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Fintech Market Overview

This article does not constitute legal advice.

Digital assets in Portugal

Fintech Software

Blockchain or distributed ledger technology is not subject to specific regulation in Portugal as a technology. Indeed, the regulation brought by blockchain has been essentially focused on the banking and finance sector, including cryptocurrencies and ICOs, notably in what concerns investor protection and fraud prevention. There is currently no regulation on the tokenisation of assets in general (and securities in particular, such as bonds or shares), although nothing in the law seems to generally prohibit it. As such, in principle we see no impediment to the tokenisation of assets or credits, provided that the parties involved in a given transaction agree on the dematerialisation of the agreement or title and the underlying assets (and the corresponding representation of the assets by tokens). Notwithstanding, in principle it would not be applicable to those assets subject to special registration or notarisation formalities (such as real estate assets) as this would additionally entail formal legal recognition by the governmental or registration authorities.1

However, in Portugal the approach in this sector has been to generally exclude cryptocurrencies from being qualified as tender or 'legal currency' and not to issue specific regulations dealing with them. As far back as 2013, the BoP issued a clarification under which it considered that Bitcoin cannot be considered secure currency, given that its issuing is carried out by non-regulated and non-supervised entities. In addition, the BoP clarified this and stated that users bear all the risk, as there is no fund or protection scheme guaranteeing depositors' or investors' funds. This approach closely follows the position of the European Banking Authority (EBA). Despite the lack of regulation and supervision, the BoP has indicated that the use of cryptocurrencies is not a forbidden or illegal act. Hence, this entity is so far more focused on a preventive and educational approach, by means of alerting to the risks of cryptocurrencies.1

Both the BoP and the CMVM share this understanding and – like the majority of European regulators – have been pursuing a wait-and-see approach towards regulation at the European level, which has culminated in the proposal for regulations contained in the Digital Finance Package (notably the proposal for a Regulation on Markets in Crypto-assets (MiCA)), which will bring a broader and harmonised European framework applicable to both cryptoassets and blockchain technology.1

Until these regulations are effectively enacted and come into force, a different case-by-case approach should be taken regarding those assets qualifying as securities, such as security tokens or other hybrid tokens comprising some security-like traits, pursuant to the European Securities and Markets Authority (ESMA) advice dated 9 January 2019, whereas cryptoassets qualifying as transferable securities (or another type of financial instrument under the Markets in Financial Instruments Directive (MiFID) II criteria) should be subject to the broader EU financial rules in this respect (including MiFID II and the Prospectus and Market Abuse Directives). Although the definition of what qualifies as a 'security' has been mostly committed to national regulation implementing EU legislation, we would expect to see the CMVM adopt the same approach as ESMA and to decide on the applicability of the legal framework applicable to securities (including that of public offerings, in the case of ICOs) on a case-by-case basis. An example of this approach was seen in 2018 in the context of the Bityond ICO, where the CMVM decided not to apply the public offerings regime (and the securities legal framework as a whole) after having analysed the white paper and the token's configuration and associated rights and obligations, which did not present traits similar to those of tradeable securities.1

Smart contracts in Portugal

Fintech in Portugal

Fintech in other countries

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Portuguese Fintech Lawyers

Denis Polyakov

Denis Polyakov

Comprehensive legal services for businesses on corporate, tax law, cryptocurrency legislation, investment activities

Kristina Berkes

Kristina Berkes

Participation as a lawyer at investment venture funds, leading venture M&A deals in IT, supporting iGaming and business assets

Silvia Calls

Silvia Calls

We work for international SMEs, startups and Telco's

Notes
  1. https://thelawreviews.co.uk/title/the-financial-technology-law-review/portugal
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