In a bid to capture its fair share of Blockchain related business Seychelles recently enacted a new law providing for the registration and regulation of Virtual Asset Service Provider Enterprises.
While licensees under the VASP Act are subject to robust regulatory requirements (similar to those applicable to securities dealers) the good news is that such enterprises have been gifted an attractive low tax rate of 1.5% of assessable income (i.e. Seychelles sourced income).
The other key advantage of registering such a business in Seychelles is the geographical location and time zone, convenient for businesses whose target markets are Asia, Africa, Middle East, or Europe.
The new law fairly places Seychelles in the market as an attractive VASP License Jurisdiction alongside the major players including the Cayman Islands the BVI, Mauritius and etc.
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CONTENTS
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| Paragraph |
Description |
| 1. |
Preliminary |
| 2. |
Seychelles VASP Highlights |
| 3. |
Seychelles VASP Licensing |
| 4. |
VASP operating requirements |
| 5. |
VASP Accounting Requirements |
| 6. |
Annual Licence Fees & Submissions to the Authority |
| 7. |
Taxation |
| 8. |
Initial Coin Offerings and Non-fungible Tokens |
| 9. |
Restrictions on certain words |
| 10. |
Anti-Money Laundering Obligations |
| 11. |
Financial Consumer Protection Act |
1. PRELIMINARY
1.1 This guide summarises the Seychelles regulatory framework for businesses providing virtual asset services. This guide is not exhaustive, is intended as a general summary and only relates to the position as at the date hereof. We do not provide legal advice and we do not accept any responsibility for any errors or omissions. We recommend that clients or other readers of this guide obtain independent legal advice.
1.2 The last ten years have seen meteoric growth globally in virtual asset business, including in the use of high-profile virtual currencies such as Bitcoin, which allow online payments to be sent directly from one party to another without going through a bank or other financial institution. Virtual currency is a type of digital money, which is issued and usually controlled by its developers and used and accepted among the members of a specific virtual community. Investment in cryptocurrencies is enabled by cryptocurrency wallets and exchanges. These platforms, analogous to dealers in virtual currency, are the entities through which many investors hold and trade cryptocurrency.
1.3 Note: Whereas this guide refers to some amounts in Seychelles Rupees (SCR), as at the date of this guide (see footer), USD1 = 14.87 SCR (mid-range exchange rate per Central Bank of Seychelles website: www.cbs.sc).
Seychelles
1.4 The Virtual Asset Service Providers Act 2024 (the Act) provides a comprehensive regulatory framework with respect to the provision of virtual asset services in or from Seychelles. The regulatory requirements are supplemented by the following Regulations made under the Act:
- Virtual Asset Service Providers (Licensing and Ongoing Requirements) Regulations, 2024 (the Licensing and Ongoing Requirements Regulations);
- Virtual Asset Service Providers (Capital and other Financial Requirements) Regulations, 2024 (the Capital and other Financial Requirements) Regulations);
- Virtual Asset Service Providers (Cyber Security Requirements) Regulations, 2024 (the Cyber Security Requirements Regulations);
- Virtual Asset Service Providers (Advertisements) Regulations, 2024 (the Advertisements Regulations);
- Virtual Asset Service Providers (Registration of Initial Coin Offering and Non-Fungible Tokens) Regulations, 2024 (the Registration of Initial Coin Offering and Non-Fungible Tokens Regulations); and
- Virtual Asset Service Provider (Safekeeping and Management of Client’s Assets) Regulations, 2024 (the Safekeeping and Management of Client’s Assets Regulations).
1.7 The Seychelles Financial Services (FSA or Authority) is the regulatory and licensing authority for virtual asset service providers and for registration of initial coin offerings and non-fungible tokens under the Act (s 3 Act).
2. SEYCHELLES VASP HIGHLIGHTS
Seychelles VASP licensing – key features
- A virtual asset means a digital representation of value that can be digitally traded or transferred and can be used for payment or investment purposes and does not include digital representation of fiat currencies, securities and other financial assets.
- Virtual asset service provider or VASP means a person that conducts one or more of the virtual asset service activities listed under the First Schedule of the Act (virtual asset services), including virtual asset wallet providers, virtual asset exchanges, virtual asset broking and virtual asset investment providers.
- LICENSING – Carrying on the business of virtual asset services in or from Seychelles is prohibited unless the person is licensed to do so by the FSA under the Act.
- A licensee under the Act must be a Seychelles company, either a company incorporated under the International Business Companies Act 2016 or the Companies Act 1972.
- Value for money – Competitive licence application and annual fees payable to the Authority (see paragraph 7 below).
- A licensee enjoys a low business rax rate of 1.5% of assessable (gross) income, confined to Seychelles-sourced income, subject to the licensee satisfying the Seychelles economic substance requirements.
- An IBC VASP licensee is exempt from Seychelles stamp duty on transaction instruments (including transfers of company shares or assets, security agreements and other transactions), except no stamp duty exemption applies for dealings in Seychelles land.
- A licensee must have at least two individual directors, at least one of whom is resident in Seychelles; and each director must be fit and proper per the requirements of the Authority.
- A licensee must operate a staffed office in Seychelles.
- Minimum paid up capital requirements, which differs for different virtual asset services.
- A licensee shall have professional indemnity insurance.
- Annual audited accounts are required.
- The licensee’s Auditor must be a Seychelles-licensed accountant or an accountant approved by the Authority who has qualified as an accountant by examination of specified overseas accountancy bodies, including in the UK, USA, Canada, Australia, Singapore, etc.
- Being a reporting entity under the AML legislation, a licensee is required to (without limitation) appoint a resident compliance officer and obtain due diligence on its clients.
