Seychelles’ new bill requires VASPs to have local offices, directors

Seychelles lawmakers have approved a new bill regulating digital currencies in the island nation.

The bill, proposed by the Minister for Finance, Naadir Hassan, was unanimously approved by the Seychelles National Assembly. It complements the country’s broader efforts to tackle risks posed by digital assets to its financial industry, which was heavily influenced by existing anti-money laundering (AML) and combating the financing of terrorism (CFT) regulations.

One of the bill’s standout stipulations is local presence for all virtual asset service providers (VASPs).

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

Seychelles joins other countries requiring VASPs to operate local offices for increased transparency and accessibility. In July, Nigeria’s SEC published a regulatory update demanding that all digital asset firms targeting Nigerian investors open local offices and appoint a local CEO. The SEC pledged to conduct random onsite inspections to ensure the licensees are keeping up their end of the bargain.

However, the local office stipulation might be more critical for Seychelles than Nigeria. Despite being Africa’s smallest nation, with a population of just over 100,000, the archipelagic state is home to some of the world’s largest digital asset firms. These include KuCoin, an exchange with 30 million users and trillions of dollars in lifetime trading volume. Others include OKX, Prime XBT, and HTX (formerly Huobi), the exchange owned by controversial TRON founder Justin Sun.

Local offices have proven an essential safeguard for investors. Japan provided the best showcase: when the global FTX exchange imploded, Japanese investors didn’t lose a dime as the country’s laws require a local subsidiary whose assets are separate from the global parent company.

The new laws will cover exchanges, wallet providers, brokers, and investment service providers in Seychelles. Hassan told local media that the government intends to apply strict licensee criteria. The bill also cements the Financial Services Authority (FSA) as the sole digital asset regulator.

“I want to point out that the proposed bill for virtual asset service providers is balancing innovation with risk mitigation and the measures against money laundering. Seychelles has ensured that it has taken all measures recommended by the Financial Action Task Force (FATF), by emphasizing risk management,” commented Hassan.

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