Seychelles introduces the Virtual Asset Service Providers Act, 2024
As digital assets continue to reshape global finance, Seychelles is stepping up to create a secure and dynamic virtual asset ecosystem. The new Virtual Asset Service Providers Act, 2024, which was was officially gazetted and enacted on 30th August 2024, with the commencement date set for 01st September 2024, establishes a comprehensive legal framework to regulate virtual asset service providers (VASPs) while addressing potential risks like money laundering and terrorist financing.
A Proactive Stance on Financial Crime Prevention
Following the 2021 National Risk Assessment, which underscored significant money laundering and terrorist financing (ML/TF) risks tied to virtual assets, Seychelles recognized the urgency for stronger regulatory controls. In alignment with the Financial Action Task Force’s (FATF) Recommendation 15, which addresses new technologies, this act underscores Seychelles’ commitment to managing financial crime risks within the growing digital asset landscape.
Key Aspects of the Seychelles VASP Act 2024:
The VASP Act introduces a range of measures to create a safer and more transparent environment for virtual asset transactions. Some of its key provisions include:
- Licensing Regime: The act requires VASPs to obtain licenses for services like wallet provision, exchanges, and brokering. Only authorized entities can offer these services within or from Seychelles, providing essential safeguards against unauthorized activities.
- Licensing Criteria: VASPs must meet specific requirements such as capital reserves, solvency, cybersecurity measures, and proper assessments of management teams, ensuring that operators meet high standards of professionalism and security.
- Substance Requirements: To promote transparency and accountability, the act mandates that VASPs have a genuine operational presence in Seychelles.
- Promoter Registration: Promoters of initial coin offerings (ICOs) and non-fungible tokens (NFTs) must register, increasing oversight and transparency in these emerging financial sectors.
- Prohibition of Unauthorized Activities: The act strictly prohibits unauthorized promotion or provision of virtual asset services, as well as the operation of mining facilities, mixing or tumbling services, and validator services, to prevent misuse and fraud.
- Enhanced Monitoring: The legislation provides for greater oversight through compliance inspections and investigations, with a focus on tackling online VASPs falsely claiming to be regulated in Seychelles.
- Supervisory Measures: VASPs must adhere to strict controls to manage ML/TF risks, ensuring that they operate with integrity and accountability.
Strengthening the Role of the Financial Services Authority
The Financial Services Authority (FSA) is appointed as the primary regulator for enforcing the VASP Act. Its responsibilities include:
- Conducting compliance inspections and investigations;
- Issuing and revoking licenses;
- Registering ICO and NFT promoters;
- Providing guidelines to ensure industry compliance;
- Requesting information as needed;
- Taking enforcement actions where necessary.
This forward-thinking legislation equips the FSA to safeguard Seychelles’ financial sector while fostering innovation in the digital asset space.