- REGISTRATION – Any person wishing to issue an initial coin offering or non-fungible tokens in or from the Seychelles is required to register the offering or tokens with the FSA; and no person may promote an initial coin offering or non-fungible tokens unless it is a company licensed under the Act to provide virtual asset services or licensed to provide services under the Securities Act 2007 as amended.
3. SEYCHELLES VASP LICENSING
3.1 No person shall carry on, or purport to carry on, the business of virtual asset services, or hold themself out as carrying on that business, in or from Seychelles, unless that person is licensed to do so by the Authority under the Act (s 5(1) of the Act).
3.2 No person shall, in or from the Seychelles, be permitted to operate: (i) a mining facility; (ii) or a mixer or tumblr service (s 5(2) Act). A natural person (individual) shall not carry on, or purport to carry on, in or from within Seychelles, the business of virtual asset services (s 5(3) Act). A person who contravenes s 5(1), (2) or (3) of the Act commits an offence and is liable on conviction to a fine or imprisonment, or both, as specified under section 33, namely in the case of an individual, to a fine not exceeding SCR2,250,000 or to imprisonment not exceeding 15 years or both; and in the case of a company, to a fine not exceeding SCR5,250,000 (s 5(4) Act read with s 33).
VASP licensing application
3.3 An application for a licence to carry on the business of virtual asset services shall be made to the Authority in compliance with such requirements as may be prescribed and accompanied by the applicable application fee, namely, SCR75,000 (s 7(1) Act read with the Second Schedule of the Act).
3.4 Under the Schedule of the Licensing and Ongoing Requirements Regulations, an application for a licence shall contain the following information and supporting records which evidence:
(a) the applicant’s status and good standing as an eligible person under section 6(3) of the Act, namely, either:
(i) a company incorporated or registered under the Companies Act 1972, excluding an overseas company; or
(ii) an international business company (IBC) incorporated, continued or converted under the International Business Companies Act, 2016 as amended (IBC Act);
(b) the members of the applicant’s board of directors satisfy:
(i) the requirements of section 12(4) of the Act, that directors appointed by the licensee be “fit and proper” persons (see paragraphs 3.11 – 3.12 below);
(ii) section 13(1) of the Act, namely, that every licensee is required to comply with the substance requirements prescribed in the Third Schedule, including every licensee shall have at least one Seychelles-resident director and shall operate a fully staffed office in Seychelles;
(iii) section 14 of the Act, namely, the business and affairs of a licensee shall be managed by a board of directors consisting of at least 2 directors (s 14(1) Act); and the board of directors of a licensee shall comprise of natural persons only, i.e. individuals (s 14(2) Act);
(iii) the requirements of the Code for fit and Proper for Virtual Asset Service Providers;
(c) the applicant’s principal officers meet the criteria under section 12 of the Act, that directors appointed by the licensee be “fit and proper” persons (see paragraphs 3.11 – 3.12 below);
(d) the applicant’s compliance officer meets the criteria under the AML/CFT Regulations and Code for Compliance Officers;
(e) the applicant’s board of directors can appropriately and effectively fulfil their governance role;
(f) there is or will be adequate oversight by the applicant’s senior management over its business, with clearly defined roles, responsibilities and accountability for staff implementing, managing, and overseeing the effectiveness of its business strategy and operations;
(g) all the applicant’s significant owners can be identified and their identity verified;
(h) the applicant has or will have in place systems and controls required under the Financial Consumer Protection Act, 2022, including the formation of a Complaints Handling Unit;
(i) the applicant has identified and applies appropriate and effective measures to mitigate interoperability risks when dealing with software and systems provided by third parties and placing reliance on compliance and operational software and systems used by the licensee;
(j) the applicant is sufficiently financially resourced and can comply with the minimum capital requirements, as prescribed in the Capital and other Financial Requirements) Regulations (see paragraph 4.9 below);
(k) the applicant has sufficient financial resources;
(l) the application has sufficient underwritten insurance commensurate to the level of operational risk, including fraud;
(m) the applicant has or will have in place appropriate and effective AML/CFT controls in compliance with the AML/CFT Act and the AML/CFT Regulations;
(n) the applicant has or will have sufficient resources to have in place measures to comply with the Cyber Security Requirements Regulations;
(o) has specified premises or data solutions that the Authority has deemed suitable for accessing and retaining records and other documents;
(p) has appropriate and effective controls to comply with the requirements of the Advertisements Regulations;
(q) has appropriate and effective controls to comply with the requirements of the Safekeeping and Management of Client’s Assets Regulations;
(r) satisfies the Authority that an approval is in the public interest having regards to the size, scope and complexity of the applicant;
(s) the non-refundable application fee as prescribed in the Second Schedule to the Act; and
(t) risk assessment of the applicant’s business operation.
