What exactly is a Virtual Asset Service Provider (VASP)?
A cryptocurrency (or cryptocurrency) is a digital asset that … more, digital asset, convertible virtual currency … there seems to be an endless list of terms for the same concept. As if that wasn’t enough, a A business that enables customers to buy cryptocurrencies or … more can also be referred to as a virtual asset service provider (What is a Virtual Asset Service Provider (VASP)? A virtual A … more), Virtual Asset Entity, Digital Asset Customer (DACs), In 2011, FinCEN issued a final rule that … more, or any other set of classifications, depending on the context. While some tend to refer to all entities associated with virtual assets as VASPs – just as they may refer to all virtual assets as “crypto”, there are some important distinguishing features between the various ones A digital asset entity is an umbrella term for a series of assets … more Typologies that affect how this company is regulated.
Digital Asset Entity (DAE)
A digital asset entity is an umbrella term for a number of companies based on cryptocurrency transactions. Digital asset entities include virtual asset service providers (VASPs) such as cryptocurrency exchanges and ATMs that are themselves financial institutions, as well as gambling sites, incubators, and other entities that use crypto but are not always classified as financial institutions. Alternative names are Virtual Asset Entity and Crypto Asset Entity.
A digital asset customer is a digital asset entity that … more
A digital asset customer is any digital asset entity that uses the services of a bank or other formal financial institution. DAC was first used to describe a broad grouping of cryptocurrency-based customers in the Treasury Department’s OCC enforcement action against MY Safra Bank in early 2020.
On January 30, 2020, the Office of the Comptroller of the Currency (OCC) issued the first cryptocurrency-related enforcement lawsuit against a US bank – MY Safra Bank (MYSB) based in New York City. The enforcement action consisted of an injunction that focused solely on poor anti-money laundering (AML) practices to comply with and monitor the bank’s digital asset customers (DAC). These entities included Exchange, ATM operators and virtual OTCs, as well as other crypto-related companies.
Read more https://ciphertrace.com/occ-hits-new-york-based-bank-with-first-ever-enforcement-action-for-lack-of-crypto-aml-compliance/
Virtual Asset Service Provider (VASP)
If a digital asset company engages in certain financial activities with virtual assets, AML / CFT and other obligations may apply to the company’s role as a money transmitter. These digital asset units may be referred to as Virtual Asset Service Providers (VASPs) or money transmitters operating in convertible virtual currency, depending on the regulator or political body.
A VASP is defined by the Financial Action Task Force (FATF) as a company that performs one or more of the following actions on behalf of its clients:
- Exchange between virtual assets and fiat currencies;
- Exchange between one or more forms of virtual assets;
- Transfer of virtual assets;
- Custody and / or management of virtual assets or instruments that enable control over virtual assets;
- Participation in and provision of financial services in connection with the offer of an issuer and / or the sale of a virtual asset;
This definition encompasses a range of crypto businesses including exchanges, ATM operators, wallet custodians, and hedge funds. The FATF also recommends that VASPs be subject to the same stringent AML / CTF and KYC requirements as traditional financial institutions.
The FATF’s VASP definition is intended to capture specific financial activities and functions and does not depend on the specific type of company but “how the person who [virtual assets] and for whose benefit. ”According to the FATF, a person (natural or legal person) who, as a company, engages in one of the activities described in the bulleted list above“ for or on behalf of another person ”is a VASP, regardless of the technology used for it used to carry out the covered VA activities.
This means that there are some digital asset entities – miners for example – who may or may not be classified as VASPs depending on their activities and functions. While a single miner’s activity may not be enough to classify him or her as a VASP, a mining pool’s activity could if they are involved in any of the above. According to the FinCEN regulations, for example, a mining pool operator would not be considered a money transmitter if it only transfers virtual assets to pool members or contract buyers in order to distribute the amount earned, “since these transfers are an integral part of the service provision “. . ”However, if the Leader combined its administration and rental services with hosting virtual wallets on behalf of the pool members (i.e. custody of virtual assets as per the FATF list), the Leader would be considered a money sender for account management -based money transfer.
Is a DEX or Decentralized Exchange is a type of cryptocurrency sex … more a VASP?
According to the FATF guidelines, decentralized exchanges (DEXs) are VASPs and should be regulated as such. A DEX or any other decentralized (distributed) app (DApp), its owner / operator, or both fall under the definition of VASP if they “facilitate the exchange or transfer of values (whether in VA or traditional fiat currency) or carry out. … “Likewise, a person who develops a DEX can be a VASP if, as a company, they facilitate or carry out the activities listed above on behalf of another natural or legal person.
Countries need to be able to determine how best to mitigate the risks associated with centralized and decentralized VASP business models. FinCEN’s May 2019 guidelines clarified their position on DApps: “The same regulatory interpretation that applies to mechanical agencies such as CVC kiosks applies to DApps that accept and transmit values, regardless of whether they are profit-oriented. Accordingly, when DApps make money transfers, the definition of the money transmitter applies to the DApp, the owners / operators of the DApp, or both. “
Why It Matters: All VASPs are Money Service Businesses (MSBs)
While there might not be a huge difference in exchanging the terms digital asset, virtual asset, and crypto, referring to a non-hosted wallet as a VASP implies certain AML obligations that the company may not have. Understanding the different typologies can provide clarity about the different obligations each company has for digital assets. For example, a VASP under FATF standards would also count as an MSB under FinCEN standards, which means they have specific AML obligations under the BSA. Conversely, not all VASPs fall under the EU’s AMLD5 regulations on cryptocurrencies.
As new regulations develop, choosing the right terminology from an existing pool can help avoid confusion by preventing the introduction of new terms or creating conflicting definitions with those already formed. Some common ways to talk about VASPs and cryptocurrency are below.
- Financial Action Task Force (FATF) – Virtual Asset Service Provider (VASP); Virtual assets
- Financial Crimes Enforcement Network (FINCEN) – Money Broker / Money Services Business; convertible virtual currency (CVC)
- US Commodity Futures Trading Commission (CFTC) – Designated Contract Markets (DCMs); virtual currency
- Securities Exchange Commission (SEC) – trading platform for digital assets; digital asset
- EU AMLD5 – providers providing exchange services between virtual currencies and fiat currencies; virtual currency