Seychelles Passes Bill to Regulate Virtual Asset Service Providers

The Seychelles National Assembly has passed a bill aimed at regulating virtual asset service providers (VASPs).

The legislation, introduced by Finance Minister Naadir Hassan, is part of the country’s broader strategy to mitigate risks associated with virtual assets and ensure that VASPs operate within a legal and ethical framework.

The new law mandates that any entity seeking to operate as a VASP in Seychelles must establish a company under the Companies Act or the International Business Companies Act.

Applicants Must Demonstrate Presence in Seychelles

To qualify for a license, applicants must demonstrate a presence in Seychelles, including having a resident director and an office staffed with competent personnel.

Additionally, all operational records must be accessible through this local office.

“For an applicant to qualify for a licence, the principal criteria is to demonstrate a substantial presence in Seychelles, such as having a director who is a resident,” Hassan said.

“They must have an office in Seychelles with enough competent workers and that all records are accessible via that office.”

Hassan added that individual applicants will not be considered, and entities already regulated by the Seychelles central bank will need to obtain additional approval from the bank.

Prospective VASPs, including wallet service providers, virtual asset exchanges, and investment providers, will undergo a thorough evaluation before receiving their licenses.

The legislation seeks to balance the promotion of innovation within the virtual asset sector with the need to prevent money laundering and other illicit activities.

This aligns with international standards, particularly the recommendations set forth by the Financial Action Task Force (FATF).

The Seychelles Financial Services Authority (FSA) will be responsible for enforcing the new regulations.

The bill also includes provisions for educating consumers and businesses about the potential risks associated with virtual assets, including scams and improper usage.

The move positions Seychelles as a proactive regulator in the rapidly evolving digital finance landscape, reinforcing its commitment to safeguarding its financial system while supporting technological advancement.

EU’s MiCA Regulation

MiCA, the Markets in Crypto Assets framework, is a comprehensive regulatory framework established by the European Union to create consistency in crypto regulation among its member states.

It was approved by the European Parliament in April 2023, and its rules are being implemented in stages.

As part of the MiCA framework, stablecoins issued within the region are subject to increased regulatory requirements.

Various provisions, including those for stablecoins, are being phased in gradually, with full compliance expected by the end of this year.

Starting from June 30, stablecoin issuers were required to comply with specific MiCA requirements.

Circle, the issuer of USDC, became the first global stablecoin firm to achieve compliance with MiCA on July 1.

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