3.5 Without limiting the generality of the licensing application requirements referred to in paragraph 3.4 above, the FSA’s VASP licence application form checklist states that (without limitation) the following documents are required when lodging a licence application:
(a) Certified true copies of the applicant’s constitutional documents (i.e. as applicable, Certificate of Incorporation, Memorandum and Articles of Association, Particulars of Directors and Secretaries, Notice of situation of registered office or any change of it);
(b) Personal Questionnaire Form (FSA format) completed by each Director, Compliance Officer and any other key individuals of application;
(c) Questionnaire Forms (FSA format) for Shareholders and Beneficial Owners completed by each individual shareholder and beneficial owner who do not hold a managerial position in the company;
(d) The last audited financial statements of the controlling owners of the applicant (if the controlling owner of the applicant is a non‐individual);
(e) Audited financial statements of the applicant for the last 2 years except in the case of an applicant who was incorporated within the last 12 months, if applicable;
(f) Proof of source of funds or wealth;
(g) Proof of Physical Place of Office in Seychelles (Title Deed of Premises or Lease Agreement for premises or Sub-Leasing Agreement and consent letter from owner of the premises stipulating that the lessee can sub-lease);
(h) A detailed Business Plan or an updated business plan if the company is already licensed by the FSA;
(i) A copy of the insurance quotation (appropriate to the proposed nature and size of the business) of the applicant has been attached and/ or the required approval as to such exemption having been granted allowing for the insurance policy to be sourced from a foreign jurisdiction;
(j) Certified true copies of the Auditor’s certificate of membership, qualifications and licence;
(k) If a Financial Institution, the authorisation letter duly issued by the Central Bank of Seychelles for the entity to undertake any of the permissible activities under the Virtual Asset Services Provider Act, 2024;
(l) Certified current valid licence or other authorisation to conduct such business under the laws of a recognized jurisdiction if the applicant is operating outside Seychelles;
(m) The applicant’s Manuals including:
- Internal Procedures Manual;
- Client Service Agreement;
- Conflict of Interest Policy;
- Compliance Manual/Anti-Money Laundering Manual/ Customer Due Diligence Procedures;
- Complaints Handling Manual;
- Business Continuity Plan;
- Institutional Risk Assessment;
- Transaction Monitoring Procedures (may be contained in Compliance Manual/Anti-Money Laundering Manual);
- Sanction Screening Procedures (may be contained in Compliance Manual/Anti-Money Laundering Manual);
- Segregation of asset policy;
- Record keeping policy; and
- Cyber Security Policy.
3.6 The Authority may:
(a) grant a licence with or without such restrictions as issued in writing to the applicant;
(b) refuse an application where an applicant fails to provide required information; or
(c) reject an application and in writing, inform the applicant of its decision and reasons for the decision (s 7(2) of the Act).
3.7 Section 7(4) of the Act prohibits the Authority from granting a VASP licence under the Act unless the applicant:
(a) is a permissible applicant as prescribed under section 6 of the Act, namely, a company incorporated under the IBC Act or the Companies Act 1972;
(b) complies with the requirements of the Act in relation to the appointment of directors on its board of directors, including the board of directors of a licensee consisting of at least 2 directors, who are individuals and one of whom is resident in Seychelles (s 14(1) and (2) Act);
(c) satisfies the Authority that it meets the substance requirements set out in the Third Schedule of the Act (see paragraph 4.1 below);
(d) will be able, if licensed, to comply with any financial obligations, including insurance, capital and solvency requirements under section 16 of the Act (see paragraphs 4.6 – 4.13 below);
(e) satisfies the Authority that its directors, principal officers and any other person required to be fit and proper meet the criteria under section 12 of the Act (see paragraphs 3.11 – 3.12 below);
(f) meets the cyber security measures as prescribed in section 22 of the Act (see paragraphs 4.19 – 4.22 below);
(g) has specified premises or data solutions that the Authority has deemed suitable for accessing and retaining records and other documents; and
(h) satisfies the Authority that an approval is in the public interest having regards to the size, scope and complexity of the applicant.
3.8 A VASP licence is valid from the date of issue until such time that it is revoked, suspended or surrendered (s 7(6) Act).
3.9 The Authority may impose such conditions on a licence as it deems fit with respect to the scope of the virtual asset services or the operations of the licensee, including but not limited to: (i) limiting the number of clients to whom the licensee may provide services; (ii) limiting the licensee to providing services only to the clients named in the licence or a schedule to the licence; or (iii) setting the minimum value of an individual client’s investment (s 8(1) Act).
3.10 A licensee shall keep its licence on display at its principal place of business in Seychelles and, include its licensing information inclusive of but not limited to, the date upon which the licence was issued, the licence number, any other business or tradename by which the licensee is known, the conditions attached to the licence, the activities for which the licence has been issued, the activities which are unlicensed by the Authority and the address of the principal place of business in Seychelles (s 8(2) Act). The aforementioned information must be displayed on its website in a prominent manner (s 8(3) Act).
3.11 No licensee shall appoint a director, principal officer or such persons as may be specified in the Code issued by the Authority under section 12(1) of the Act or allow them to continue to act in such capacity without the prior approval of the Authority (s 12(2) of the Act). A licensee shall take all reasonable steps to ensure that a person to whom the fit and proper criteria apply is and remains fit and proper to fulfil the relevant role (s 12(3) Act).
3.12 Section 12(4) of the Act provides that in determining whether a person is fit and proper, regard shall be had to:
(a) the person’s probity, competence, experience and soundness of judgment for fulfilling the responsibilities of the relevant position;
(b) the diligence with which the person is fulfilling or is likely to fulfil those responsibilities;
(c) the person’s educational and professional qualifications and membership of professional or other relevant bodies as applicable or such other equivalent as may be relevant;
(d) the person’s knowledge and understanding of the legal and professional obligations to be assumed or undertaken;
(e) any evidence that the person has committed any offence involving dishonesty or fraud or has contravened any law designed to protect members of the public arising from dishonesty, incompetence, malpractice, misconduct or conduct of discharged or undischarged bankrupts or otherwise insolvent persons; and
(f) the person’s financial standing and integrity.
4. VASP OPERATING REQUIREMENTS
Substance requirements
4.1 Every licensee is required to comply with the requirements relating to substance (the Substance Requirements) as prescribed in the Third Schedule (s 13(1) Act), namely, every licensee shall:
(a) have at least one resident person as director on its board of directors;
(b) operate a fully staffed office in Seychelles;
(c) employ qualified or experienced staff to manage the office specified under paragraph (b);
(d) ensure that all records and documentation required to be kept by the licensee under the Act and regulations are available and accessible from the office specified under paragraph (b);
(e) undertake complaint handling in Seychelles;
(f) annually, hold at least 2 meetings of its board of directors in Seychelles; and
(g) annually, hold at least 4 management meetings in Seychelles.
