirements, the AMF would have the legal basis under Law No. 66/2020 and Law No. 9879/2008 to take enforcement action, which could include fines, injunctions, and criminal referrals.

Specific Legislation and Regulatory Guidance URLs

1. Law No. 66/2020 "On Financial Markets Based on Distributed Ledger Technology":

   • While difficult to find in English directly from official Albanian government sites, the original Albanian can be found via the Parliament website or official gazette. Many legal firms have published English translations.
   • Search Term for Official Albanian: "Ligji 66/2020 Për tregjet financiare të bazuara në teknologjinë e regjistrave të shpërndarë"
   • General AMF publications often refer to it: AMF Official Website

2. Law No. 9879/2008 "On Securities" (as amended):

   • Search Term for Official Albanian: "Ligji 9879/2008 Për letrat me vlerë"
   • This is fundamental for defining what constitutes a "security."

3. Law No. 110/2019 "On Preventing Money Laundering and Terrorism Financing":

   • Search Term for Official Albanian: "Ligji 110/2019 Për parandalimin e pastrimit të parave dhe financimit të terrorizmit"
   • Crucial for all virtual asset service providers.

4. AMF Regulatory Guidance: The AMF website (amf.gov.al) is the primary source for regulatory updates, decisions, and guidance related to financial markets, including virtual assets. While specific, detailed guidance on token classification akin to the U.S. SEC's "Framework for 'Investment Contract' Analysis of Digital Assets" might not be published in the same form, the AMF issues various regulatory acts and instructions.

Note: Accessing official English translations of Albanian legislation directly from government sources can sometimes be challenging. Legal databases or specialized law firms often provide translated versions.