Crypto business license in Seychelles
On 1 September 2024, the Virtual Asset Service Providers Act 2024 (the VASP Act) came into force in Seychelles. The Act introduces mandatory licensing for companies providing services related to cryptoassets in Seychelles. The VASP Act also establishes liability for unlicensed activities and other violations.
A virtual asset is a digital representation of value that can be digitally traded or transferred and can be used for payment or investment purposes. It does not include digital representation of fiat currencies, securities and other financial assets.
What should the existing service providers do?
Under article 42 of the Act, if a person provides virtual asset services on the commencement of the Act, the person must apply for a VASP license by 31 December 2024.
Such persons may continue their activities until a licence is obtained or until its issuance is refused, which shall be communicated to the applicant in writing. The Seychelles Minister of Finance may issue regulations concerning the implementation of the Act, including necessary transitional provisions.
In this regard, companies concerned should evaluate whether their activities fall under the licensed categories of crypto services. If so, the company has a choice between:
- applying for a VASP license or
- ceasing the relevant activities from 1 January 2025 (or after the license application is denied).
If a business, although related to crypto assets, is not prohibited and not subject to licensing, no particular actions are required. However, a company must be able to justify that the relevant activity is not subject to licensing under the Act.
The main criterion distinguishing licensed activities is executing transactions with or exercising control over third-party crypto assets. For example, suppose a person owns and manages their own crypto assets or carries out P2P transactions or staking to their personal advantage. In that case, no licensed services are provided to clients (third parties).
Below is an overview of licensed activities and requirements for companies with a crypto license in Seychelles.
Virtual asset services
The law specifies four types of permitted licensed activities related to virtual assets in Seychelles:
- Virtual asset wallet providers (crypto wallets);
- Virtual asset exchange (cryptocurrency exchange);
- Virtual asset broking;
- Virtual asset investment providers.
| Type of service provider | Undertakes for and on behalf of clients |
|---|---|
|
Virtual asset wallet (the main function – custodial services) |
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Virtual asset exchange (the main function – exchange, transfer and conversion of virtual assets) |
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Virtual asset broker (the main function – intermediary and facilitation services) |
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Virtual asset investment provider (the main function – investment management) |
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ICO and NFT promoter registration
The Act requires registration of initial coin offerings (ICO) and sale of or investment in non-fungible tokens (NFT) and their promoters in Seychelles.
Besides this, to promote an ICO or the sale of or investment in the development of NFT, a company must possess:
- a license under the VASP Act 2024, or
- a license to provide services under the Securities Act 2007.
Promoters are persons who cause the preparation or distribution of an offering document (white paper) relating to ICO or NFT. Promoters do not include lawyers or accountants acting on behalf of such persons.
Conditions for obtaining a crypto license in Seychelles
To obtain a crypto business license in Seychelles, the applicant must contact the Seychelles Financial Services Authority (FSA), the regulator and licensing body in this area. The license may be issued subject to the following conditions:
- The person belongs to the permitted types of applicants (a legal entity that is a local company incorporated under the Companies Ordinance 1972 or an international business company under the IBC Act 2016).
- The applicant has complied with the requirements of the Act concerning the appointment of directors.
- The applicant can ensure its presence (substance) in Seychelles to the extent required by the Act.
- The applicant is able to meet relevant financial obligations, including insurance, capital, solvency and other requirements.
- Directors and principal officers of the applicant satisfy the criteria established by the Act.
- The applicant has implemented the required information security measures.
- The applicant has the necessary premises and data solutions.
- The FSA believes that approving the licence would be consistent with the public interest.
A business plan, contracts, financial documents, internal policies and manuals must accompany the license application.
The license is valid from the date of issue until its revocation, suspension or refusal by the licensee.