Business to be conducted in a prudent manner
4.2 A licensee shall conduct its business in a prudent manner (s 14(3) Act).
4.3 Section 14(5) of the Act states that licensee shall not be regarded as conducting its business in a prudent manner unless it:
(a) maintains the minimum net assets in such other amount as the Authority may direct in writing, taking into consideration the nature, size and complexity of the licensee’s business;
(b) maintains the adequate accounting and other records of its business and adequate systems of control and records, and has developed policies and procedures pertaining to its obligations under the Act or any other law; and
(c) has an insurance policy to cover risks inherent in the operation of its business of an amount commensurate with the nature and scale of its virtual asset service.
Business to be conducted with integrity
4.4 Under section 15(1) of the Act, a licensee shall:
(a) at all times conduct its business with integrity, acting with due care, skill and diligence, having regard to the nature and scale of its business activities; and
(b) deal fairly with all clients and seek to ensure that its clients are not misled as to the service being provided and the duties and obligations of the licensee.
Standard of conduct
4.5 Under regulation 9 of the Licensing and Ongoing Requirements Regulations, a licensee shall:
(a) observe a high standard of integrity and fair dealing;
(b) act with due skill, care and diligence;
(c) observe high standards of market conduct;
(d) seek from client information about their circumstances and investment objectives which might reasonably be expected to be relevant in enabling the licensee to fulfil the licensee’s responsibilities to the client;
(e) take reasonable steps to give every client the licensee advises, in a comprehensible way, any information needed to enable the client to make a balanced and informed investment decision;
(f) avoid any conflict of interest with clients and, where such a conflict arises which cannot be avoided, ensure fair treatment to the client by the complete disclosure or by declining to act;
(g) ensure that the interests of the licensee are not unfairly placed above those of the client;
(h) protect by way of segregation and identification, of client assets for which the licensee is responsible;
(i) maintain adequate financial resources to meet the virtual asset service’s business commitments and withstand the risks to which the business is subject to;
(j) organise and control internal affairs in a responsible manner;
(k) keep and maintain proper up to date records;
(l) have adequate arrangements to ensure that all staff employed are suitable, adequately trained and properly supervised and establish and maintain well defined compliance policies; and
(m) deal with the Authority in an open and cooperative manner.
Capital, solvency and insurance requirements
4.6 A licensee shall maintain its business in a financially sound condition by complying with such capital, solvency and insurance requirements as may be prescribed (s 16(1) of the Act).
4.7 A licensee shall have capital and other financial requirements of such nature and amount that commensurate to the scale, risk and complexity of the licensee based on its authorised activities so as to be financially sound (r 4(1) of the Capital and other Financial Requirements Regulations).
4.8 Under regulation 4(2) of the Capital and other Financial Requirements Regulations, the matters which are relevant in determining whether a licensee has adequate capital and other financial requirements include (without limitation), a licensee’s ability to at all times:
- have and maintain the prescribed paid-up capital requirements;
- have a proper accounting record framework established, documented and maintained;
- have adequate financial reporting mechanism; and
- have and maintain the required insurance policies.
Paid up capital
4.9 A licensee is required to at all times, hold and maintain a minimum paid-up capital as specified in the Schedule of the Capital and other Financial Requirements Regulations (see below table), which shall be in the form of cash, bond or other security approved by the Authority (rr 5(1) and 5(2) Capital and other Financial Requirements Regulations):
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Virtual Asset Service Providers (Capital and other Financial Requirements) Regulations, 2024)
Part 1 of the Schedule
Entities not operating as a virtual asset service provider on the date of commencement of the Act
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Initial paid-up
capital
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As at beginning of 3rd
year of operation
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| Virtual Asset Wallet Providers |
$75,000 |
2.5% of annual turnover
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| Virtual Asset Exchange |
$100,000 |
| Virtual Asset Broking |
$50,000 |
| Virtual Asset Investment Providers |
$25,000 |
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To show proof at licence application
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To show proof at payment of 3rd annual licence fee |
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Part 2 of the Schedule
Entities operating as a virtual asset service provider as of the date of commencement of the Act
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| |
Initial paid-up
capital |
| Virtual Asset Wallet Providers |
2.5% of annual turnover
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| Virtual Asset Exchange |
| Virtual Asset Broking |
| Virtual Asset Investment Providers |
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To show proof at licence application
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4.10 Under regulation 5(3) of the Capital and other Financial Requirements Regulations, the paid-up capital required to be maintained by regulations 5(1) and 5(2), shall be maintained in a bank licensed under the Financial Institutions Act or a financial institution, excluding alternative money solutions, licensed in a country which complies with, at a minimum, the Basel II Requirement as approved by the Authority.
4.11 Where a licensee intends or has been authorised to carry more than one virtual asset service, the licensee shall hold the amount of paid-up capital specified in the Schedule for each activity authorised for (r 5(4) Capital and other Financial Requirements Regulations).
Reserve assets or monies
4.12 A licensee shall maintain reserve assets or monies equivalent to one hundred percent of the liabilities owed to clients with respect to client assets being held by the licensee (r 6(1) of the Capital and other Financial Requirements Regulations) and the reserve assets shall be maintained by the licensee itself in separate accounts under its management (r 6(2) Capital and other Financial Requirements Regulations). The monies shall be maintained by the licensee in a bank licensed under the Financial Institutions Act or a financial institution, excluding alternative financial services, licensed in a country which complies with, at a minimum, the Basel II Requirement as approved by the Authority (r 6(1) of the Capital and other Financial Requirements Regulations).
Insurance
4.13 A licensee shall hold and maintain professional indemnity insurance; and such other insurance policy allowing for the necessary protection and coverage of client’s assets, commensurate with the level of risks and scale of the proposed business (r 8(1) Capital and other Financial Requirements Regulations).
