Seychelles VASP regime

For those who missed it over the summer, the Seychelles VASP Bill 2024 was passed. 

The Bill is now an Act: Virtual Asset Service Providers Act 2024 (VASP Act)

The Seychelles VASP Act aims to establish a comprehensive legal framework for regulating virtual asset service providers (VASPs) and addressing financial crime risks linked to virtual asset misuse. 

The changes have come about as part of areview of AML/CTF controls for virtual assets following a 2021 National Risk Assessment.

Key aspects of the VASP Act 

• Substance: Companies will be required to be locally registered companies and to have a presence in the Seychelles. “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” Naadir Hassan (Finance Minister).

• Financial Services Authority (FSA) Oversight: Designates the FSA as the regulatory body overseeing VASPs and the registration of initial coin offerings (ICOs) and non-fungible tokens (NFTs).

• In scope VASPs:  Wallet Providers, Exchange and conversion services, Transfer Services, Brokering, some intermediary and facilitation services, Investment Providers and Investment Advisor services. ICOs (token sales) and NFT activities are also in scope.

• Licensing Regime: Introduces a licensing requirement for VASPs operating in or from Seychelles, outlining permissible activities and entities eligible for licensing.

• Promoter Registration: Mandates registration for promoters of ICOs and NFTs. Interestingly they have decided to treat NFTs as virtual assets notwithstanding that the FATF takes a more nuanced approach to NFTs.

• Prohibitions: Prohibits unauthorised VASP activities, including the operation of mining facilities and mixer/tumbler services.

• Compliance and Enforcement: Grants the FSA powers to inspect, investigate, and enforce compliance with the law, including the ability to impose penalties and wind up non-compliant licensees.

• Consumer Protection: Includes measures to raise awareness about virtual asset scams and misuse, ensuring consumer protection.

• Amendments to Existing Laws: Introduces consequential amendments to related acts like the Anti-Money Laundering and Countering the Financing of Terrorism Act to align with the VASP regulatory framework.

Grandfathering: There is a grandfathering period for businesses already operating in the virtual asset space. If a person is already providing virtual asset services when the Act commences, they have until December 31, 2024 to apply for a license or register as an issuer. They can continue their business activities during this period until a decision is made on their application.