Cryptocurrencies in the Western Balkans: Analysis of Legal Regulation and Future Prospects

Background: Cryptocurrencies have revolutionised the global financial sector, thus challenging traditional financial systems. They offer new opportunities for investments and fund transfers. However, the legal challenges associated with regulating cryptocurrencies are numerous, especially in the Western Balkans, where existing legal infrastructures are not suitable to address the decentralised nature of this financial system. This study provides an analysis of the legal obstacles to regulating cryptocurrencies in the region, examining the main legal issues and existing legal infrastructure that impact the development of this digital financial sector. Methods: This scientific paper explores the legal spectrum of cryptocurrency regulation in the Western Balkan countries. The research objectives include examining the extent of legal regulation across the six countries and identifying legal shortcomings. Given the nature of the topic, the analytical method was employed to study existing regulations on cryptocurrencies and practical cases related to cryptocurrencies; the comparative method to contrast the legal approaches among Western Balkan countries; and the statistical method to quantify the scope and trends in crypto-related activity in the region. Results and Conclusions: The Western Balkan countries have not yet developed a stable and harmonised framework for regulating cryptocurrencies. In some Western Balkan countries, this leaves room for abuse and misuse, largely due to technological barriers. The findings show that Kosovo and Bosnia and Herzegovina are particularly weak in the legal regulation of cryptocurrencies; the absence of relevant court cases or judicial precedents in these countries is directly linked to the lack of laws governing this sphere. Meanwhile, Serbia and Albania are a step further in the legal regulation of cryptocurrencies. The article examines whether there have been efforts to create a common legal framework across the Western Balkan region. The analysis reveals that no country has defined or specified the scope of cryptocurrency activity in law. Moreover, there are no efforts to create a common framework. These countries still require a much greater commitment to reform and strengthen their national legal infrastructures. In the case of Kosovo, the legislative gap is concerning, as it also reflects the inability to combat illegal acts associated with cryptocurrency use.