Conflict of interests
4.14 A licensee shall ensure that it has in place policies and procedures, satisfactory to the Authority, as applicable to avoid, mitigate and deal with conflicts of interests between: (i) the licensee and its clients; (ii) the licensee and its service providers or other third parties; (iii) the licensee’s clients (s 17(1) Act).
Ongoing notifications
4.15 Under section 18(1) of the Act, the directors appointed by the licensee shall be responsible for ensuring that the Authority is notified within 12 hours in writing where a director becomes aware or has reason to believe:
(a) the licensee has become insolvent or there is a likelihood of it becoming insolvent;
(b) the licensee has failed to comply substantially with a provision of the Act or such other relevant and applicable laws or a condition imposed upon it by the Authority;
(c) the licensee has failed to comply with a modified provision, or with a condition, being a provision or condition specified in a direction given to it by the Authority;
(d) the licensee has become involved in any criminal proceedings whether in Seychelles or outside Seychelles;
(e) where the licensee is an international business company, that the registered agent of the licensee has notified the licensee of its intention to resign as registered agent;
(f) that the licensee is being sued civilly for virtual assets, initial coin offerings and non-fungible token recovery;
(g) the licensee has ceased to carry on business for which it was licensed and authorised;
(h) the directors or principal officers have resigned or ceased to be fit and proper; or
(i) a cyber-security event has occurred.
4.16 Within 5 days of providing notification under section 18(1) of the Act (see preceding paragraph), the licensee shall furnish the Authority with a written report setting out the particulars of the situation and indicate such mitigating measures as will be undertaken by the licensee (s 18(2) Act).
Material changes to business
4.17 No licensee shall effect or permit a material change within the meaning of section 19(2) of the Act unless: (i) it has served on the Authority a notice in writing stating that the licensee intends to effect such a material change; and (ii) the Authority, has notified the licensee in writing that it has no objection to the licensee effecting the material change (s 19(1) of the Act). Under section 19(2) of the Act, for the purposes of section 19(1), the following are material changes:
(a) a change to the business activity for which the licensee was first issued;
(b) a change to the most recent business plan submitted to the Authority;
(c) an amalgamation with or acquisition of another legal person;
(d) the sale of a subsidiary;
(e) acquisition of a controlling interest in another company or other entity;
(f) the outsourcing of the functions of the virtual asset services;
(g) where the licensee is an international business company, a change of registered agent of the licensee;
(h) a change of principal place of business;
(i) a change of business or trade name or such other marks used by the licensee;
(j) a change of domain name; or
(k) a change in target market.
Ownership changes
4.18 No shares in a licensee shall be issued and no issued shares shall be voluntarily transferred or disposed of, without the approval of the Authority (s 20(1) Act). The Authority may (on application) exempt from the provisions of this section a licensee whose shares or interests are publicly traded on a Seychelles securities exchange or a recognized overseas exchange (s 20(2) Act).
Cyber security
4.19 A licensee shall have appropriate and effective cyber security measures, as may be prescribed (s 22(1) Act). A licensee shall submit a cyber security report, as may be prescribed (s 22(2) Act).
4.20 A licensee shall have in place a cyber security strategy for the establishment and maintenance of appropriate systems and controls for managing cyber security and operational risks that can arise from inadequacies or failures in its processes and systems and the licensee shall also include appropriate systems and processes with or from third-party suppliers, agents and intermediaries (rr 4(1) and 4(2) Cyber Security Requirements Regulations.
4.21 In maintaining appropriate systems and controls under regulations 4(1) and 4(2), a licensee shall have regards to (r 5(1) Cyber Security Requirements Regulations):
(a) confidentiality, including the safe storage of information and transmission of data in accordance with clear protocols, which may require firewalls within a system, as well as entry restrictions and compliance with relevant data protection laws;
(b) accessibility of the system to authorised persons, employees of the licensee and to authorised employees of the Authority;
(c) integrity, including safeguarding the accuracy and completeness of information and data through its system and control;
(d) maintenance of systems and infrastructure, including proper code version control, implementation of updates and resolution; and
(e) procedures to address updates to technological infrastructure, including forks.
4.22 Under regulation 8(1) of the Cyber Security Requirements Regulations, for the purpose of section 22(2) of the Act, a cyber security report shall be duly prepared by the fit and proper person responsible for information security, containing:
(a) the availability, functionality and integrity of the licensee’s electronic systems;
(b) any identified cyber risk arising from any virtual asset service carried on or to be carried on, by the licensee; and
(c) the cybersecurity program implemented and proposals for steps for the redress of any inadequacies identified.
Advertisements
4.23 No person shall carry on, or purport to carry on, the advertisement of virtual asset services or the issue or the promotion of virtual assets, including initial coin offerings and non-fungible tokens, in or from Seychelles, unless that person complies with the requirements of the Advertisements Regulations (r 3(1) Advertisements Regulations).
4.24 Under regulation 5 of the Advertisements Regulations, the general requirements in respect of advertisements are:
(a) Advertisements shall be fair, clear, complete, concise, unambiguous and unbiased, and shall not be false, misleading nor deceptive.
(b) Advertisements shall contain information that is timely and consistent with any relevant virtual assets, including initial coin offerings and non-fungible tokens, or virtual assets services.
(c) Advertisements shall convey an equitable message in respect of the returns, benefits and risks associated with the relevant virtual asset, including initial coin offerings and non-fungible tokens, or virtual assets services.
(d) Advertisements shall be clearly identifiable and the media chosen for an advertisement shall be suitable for that advertisement with due consideration as to the target market and or class of consumers.
(e) Advertisements shall not lure or induce clients into malicious virtual asset services and offerings.
(f) Advertisements shall not facilitate illicit actors or high-risk virtual asset service providers in the offering of virtual assets, including initial coin offerings and non-fungible tokens, or virtual asset services.
