Enactment Of The Virtual Assets Service Providers (VASP) Act 2024 In Seychelles

Licensing regime of the Act

According to the Act, any person conducting, or purporting to conduct virtual asset services, or hold himself, herself or itself out as carrying on that activity, in or from Seychelles, must obtain the necessary licenses from the Authority to operate legally.

Permissible activities

The Act outlines the permissible activities for which a license may be issued:

• Virtual Asset Wallet Providers: Custodial services that enable the management, transfer, and safekeeping of virtual assets, Initial Coin Offerings (ICOs) and Non-Fungible Tokens (NFTs), for and on behalf of clients.
• Virtual Asset Exchange: Services facilitating the exchange between (1) virtual assets, ICOs, NFTs, and fiat currencies for and on behalf of clients or (2) one or more forms of virtual assets, ICOs, NFTs, and fiat currencies for and on behalf of clients; as well as transfer, safekeeping, and management of these assets.
• Virtual Asset Broking: Services that facilitate the exchange or safekeeping of virtual assets, ICOs, NFTs, and fiat currencies through a virtual assets wallet provider and virtual assets exchange for and behalf of clients.
• Virtual Asset Investment Providers: Services offering investment and fund management portfolios of virtual assets, ICOs, NFTs, and delivering investment advice for these assets.

For detailed clarification of each activity, refer to the Virtual Assets Service Providers (VASP) Act 2024.

Prohibited activities

The Act expressly prohibits the following activities:

• Operating a mining facility, mixer, or tumbler service in or from Seychelles; and
• Using specific words such as “blockchain,” “cryptocurrency,” “currency,” “deFI,” “digital wallet,” “hot/cold wallet,” “exchange,” “ICO,” “NFT,” “virtual,” “virtual coin,” or “Web 3” in registered business or trade name, unless the entity is a licensee or registrant under the VASP Act.

Eligible persons

The following persons are qualified to apply for a license as a virtual asset service provider:

• A company incorporated or registered under the Companies Act of 1972 (excluding overseas companies); or
• An international business company incorporated, continued, or converted under the International Business Companies Act of 2016.

Criteria for license registration

To ensure compliance and integrity, Virtual Asset Service Providers (VASPs) must meet the following criteria for license registration:

Substance and prudent manner requirements

VASPs must adhere to substance and prudent requirements as outlined below:

• The management of the VASP’s business affairs must be conducted by a board of directors comprising at least two members, with a minimum of one being a local resident. All directors must be individuals (natural persons);
• Establish and maintain a fully staffed office in Seychelles;
• Employ qualified or experienced personnel to manage this office;
• Ensure that all records and documentation required by the Act and its regulations are readily available and accessible from the local office;
• Manage complaints directly in Seychelles;
• Hold a minimum of two board meetings annually in Seychelles;
• Conduct at least four management meetings annually in Seychelles;
• Maintain a financially sound business by meeting any prescribed capital, solvency, and insurance requirements; and
• Comply with all relevant laws in Seychelles, including the VASP Act and AML/CTF legislation.

Fit and proper standards

Take all reasonable measures to ensure that key personnel—including shareholders, ultimate beneficial owners (UBOs), directors, compliance officers, and other principal officers—are fit and proper for their respective roles.

Audit requirements

• Prepare annual audited financial statements as mandated by the Act, covering all transactions and balances associated with the business.
• Within thirty days of obtaining the license, appoint an auditor approved in writing by the Authority to audit the financial statements.

Cybersecurity measures

Implement and maintain effective cybersecurity measures and prepare a cybersecurity policy.

Public interest

Demonstrate to the Financial Services Authority (FSA) that the size, scope, and market role of the VASP aligns with public interest considerations.

Registration regime for ICOs and NFTs

The Act also introduces a registration regime for the promotion and issuance of Initial Coin Offerings (ICOs) and Non-Fungible Tokens (NFTs).

• Any promotion of an ICO or the sale/investment in NFT development in or from Seychelles must be conducted by licensed Virtual Asset Service Providers (VASPs) or entities authorized under the Securities Act of 2007 and registered with the relevant authority prior to promotion.
• Any issuance or purport to issue an ICO or NFT in or from Seychelles must register with the authority before proceeding with the issuance.

What to do for businesses in Seychelles?

The VASP Act outlines implications for businesses operating in Seychelles. Whether you are an existing company or a new company, compliance with the Act is crucial.

For existing companies

By 31st December 2024, existing companies involved in virtual asset services in or from Seychelles must:

• Submit the necessary applications or registrations
• Cease operations of any mining facilities or mixer/tumbler services
• Remove any references to prohibited words from business or trade names if they are unable to obtain the license or registration under the VASP Act

For new companies

New companies must obtain the necessary licenses or registrations before commencing the business of providing VASP services or issuing/promoting ICOs or NFTs. Importantly, new companies with no previous operational history are expressly forbidden from undertaking any of the prohibited activities under VASP Act 2024.

By adhering to these requirements, businesses can ensure compliance with the VASP Act and take advantage of the opportunities it presents.

Conclusion

The VASP Act 2024 signifies Seychelles’ commitment to fostering a safe and dynamic virtual asset sector, ensuring sustainable growth and international cooperation.

We encourage all stakeholders to familiarize themselves with the new regulations and take the necessary steps to align with the Act.

If you have any questions regarding the Act, please consult with a legal professional or reach out to the Seychelles Financial Services Authority for further information

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