Seychelles approves landmark crypto bill to regulate virtual assets sector

Seychelles, long regarded as a crypto-friendly jurisdiction, is moving to rein in the digital asset industry within its borders as consumer complaints about crypto-related losses continue to rise.

The country’s National Assembly has unanimously approved a new Virtual Assets Bill presented by Finance Minister Naadir Hassan. The legislation, reported by Seychelles News Agency, aims to establish a comprehensive legal framework for regulating virtual asset service providers (VASPs) operating in Seychelles.

The details

• Under the new framework, VASPs will be required to set up a company under either the Seychelles Companies Act or the International Business Companies Act.
• Applicants must demonstrate a “substantial presence” in Seychelles, including having a resident director and an adequately staffed office.
• The Financial Services Authority (FSA) has been designated as the regulator responsible for implementing and enforcing the Virtual Assets Bill.
• Key VASP activities that will require licensing include virtual asset exchanges, brokerage, investment services, and wallet providers.

Key quote

“For an applicant to get a license, there will be well-detailed and strict criteria they will have to follow and meet for them to address identified vulnerability directly linked to the services they offer,” Hassan said.

Dive deeper

This development comes over a year after Minister Hassan first revealed that the island nation, located in the Indian Ocean, southeast of mainland Eastern Africa, was developing a national digital asset policy amid a rise in consumer complaints about crypto-related losses.

• The bill also follows a recent report that shows that 97% of African countries struggle to comply with the Financial Action Task Force’s (FATF) Recommendation 15 (R 15) on crypto assets.
• Hassan acknowledged that the FATF’s recommendation was factored into the bill:

“I want to point out that the proposed bill for virtual asset service providers is balancing innovation with risk mitigation and 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.”

Zoom Out

Seychelles’ efforts to tighten crypto oversight mirror a broader effort across Africa to comply with global standards set by the FATF.

• South Africa currently has the continent's most advanced crypto regulation, granting 138 crypto licenses as of June 2024.
• Nigeria, on the other hand, is still figuring out what its regulatory framework should be. The West African nation released a VASP rulebook in 2022, but industry experts deemed it impractical.
• Now, the country’s new Securities and Exchange Commission (SEC) chief is looking to make progress in this area. The regulator recently introduced a sandbox for crypto operating in the country.