(g) Before selling any relevant virtual asset, including initial coin offerings and non-fungible tokens, or virtual assets services because of an advertisement, any licensee or promoter shall ensure that consumers have received sufficient information, regarding such products or services, inclusive of the benefit and potential failings, so as to allow a consumer to make an informed decision.
(h) Advertisements shall be in plain language as to be capable of being clearly understood by prospective clients or consumers that might reasonably be expected to see it.
(i) Advertisements should not purport to advertise illicit or fake virtual asset services or projects.
(j) Advertisements should not contain colorful mages in appearance that would induce a minor in partaking in virtual asset services.
(k) Advertisement shall not state or imply that relevant virtual assets, including initial coin offerings and non-fungible tokens, or virtual asset services are suitable for a particular class of clients or consumers unless designated as being a product advertisable to a particular class of individuals and or persons.
(l) Advertisements relating to the virtual asset services rendered by a licensee, shall include such relevant information as to the type of service offered, inclusive of terms and timeframes for client deposits and withdrawals, associated fees payable and such other relevant terms under which the service is provided to clients.
Content of advertisements
4.25 A licensee or promoter shall avoid extensive use of technical, legal terminology or complex language in an advertisement which may not convey a clear message to the consumers or may be such as to cause confusion if the likely audience is unfamiliar with the concepts (r 6(1) Advertisements Regulations).
4.26 Under regulation 6(2) of the Advertisements Regulations, all advertisements shall:
(a) include details of the licensee or promoter, including its full name and tradename (if applicable), licence number and registered office;
(b) include, if a known third party is issuing or cause the advertisement to be issued on behalf of the licensee or promoter of the virtual asset, the relevant details of the third party;
(c) be accurate and up to date;
(d) not omit any material relevant facts, and do not make definitive statements that cannot be sustained;
(e) use a design and presentation that shall be easily and clearly understood;
(f) include, if relevant, any approved trademark, tradename, slogan or associated marker to the licensee or promoter;
(g) not be given undue prominence of benefits compared to risks, and always give a fair, balanced and clear indication of any relevant risks when referencing potential benefits;
(h) include the contact details where consumers can make enquiries; and
(i) ensure that changes to original information about the virtual asset or virtual asset service are promptly notified and described, with the advertisement indicating the date the information contained therein was updated.
Record Keeping
4.27 A licensee or promoter shall maintain adequate records of its advertisement, including details of who signed off each advertisement and when it was signed off, for at least 7 years after the advertisement ceases to be available to consumers, or such other period which the Authority may request (r 15 Advertisements Regulations).
Client Asset Management
4.28 Under regulation 4(1) of the Safekeeping and Management of Client’s Assets Regulations, a licensee shall:
(a) establish policies, systems and controls for the safekeeping and management of client assets;
(b) make adequate arrangements to safeguard clients’ ownership rights, mitigate the risk of loss or diminution on the value of the clients’ assets; and
(c) establish and maintain adequate organisational arrangements for transfer of client assets.
4.29 A licensee shall, as part of its policies, procedures and controls for the safekeeping and management of client assets, including the reconciliation of client assets, specify how client assets are segregated so that they are not subject to the claims of the licensee’s creditors (r 4(2) Safekeeping and Management of Client’s Assets Regulations).
4.30 Under regulation 5(1) and 5(2) of the Safekeeping and Management of Client’s Assets Regulations, a licensee shall ensure that each client for whom they provide custodial services is made aware of and agrees to the terms upon which the services will be provided, before providing any custodial services, including making its clients aware of the following information:
(a) the licensee’s custody policy;
(b) identity of the legal entity that will be safekeeping and managing the client’s assets, including, if applicable, any authorized sub-custodian;
(c) nature of the custodial services to be provided;
(d) extent to which client assets are aggregated or pooled;
(e) the client’s rights with respect to aggregated or pooled assets, and risks of loss arising from any pooling or aggregating activities;
(f) how client assets are protected against loss or misuse;
(g) fees, costs and charged applied for the custodial services; and
(h) information on the obligations and responsibilities of the licensee with respect to the use of client assets, as well as private keys, including the terms for their restitution, recovery and on the risks involve.
4.31 Under regulation 6 of the Safekeeping and Management of Client’s Assets Regulations, as part of the management and safekeeping of client assets:
(a) A licensee shall ensure that the total amount and type of client assets held for clients matches the amounts it has agreed to hold.
(b) Any transfer undertaken of client assets shall be authorised or expressly permitted by the client.
(c) A licensee shall, following the day on which clients’ funds, other than client assets, are received, place those funds by the end of the business day, with a bank or financial institution specified in regulation 6(3) of the Capital and other Financial Requirements Regulations.
(d) A licensee shall take all necessary measures to ensure that clients’ funds, other than client assets, are held in accordance with subparagraph (c) above, are held in an account separate to that is used to hold funds belonging to the licensee.
(e) A licensee shall:
(i) On a segregated basis, in which case the licensee needs to clearly identify and segregate virtual assets belonging to different clients;
(ii) On an omnibus basis, in which case the licensee needs to ensure that at all times the total amount and type of virtual assets held for client’s matches the amounts it has agreed to hold, and that the licensee shall be able to, at all times know the amount and type of virtual assets being held for each client.
(f) A licensee shall have adequate arrangements in place to safeguard the ownership rights of clients over their client assets and prevent the use of those assets for their own account.
(g) A licensee shall not use client assets for its own account or the account of any other person or client of the licensee, unless: (i) the client has given explicit prior consent to the use of the client assets on specified terms; and (ii) the use of that client’s assets is restricted to the specified terms to which the client consents.
(h) For the purposes of the preceding subparagraph, the consent provided by the client shall be recorded and retained, showing the date and time at which the consent was given.
(i) A licensee shall take appropriate measures to prevent the unauthorized use of client assets for its own account or the account of any other person.