Obligations of companies with crypto licenses in Seychelles
Requirements for doing business
The licensee’s business is subject to requirements of professionalism and prudence, which imply that the licensee:
- complies with the VASP Act, anti-money laundering (AML) legislation, rules, codes and guidelines issued by the FSA;
- maintains minimum net assets at the level prescribed by the FSA (taking into account the type, size and complexity of its activities);
- maintains proper accounting and other business records and has adequate controls, policies and procedures in place;
- insures the risks of its activities to the required extent.
The licensee must conduct business with integrity, due diligence and fair treatment of all customers. The licensee must not mislead customers about the services provided and the licensee’s obligations.
The licensee must always maintain its business in a sound financial position, meeting the regulator’s requirements for capital, solvency, and insurance.
Presence in Seychelles
A virtual asset service provider must ensure a physical presence (substance) of the company in Seychelles, which includes:
- At least one director who is a resident of Seychelles;
- A full-fledged office in Seychelles;
- A qualified and experienced staff employed to manage the said office;
- Availability of records and documentation that the licensee is required to keep in the said office;
- Handling of complaints in Seychelles;
- Holding at least two meetings of the board of directors and at least four meetings of the management in Seychelles per year.
Accordingly, the company will need to rent a real office in the Seychelles, premises, and technical solutions for accounting transactions and data storage.
Directors
The board must consist of at least two directors. Directors can only be individuals. Their appointment requires prior approval from the FSA.
Directors and other persons appointed to key positions within the company (e.g., persons responsible for compliance procedures, cybersecurity, and complaint handling) must meet the requirements for such persons under the relevant FSA Code. The Licensee is responsible for ensuring that the qualifications and legal compliance of the persons it appoints are adequately assessed.
When assessing the suitability of a director or other officer, his or her education, experience, financial status, membership in professional associations, criminal records, disqualifications and cases of unethical professional conduct are considered.
Capital and solvency requirements
The licensee must always have paid-up capital not less than the amount established by the Act and meet other financial requirements corresponding to the volume, risk, and complexity of its activities.
The Act specifies the following minimum amounts of paid-up capital for companies that did not provide virtual asset services on the date of entry of the Act into force:
| Service providers | Initial paid-up capital |
|---|---|
|
Virtual asset wallet |
75 000 USD |
|
Virtual asset exchange |
100 000 USD |
|
Virtual asset broker |
50 000 USD |
|
Virtual asset investment provider |
25 000 USD |
If a company plans to obtain a license for several types of services, it must pay and maintain capital for each type of service.
Starting from the third year of activity, the company must have a capital of at least 2.5% of its annual turnover (which should be demonstrated when paying the third annual fee). The same capital amount is prescribed for companies that were already providing crypto-asset services at the time the Act entered into force.
In addition to capital, the company must always hold reserve assets or money equal to 100% of the amounts due to customers in respect of their assets deposited with the licensee.
The company must allocate its paid-up capital to:
- a bank licensed under the laws of Seychelles, or
- a financial institution licensed in a country that complies with at least the Basel II requirements.
In plain terms, these are accounts in “traditional” banks, and alternatives such as payment services and EMIs will not be acceptable.
The proof of payment of capital to a corporate bank account must be submitted when applying for a license.
Insurance
The licensee must maintain professional liability insurance and other insurance to protect clients’ assets appropriate to the level of risk and volume of activity. The insurance policy may be maintained with an insurer licensed in Seychelles or in a jurisdiction outside Seychelles, which the FSA has approved.
The insurance policy may be held in the name of another entity within the licensee’s group, provided that it explicitly states the licensee is an insured party and states the nature and the level of cover applicable to the licensee.
Accounting records and financial statements
The licensee must maintain accounting records that show and explain the transactions made on its behalf and on behalf of clients. The company must accurately reflect its financial position to prepare a balance sheet and a profit or loss account.
The company must keep accounting records in accordance with international accounting standards. The accounting records must contain, among other things:
- records of any amounts of money and virtual assets, including ICOs and NFTs, received, exchanged, sold, transferred or held;
- all commissions received and collected by the licensee from the performed transactions;
- all assets and liabilities of the licensee;
- customer account balances and others.
