Comprehensive Overview: The Virtual Asset Service Providers Act, 2024 (VASPA)

The Virtual Asset Service Providers Act, 2024 (VASPA) came into effect on September 1, 2024, marking a significant shift in how Seychelles regulates virtual asset service providers (VASPs). This new legislation is part of Seychelles’ commitment to enhancing transparency, investor protection, and compliance within the fast-evolving virtual asset space, such as cryptocurrency exchanges, custodial services, and related platforms.

Here is a detailed breakdown of the key provisions:

• 1. Entity Registration: All entities wishing to provide virtual asset services in Seychelles must be incorporated locally, ensuring a meaningful presence in the jurisdiction. VASPs include platforms involved in trading, managing, or safeguarding virtual assets. Companies that fail to apply for a license by the December 31, 2024 deadline will face severe penalties, including fines or imprisonment for directors.
• 2. Share Capital Requirements: VASPA mandates that companies maintain minimum paid-up capital as per Schedule 1 of the Virtual Asset Service Providers (Capital Adequacy and Other Financial Requirements) Regulation, 2024. The specific capital requirements are determined by the size and scope of the VASP’s operations and are intended to protect clients against market risks and operational failures. Maintaining proper solvency ratios is essential to ensuring the financial health of the VASP and the security of client funds.
• 3. Economic Substance: As with other financial entities in Seychelles, virtual asset service providers are required to maintain sufficient economic substance within the country. This includes having a local office, employing qualified personnel, and performing core income-generating activities in Seychelles. The goal is to prevent businesses from using Seychelles as a nominal headquarters without conducting actual business activities on the island.
• 4. Compliance Requirements: One of the primary focuses of VASPA is strong compliance with anti-money laundering (AML) and counter-terrorism financing (CFT) measures. Licensed VASPs must have robust systems in place to conduct customer due diligence (CDD), monitor transactions, and report suspicious activity to the relevant authorities. Additionally, VASPs must appoint a Compliance Officer and an Alternate Compliance Officer to oversee these protocols and ensure they adhere to international financial standards.
• 5. Directors and Governance: Under VASPA, the directors of virtual asset service providers are required to meet strict fit-and-proper criteria. This ensures that directors have the expertise and integrity necessary to oversee virtual asset operations. VASPs must have at least two directors, one of whom must be a resident of Seychelles. Directors are also held personally accountable for ensuring that their company complies with the Act.
• 6. Prohibited Activities: Certain activities, such as the operation of mining facilities and the use of mixer and tumbler services (which anonymize virtual asset transactions), are prohibited under VASPA. These prohibitions align Seychelles with international regulatory standards and aim to prevent money laundering and illicit financial activities.

Through VASPA, Seychelles aims to strike a balance between fostering innovation in the virtual asset industry and maintaining rigorous regulatory oversight to protect consumers and investors.

As your Registered Agent, we are dedicated to ensuring that all International Business Companies (IBCs) under our administration are fully informed about these new requirements. If your company is conducting or intends to conduct virtual asset services, we advise you to evaluate your business activities to ensure compliance with VASPA.

Key Takeaways:

• License Deadline: Apply for a VASP license by December 31, 2024.
• Economic Presence: Ensure your business has substantial operations in Seychelles.
• Compliance Obligations: Appoint qualified compliance officers and adhere to AML/CFT requirements.
• Director Requirements: Meet the governance standards, including having at least one Seychelles-based director.

For any further assistance, contact us at info@sfm.com or visit the FSA FAQ page for more information.