Distributed Ledger Technology (DLT) stock exchange is a centralized or decentralized DLT stock exchange, in which: Digital Tokens (DT) of services, DT of payments and DT of assets can be listed and traded. In addition, exchanges between FIAT money and/or virtual currencies against DT of services, DT of payment and DT of assets and vice versa may also be performed and DT of securities can be listed and traded or exchanged between, in accordance with the Albanian Law 66/2020 "On financial markets based on DLT" (the "Law").
Decentralized DLT stock exchange is a stock exchange that uses DLT technology, where the private key to access DT and/or VC, which are subject to transactions on this stock exchange, is held by the stock exchange users themselves. On the other hand, centralized DLT stock exchange is a stock exchange that uses DLT technology, where the private key for accessing DT and/or VC, which are traded on this stock exchange, is held by the DLT stock exchange itself.
DLT stock exchange licenses are divided into three categories, as follows:
Category "A" includes licenses of the centralized and decentralized DLT stock exchange, where only "DT of services, and/or DT of payments, and/or DT of assets can be traded;
Category "B" includes licenses of the centralized and decentralized DLT stock exchange, where, in addition to the activities listed in category "A", exchanges between
FIAT money and/or virtual currencies against DT of services, DT of payment and DT of assets and vice versa may also be performed;
Category "C" includes licenses of the centralized and decentralized DLT stock exchange, where, in addition to the activities listed in category "B", DT of securities can also be traded;
Any legal entity that wants to operate as a DLT stock exchange, in accordance with the Law, must obtain the relevant license issued by AMF and AKSHI, and may only operate during the period of validity of the license, as well as be registered in the register of DLT stock exchange licensed in accordance with the Law. In addition to the licensing requirements, specific licensing requirements of DLT are provided in article 51 of the Law.
For any DT and Virtual Coin (VC) to be listed on a DLT stock exchange, the latter must declare that it is independent from the issuer of the DT and/or VC and that it is not in a position of conflict of interest with the issuer in question and/or with the relevant STO or ICO. This self-declaration must be attached to the application for the license and the annual statement of compliance.
According to the Law, DLT stock exchanges are liable towards any customer for all damages that have been directly caused, as a result of the violation of any of the DLT stock exchange duties or responsibilities set out in the Law. Article 53 of the Law provides all duties applying to the DLT stock exchange.
Centralized DLT stock exchanges must meet additional criteria set forth in articles 55 to 59 of the Law.
Trading cryptocurrency is generally simple, but what if you're looking for options that are a bit more advanced? That's where margin trading comes in. Margin trading lets you amplify your gains from market swings, allowing you to execute more complex, active trading strategies. Margin trading is the activity of transactions through the use of financial leverage in DLT stock exchanges or DLT trading premises, where users or DLT stock exchanges or DLT trading premises lend to users, to be used as collateral, for the purpose of investment on these DLT scholarships or DLT trading premises, taking interest from these loans. In more simple words, Margin trading with cryptocurrency allows users to borrow money against their current funds to trade cryptocurrency "on margin" on an exchange. Consequently, users can leverage their existing cryptocurrency or currency (EUR, dollars etc.) by borrowing funds to increase their buying power (generally paying interest on the amount borrowed, but not always).
A DLT stock exchange can only perform activities related to Margin Trading in cases where it:
- verifies, making available a copy of the relevant license from the Bank of Albania;
- verifies, by making available copies of the relevant documentation, that the activity of Margin Trading in the DLT stock exchange is in accordance with the conditions and criteria that are determined by the regulatory acts pursuant to the Law.
Example: With margin trading you can, for a theoretical example, buy $10,000 worth of bitcoin with only $5,000 (borrowing 50% AKA leveraging 2:1 or 2x). You put down your $5,000, you borrow the other $5,000 from a lender automatically (generally either borrowing from the exchange or other traders), and then when you sell you may-or-may-not pay a fee (that fee being interest on the money borrowed). With that said, because you are borrowing money, you owe the money back along with any applicable fees, no matter what.
That means if you bet on cryptocurrency going up, and it goes down or stagnates, and you have to sit on your coin, you'll rack up interest in cases where interest is charged. That also means, if it goes down, you'll owe what you borrowed plus any fees even though you lost money.
DLT trading premises
DLT trading premises are the trading premises, where the trading activity of a DLT stock exchange is performed, according to the certificate given by AKSHI after the evaluation of the criteria defined in paragraphs "a", "b", "c", "ç" and "d", of article 51, of the Law. DLT trading premises can be centralized trading premises or decentralized trading premises. Certification by AKSHI is carried out in accordance with the provisions of Chapter II of the Law (i.e. Licenses and competences of authorities), by analogy implementing the relevant procedures. In addition, the provisions of the chapter related to DLT stock exchange, shall apply mutatis mutandis to DLT trading premises, in addition to the relevant provisions of the legislation in force in the Republic of Albania.
End note regarding DLT stock exchange
The exponential pace of asset digitalization provides immense opportunities to reshape capital markets. Whichever way a company chooses to enter, digital securities stand to open the door to a whole new type of global market, one that resembles the efficiency of cryptocurrencies but still uses tangible assets as a basis.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.