(j) A licensee shall maintain records where it uses client assets for its own account, recording in real time: (i) details of the client from whom the assets have been obtained, including the wallet address and the transaction hashes; and (ii) the amount and value of client assets obtained as at the time the assets were used by the licensee.
(k) A licensee shall have procedures in place to ensure that clients have a means by which to access their client assets.
5. VASP ACCOUNTING REQUIREMENTS
Duty to prepare annual audited financial statements
5.1 Every licensee shall cause to be prepared annual audited financial statements in respect of all transactions and balances relating to its business (s 23(1) Act).
5.2 A licensee’s financial statements shall be audited by an approved auditor in accordance with the provisions of sections 142 to 144 and the Sixth Schedule of the Companies Act 1972, or generally accepted auditing standards of the International Financial Reporting Standards or such other standards as the Authority may recognize, and the approved auditor shall be required to provide an auditor’s report in respect of the audit (s 23(2) Act).
5.3 An “approved auditor” means an accountant licensed by the Seychelles Licensing Authority or an accountant licensed outside of Seychelles who has been approved in writing by the Authority (s 2 Act).
5.4 An “accountant” means a person who has qualified as an accountant by examination of any one of the following bodies: (i) Institute of Chartered Accountants in England and Wales; (ii) Association of Chartered Certified Accountants (United Kingdom); (iii) Institute of Chartered Accountants in Ireland; (iv) Institute of Certified Public Accountants in Ireland; (v) Institute of Chartered Accountants in Scotland; (vi) Institute of Chartered Accountants in Australia; (vii) Institute of Certified Public Accountants in Singapore; (viii) Hong Kong Institute of Certified Public Accountants; (ix) South African Institute of Chartered Public Accountants; (x) American Institute of Certified Public Accountants; (xi) Canadian Institute of Chartered Accountants; or a member of any other accountancy body recognized by the Authority as such for the purposes of the Act, and who is a current member in good standing of one of those bodies (s 2 Act).
5.5 Every licensee shall submit a copy of its audited financial statements with the Authority within 6 months from its financial year end or within such longer period as may be permitted in writing by the Authority (s 23(3) Act).
Appointment of auditors
5.6 Within thirty days of becoming licensed under the Act, a licensee shall appoint an approved auditor who is acceptable to the Authority (s 24(1) Act). Every licensee shall annually appoint an approved auditor to audit its financial statements (s 24(2) Act).
5.7 Prior to the appointment of an auditor, the licensee shall submit written particulars of such person to the Authority for approval, as may be prescribed (s 24(3) Act). A licensee shall forthwith give written notice to the Authority if it: (i) proposes to remove an auditor before the expiration of his or her term of office; or (ii) proposes to replace an auditor at the expiration of the term of his or her office with a different auditor (s 24(4) Act).
5.8 No person having an interest in any licensee otherwise than as a client, and no officer, employee or agent of the licensee shall be eligible for appointment as an approved auditor for that licensee; and any person appointed as such auditor to any licensee who subsequently acquires such interest or becomes an officer, employee or agent of that licensee shall cease to be an approved auditor (s 24(5) Act).
6. ANNUAL LICENCE FEES & SUBMISSIONS TO THE AUTHORITY
6.1 Under section 21(1) of the Act, a licensee shall in January of each year:
(a) pay to the Authority the annual licence fees as set out in the Second Schedule of the Act (see below);
(b) lodge with the Authority a compliance form as prescribed by the Authority;
(c) lodge a cyber security report in accordance with section 22 of the Act; and
(d) submit such additional information as may be specified by the Authority.
6.2 Under the Second Schedule of the Act, the following annual licence fees apply:
(a) Base fee: SCR75,000 (approx. US$5,400);
(b) Plus Fee for permissible activities:
(i) Virtual Asset Wallet Provider: SCR300,000 (approx. US$ 21,560)
(ii) Virtual Asset Exchange SCR375,000 (approx. US$26,950)
(iii) Virtual Asset Broking: SCR150,000 (approx. US$10,780)
(iv) Virtual Assets Investment Provider: SCR75,000 (approx. US$5,400).
6.3 If a licence under the Act is not first granted in the month of January, February or March, the first annual licence fee payable under the Act shall be reduced on a quarterly pro-rata basis, calculated having regard to the quarter in which the licence was first granted (s 21(2) of the Act). Where a person has acted in contravention of section 21(1) (i.e. not paid the annual licence fee when it falls due), the Authority shall take such enforcement action as it deems necessary, in terms of section 32 and may impose an administrative penalty equivalent to 50% of the annual licence fee, for each month or part of each month, not exceeding three months during which section 21(1) is not complied with (s 21(3) read with s 32 Act).
7. TAXATION
7.1 Licensed virtual asset service providers are liable to a low business tax rate of 1.5% (one and a half percent) of assessable (gross) income pursuant to the Seventh Schedule of the Business Tax Act 2009 as amended (BTA).
7.2 Under the BTA, assessable income is generally confined to Seychelles-sourced income. A licensed VASP, as a Seychelles tax resident, is liable for Seychelles tax on its Seychelles-sourced income but not on its foreign-sourced income, subject to it satisfying the Seychelles economic substance requirements.
7.3 A VASP licence applicant typically prefers to form an IBC (international business company under the IBC Act) for its Seychelles operating entity, rather than a company under the Companies Act 1972; as well as the IBC Act providing a modern corporate law framework, an IBC is exempt from Seychelles stamp duty on instruments relating to: (i) the company’s formation; (ii) transfers of assets to or by a company; (iii) transactions in respect of the shares, debt obligations or other securities of the company; (iv) the creation, variation or discharge of a charge or other security interests over any property of the company; and (v) other transactions relating to the business or assets of the company (s 362 IBC Act), except that no stamp duty exemption applies to an instrument directly or indirectly relating to Seychelles immovable property (land).