Accounting records must be available for inspection by the FSA upon request and kept for at least seven years from the date of the transaction to which they relate.
Companies licensed for crypto services are required to prepare and audit annual financial statements. A company must submit a copy of its audited financial statements to the FSA within six months of the end of its financial year.
By written permission, the FSA may grant an extension to the company’s reporting deadline. The FSA may also require the licensee to prepare and audit its financial statements at any time (not just annually).
An auditor must be appointed within 30 days after the company receives the license and must be approved by the FSA.
Annual license fees and reporting
In January of each year, a company with a crypto license in Seychelles must:
- pay annual license fees;
- file a compliance form with the FSA;
- file a substance requirement report with the FSA;
- file a cyber security report;
- submit such additional information as may be requested by the FSA.
The Act establishes the following annual fees (approximate amounts in US dollars at the current exchange rate to the Seychelles rupee):
| License fee | Amount |
|---|---|
|
Application fee for a license |
5 500 USD |
|
Annual fee (base) |
5 500 USD |
|
Annual fee for the licensed activity (added to the base fee) |
|
|
Virtual asset wallet provider |
22 000 USD |
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Virtual asset exchange |
27 500 USD |
|
Virtual asset broker |
11 000 USD |
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Virtual assets investment provider |
5 500 USD |
|
Determining whether a person is eligible for appointment to a company |
1 100 USD |
Powers of FSA and enforcement actions
A licensee may carry out specific corporate actions only with the permission or in the absence of objections from the FSA, in particular:
- issue, transfer or disposal of the licensee’s shares;
- change of activity or changes to the business plan;
- merger, sale or acquisition of shares in other companies;
- change of a registered agent (if the licensee is an IBC) or a place of business;
- change of name, other identifications or a domain name;
- changes in the target market.
The director must notify the FSA in writing within 12 hours of any circumstances that become known to him that affect the company’s activities (for example, insolvency, involvement in legal proceedings, cyber security events). The licensee must then, within five working days, submit a report to the FSA detailing the situation and the measures it intends to take to address it.
In the event of non-compliance by a licensee with any of the provisions of the VASP Act, the FSA may apply the following enforcement actions against such licensee:
- issue written warnings;
- instruct on specific actions to remedy the non-compliance;
- impose restrictions on the licensee’s activities;
- require that measures be taken to protect the property of clients or creditors that is under the control, custody or possession of the licensee;
- suspend or revoke a license or a registration;
- initiate investigations;
- impose administrative penalties.
Prohibitions and penalties
The Act explicitly prohibits operating mining facilities and mixer services used to conceal the origin of cryptocurrencies.
Natural persons are prohibited from providing any virtual asset services.
The Act provides criminal sanctions (penalties and/or imprisonment), including for:
- providing crypto-asset services without a VASP license;
- ICO or NFT promoters’ activities without registration with the FSA;
- issue, transfer or disposal of shares in a company with a VASP licence without FSA approval;
- submission of false information when applying for a licence;
- violation of requirements for accounting of own and client transactions at the place of business and data storage.
Summary
The legislator in Seychelles has chosen a reasonably strict licensing policy for virtual asset services. This is due to virtual asset activities’ relative novelty and risks and the need to protect clients’ interests. Some conditions and the costs associated with them can be assessed as aimed at discouraging potential applicants.
The critical requirements for companies applying for a VASP license in Seychelles include a sufficient presence in the country with an office and staff, a bank account, paid-up capital, maintenance of reserve assets and insurance, and a complete set of internal policies and procedures.
The existing companies in Seychelles whose business is subject to licensing under the VASP Act must apply for a license by 31 December 2024. There is no information yet on a possible extension of this deadline. In case of failure to apply for or refusal to issue a license, such companies’ crypto services activities will cease to be legal.
Companies just planning to register in Seychelles to conduct crypto business are advised to assess the possibility of complying with all licensing requirements and carefully prepare a package of necessary documents.
