Virtual Assets Service Providers to be subject to new regulations |19 January 2024
Vice-President Afif speaking during the press briefing (Photo: Kurtrine Albert)
The cabinet of ministers in Seychelles has approved the introduction of a regulatory framework for Virtual Assets (VA) and Virtual Assets Service Providers (VASP), towards becoming compliant to Recommendation 15 of the Eastern and Southern African Anti-Money Laundering and Countering the Financing of Terrorism (ESAAMLG) Task Force.
The new regulations aim to strike a balance between fostering innovation and ensuring responsible and sustainable growth within the VA industry. The framework is also designed to tackle potential financial crime risks associated with the misuse of VA and services offered in, or from Seychelles.
The National Anti-Money Laundering and Countering the Financing of Terrorism Committee (NAC) has played an active role in developing an action plan to address these risks and meet the requirements of the Financial Action Task Force (FATF) Recommendation 15, which focuses on new technologies.
The regulation, set to be finalised by the end of February, will be submitted for re-rating under Recommendation 15 by March 2024, with a decision expected from the Eastern and Southern African Anti-Money Laundering and Countering the Financing of Terrorism (ESAAMLG) Task Force in September 2024.
In a briefing yesterday morning, Vice-President Ahmed Afif acknowledged past weaknesses in the system, citing a 2018 identification by ESAAMLG of a weakness related to virtual financial transactions.
The recommendation was for Seychelles to strengthen its framework covering such transactions. The government has responded by introducing the VASP Act, which establishes a clear legal framework and licensing system for companies involved in virtual financial transactions.
Under the proposed regulations, licensing for virtual asset transactions will be subject to supervision and controlled by specific regulations.
Companies, rather than individuals, will be eligible for licences, and local entities must demonstrate substance in Seychelles, including a qualified board based in the country.
Vice-President Afif emphasised the need for clarity in licensing, expressing concern over entities claiming Seychelles as their base, without physical presence in the country.
“When the regulation is enforced, they will not be able to claim that they are operating from Seychelles, if they have not been issued a licence from Seychelles,” Vice-President Afif stated.
The proposed activities to be regulated include VA wallet providers, VA exchanges, asset brokers, and investment providers, while certain activities such as payment service providers and mining mixers will not be permitted.
Once the National Assembly is in session, the regulations are to be tabled, although it is not subject to the Assembly’s approval.
The regulations were collaboratively drafted by the Central Bank of Seychelles, the Ministry of Finance, the Financial Intelligence Unit (FIU), and the Financial Services Authority (FSA) as the sector regulator. The draft regulations were developed in consultation with various VASP.
According to the vice-president, there is strong interest from local operators to secure licences for their operations, indicating a strong interest among local operators to obtain licences.
The move aligns with FATF's Recommendation 15, emphasising the importance of regulating virtual asset service providers for anti-money laundering and counter-terrorism financing purposes. The proposed regulations, once passed, will mark a significant milestone in Seychelles' efforts to create a robust and responsible framework for the burgeoning virtual assets industry.
Laura Pillay
