North Macedonia -- Securities Classification Regulatory Overview

North Macedonia, as an EU candidate country, generally aligns its regulatory approach with existing EU financial market regulations. While there isn't a standalone, dedicated "crypto-asset security" law akin to the U.S. Howey Test, the classification of cryptocurrency tokens as securities in North Macedonia is based on applying the existing Law on Securities (Закон за хартии од вредност) by analogy.

The primary regulatory body responsible for capital markets and securities is the Securities and Exchange Commission of the Republic of North Macedonia (Комисија за хартии од вредност на Република Северна Македонија - КХВРСМ / SECRNM).

Legal Test Used (Howey Test Equivalent)

North Macedonia does not have a specific "Howey-equivalent" test explicitly designed for crypto assets. Instead, the SECRNM assesses whether a crypto token falls within the definition of "securities" as outlined in the Law on Securities. This law defines securities broadly to include:

1. Transferable Securities:
   • Shares in companies and other securities equivalent to shares in companies, partnerships, or other entities, and depositary receipts in respect of shares.
   • Bonds or other forms of securitised debt, including depositary receipts in respect of such securities.
   • Any other securities giving the right to acquire or dispose of any such transferable securities by subscription or exchange.
   • Securities giving rise to a cash settlement determined by reference to transferable securities, currencies, interest rates or yields, commodities or other indices or measures.
2. Money Market Instruments: (less relevant for most crypto tokens, but potentially for stablecoins or very short-term debt tokens).
3. Units in collective investment undertakings.

The test essentially boils down to whether the token represents an investment contract or a financial instrument that grants rights similar to traditional securities (e.g., ownership, debt, right to profits, voting rights). If a token exhibits characteristics of an investment contract where individuals invest money in a common enterprise with an expectation of profits derived from the efforts of others, it is highly likely to be treated as a security under this framework.

Which Tokens Are Considered Securities

Based on the above interpretation, the following types of tokens would likely be classified as securities:

• Equity Tokens: Tokens that represent ownership stakes in a company, granting rights similar to shares (e.g., voting rights, dividend distribution, share in profits).
• Debt Tokens: Tokens that represent a loan or debt instrument, entitling the holder to principal repayment and/or interest, similar to bonds.
• Revenue/Profit-Sharing Tokens: Tokens that grant holders a direct right to a share of the issuer's future revenues or profits, even if they don't represent direct equity.
• Investment Contract Tokens: Tokens offered with a promise of future profit derived from the entrepreneurial or managerial efforts of the issuer or a third party, where the primary purpose for purchase is investment.

Tokens generally not considered securities (provided they are purely functional and do not carry investment rights) include:

• Utility Tokens: If their sole purpose is to provide access to a product or service within a specific ecosystem, with no investment expectation.
• Payment Tokens: If their primary function is purely as a means of exchange for goods and services, without conveying any investment rights or claims on an underlying asset.
• Asset-referenced tokens (ARTs) and E-money tokens (EMTs): These are expected to be regulated under the upcoming EU MiCA regulation, which North Macedonia is preparing to adopt. MiCA specifically carves out "crypto-assets that qualify as financial instruments" (i.e., securities) from its scope, ensuring they remain under existing securities law.

Registration/Exemption Requirements for Token Issuers

If a token is classified as a security:

1. Prospectus Requirement: Public offerings of security tokens would generally require the publication of a prospectus, which must be approved by the SECRNM. The prospectus must contain detailed information about the issuer, the token, the rights it confers, the risks involved, and the use of proceeds, in accordance with the Law on Securities and principles of the EU Prospectus Regulation.
2. Disclosure Obligations: Issuers would be subject to ongoing disclosure obligations, including periodic financial reporting and notification of significant events, similar to traditional listed companies.
3. Exemptions: Exemptions from prospectus requirements might apply for:
   • Small offerings below certain thresholds.
   • Offerings made exclusively to qualified investors.
   • Offerings to a limited number of persons.
   • These exemptions would generally mirror those applicable to traditional securities offerings.

It's important to note that North Macedonia is in the process of aligning its legislation with the EU's Markets in Crypto-Assets (MiCA) regulation. Once MiCA is adopted and implemented, it will provide a harmonized framework for crypto-assets not deemed securities. Crypto-assets that do qualify as financial instruments (securities) will remain under the Law on Securities.

Secondary Trading Rules

If a crypto token is classified as a security:

• Regulated Markets: Secondary trading would ideally need to take place on a regulated market (e.g., the Macedonian Stock Exchange, if the tokens were admitted to trading) or through licensed investment firms.
• Licensed Intermediaries: Investment firms facilitating the trading of such tokens would need to be licensed by the SECRNM and adhere to all relevant rules regarding investor protection, best execution, suitability, and market integrity.
• Market Abuse Regulations: Trading activities would be subject to market abuse regulations (prohibition of insider trading, market manipulation).
• Custody: Custody of security tokens would likely need to be handled by licensed custodians.

Enforcement Examples

Specific public enforcement actions by the SECRNM directly against crypto token issuers for unregistered securities offerings are not widely documented or publicized in North Macedonia. The relatively nascent stage of the crypto market in the country, combined with a generally cautious approach, has meant that:

• Focus on Warnings: The SECRNM, alongside the National Bank of the Republic of North Macedonia (NBRSM), has primarily issued general warnings to the public about the risks associated with investing in crypto-assets, highlighting their speculative nature, lack of regulation, and potential for fraud. The NBRSM has also focused on Anti-Money Laundering (AML) concerns related to crypto.
• Limited Market Activity: The scale of security token offerings specifically targeted at North Macedonian investors might be limited, leading to fewer direct enforcement cases.
• Proactive Consultations: Regulators might engage in dialogue with potential issuers on a case-by-case basis before public offerings occur, guiding them towards compliance if their tokens are deemed securities.

While direct examples are scarce, the legal framework exists, and the SECRNM has the power to take action against issuers and intermediaries violating the Law on Securities, including imposing fines and ordering cessation of activities.

Specific Legislation and Regulatory Guidance URLs

• Securities and Exchange Commission of the Republic of North Macedonia (SECRNM):

  • Official Website: https://www.sec.gov.mk/ (The website is available in Macedonian and English, offering access to their regulatory framework, decisions, and news).

• Law on Securities (Закон за хартии од вредност):

  • This is the primary legislation. While a direct English translation URL from an official gazette is hard to find without specific legal databases, the law is published in the Official Gazette of the Republic of North Macedonia (Службен весник на Република Северна Македонија). The SECRNM's website often references and interprets this law. The latest consolidated version would be the operative one.

• National Bank of the Republic of North Macedonia (NBRSM):

  • Official Website: https://www.nbrm.mk/ (Often issues warnings and statements regarding crypto-assets from a financial stability and AML perspective, though not directly on securities classification).

• EU MiCA Regulation: While not yet directly applicable, North Macedonia's future regulatory approach will be heavily influenced by MiCA, which will differentiate between crypto-assets falling under existing financial services law (securities) and those falling under MiCA's new framework.

  • Regulation (EU) 2023/1114 on markets in crypto-assets (MiCA): https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32023R1114

In summary, North Macedonia follows a substance-over-form approach, applying its existing Law on Securities to determine if a crypto token constitutes a financial instrument. Issuers of tokens deemed securities must comply with prospectus, registration, and ongoing disclosure requirements, and secondary trading must adhere to capital market rules. While specific enforcement examples against crypto-asset offerings are not prominent, the legal basis for such action exists.