Seychelles Enacts Legislation to Regulate Virtual Asset Service Providers

Seychelles Enacts Legislation to Regulate Virtual Asset Service Providers

The Seychelles National Assembly has recently passed a significant bill aimed at regulating Virtual Asset Service Providers (VASPs), marking a key step in the nation’s effort to address the risks associated with virtual assets while promoting a secure and ethical framework for their operation.

New Legal Requirements for VASPs in Seychelles

The legislation, introduced by Finance Minister Naadir Hassan, mandates that any entity wishing to operate as a VASP in Seychelles must be registered as a company under either the Companies Act or the International Business Companies Act. A crucial requirement for obtaining a license includes establishing a substantial presence in the country, which entails having a resident director and an office staffed with qualified personnel. This office must also maintain accessible operational records.

Minister Hassan emphasized that only entities, not individuals, will be eligible for VASP licenses. Additionally, entities already regulated by the Seychelles Central Bank will need to seek further approval from the bank to operate as a VASP. The scope of VASPs covered by this legislation includes wallet service providers, virtual asset exchanges, and investment service providers, all of which will undergo rigorous evaluation before being granted a license.

Balancing Innovation with Security

The new law is designed to strike a balance between fostering innovation in the virtual asset sector and safeguarding against money laundering and other illicit activities. This approach aligns Seychelles with international standards, particularly those recommended by the Financial Action Task Force (FATF). The Seychelles Financial Services Authority (FSA) will be responsible for enforcing these new regulations.

In addition to regulatory measures, the bill also includes provisions to educate consumers and businesses about the risks associated with virtual assets, such as scams and improper usage. This comprehensive approach aims to protect the integrity of Seychelles’ financial system while supporting the growth of digital finance.

Seychelles’ Role in the Global Digital Finance Landscape

With this legislation, Seychelles positions itself as a proactive and forward-thinking regulator in the rapidly evolving digital finance landscape. By implementing these regulations, the country reinforces its commitment to maintaining a secure and transparent financial environment while embracing technological advancements.

European Union’s MiCA Regulation: A Parallel Development

The move in Seychelles mirrors broader regulatory trends seen globally, such as the European Union’s Markets in Crypto Assets (MiCA) framework. MiCA, which was approved by the European Parliament in April 2023, aims to harmonize crypto regulation across EU member states. As part of this framework, stablecoins issued within the EU are subject to increased regulatory scrutiny, with full compliance expected by the end of this year. Notably, Circle, the issuer of USDC, became the first global stablecoin firm to achieve compliance with MiCA in July 2023.

By enacting this legislation, Seychelles is taking a significant step towards aligning with international regulatory standards, ensuring that its financial system remains robust and secure in the face of the growing influence of digital assets.

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