8. INITIAL COIN OFFERINGS AND NON-FUNGIBLE TOKENS
8.1 “Initial coin offering” means a method of raising funds whereby an issuer is issuing virtual assets and is offering them in exchange for funds (s 2 of the Act); and “non-fungible token” means a unique digital identifier that is recorded on a blockchain and is used to certify ownership and authenticity (s 2 Act).
8.2 No person shall issue or purport to issue an initial coin offering or a non-fungible token, or hold themselves out as carrying on that activity, in or from the Seychelles, unless registered by the Authority under the Act (s 27(1) Act).
8.3 Pursuant to section 27(2) of the Act, no person shall carry on or to purport to promote an initial coin offering or the sale of or investment in the development of non-fungible tokens, or hold themself out as carrying on that activity, in or from the Seychelles, unless that person is either:
(a) licensed under the Act to provide virtual asset services; or
(b) licensed to provide services under the Securities Act 2007 as amended.
8.4 A person shall apply for the registration of an initial coin offering or the sale of or investment in the development of non-fungible tokens prior to its issuance or promotion in or from the Seychelles (s 27(4) Act). An application for registration of either the issue or promotion of an initial coin offering or the sale of or investment in the development of non-fungible tokens in or from the Seychelles shall comply with such requirements as may be prescribed and accompanied by the application fee as set out in the Second Schedule, namely, SCR22,500 (c. US$1,515 as at 31.12.2024).
8.5 A natural person (individual) is not eligible to promote an initial coin offering or the sale of or investment in the development of non-fungible tokens in or from the Seychelles (s 27(3) Act), i.e. only a Seychelles company may apply for registration.
Application for registration
8.6 Under regulation 4(1) of the Registration of Initial Coin Offering and Non-Fungible Tokens Regulations, an application under section 27(4) of the Act shall be accompanied by:
(a) a white paper as per requirements in the Schedule;
(b) policies and procedures for the monitoring the cycle of the issuing and offering of an initial coin offering or non-fungible token;
(c) information where proceeds raised will be transferred or deposited;
(d) location where the records as required by regulation 11 will be retained and will be accessible in Seychelles;
(e) the details and confirmation of the promoter; and
(f) the registration application fee
Publication of white paper
8.7 A registrant may publish its white paper where it has either: (i) received a notice from the Authority that it has no objection to the proposed issuance and promotion; or (ii) the 30 day-working day period specified under subsection 27(6)(b) of the Act has lapsed (r 7(1) Registration of Initial Coin Offering and Non-Fungible Tokens Regulations). A person who fails to comply with regulation 7(1) of the Registration of Initial Coin Offering and Non-Fungible Tokens Regulations, is liable to an administrative penalty of SCR500,000 (r 7(2) Registration of Initial Coin Offering and Non-Fungible Tokens Regulations).
Records to be maintained
8.8 Under regulation 11(1) of the Registration of Initial Coin Offering and Non-Fungible Tokens Regulations, a registrant shall maintain the following records:
(a) identity of subscribers or investors;
(b) amounts received from or transferred by subscribers or investors;
(c) use of the proceeds received and parties paid from those proceeds; and
(d) location, websites and other channels used for promotion or advertisement purposes.
8.9 Records identified in regulation 11(1) of the Registration of Initial Coin Offering and Non-Fungible Tokens Regulations, shall be retained for a period of not less than seven years in Seychelles, by the registrant (r 11(2) of the Registration of Initial Coin Offering and Non-Fungible Tokens Regulations).
9. RESTRICTIONS ON CERTAIN WORDS
9.1 For the purposes of sections 5(1) and 27(1) of the Act, a person purports to carry on virtual asset services where the person uses any name which indicates or may reasonably be understood to indicate (whether in English or in any other language) that it is carrying on virtual asset services (s 40(1) Act).
9.2 It shall be a contravention of section 5(1) or 27(1) of the Act for a person other than a licensee or registrant to use any name that includes the words “cryptocurrency”, “virtual”, “currency”, “virtual coin”, “ICO”, “NFT”, “Exchange”, “Digital Wallet”, “Block chain”, “hot/cold Wallet”, “DeFI”, Web 3”, or such other combination of the words which could reasonably be used to allude as to the services licensed under the Act (s 40(2) Act).
10. ANTI-MONEY LAUNDERING OBLIGATIONS
Seychelles virtual asset service providers are “reporting entities” for the purposes of the Anti-Money Laundering and Countering the Financing of Terrorism Act 2020 as amended (AML Act) and Anti-Money Laundering and Countering the Financing of Terrorism Regulations, and are accordingly subject to various obligations under the AML Laws, including (without limitation):
(a) to apply customer due diligence (CDD) measures in respect of customers, business relationships and transactions, and conduct ongoing monitoring of business relationships (section 35(1) of the AML Act), including verification of customer identity and address and obtaining information on the business activities of the company and source of customer funds (note: a VASP licensee is not permitted to rely on a regulated person (including a foreign regulated person) to apply CDD measures in respect of its customers, unless the licensee and the regulated person are part of the same group: r 3(3A) of the Anti-Money Laundering and Countering the Financing of Terrorism (Reliance on Regulated Persons) Regulations, 2023 as amended);
(b) to maintain records of CDD measures and transactions carried out by the licensee (s 47 AML Act);
(c) to appoint a Seychelles-resident compliance officer, to be responsible (together with the licensee’s directors) for ensuring the compliance with the provisions of the AML Act and whose appointment is subject to FSA’s approval (s 34(1) and (2) of the AML Act);
(d) where it has reasonable grounds to suspect that any service or transaction may be related to the commission of criminal conduct including an offence of money laundering or of terrorist financing activities or to money or property that is or represents the benefit of criminal conduct, the licensee shall submit a suspicious transaction report to the FIU within two business days (s 48 AML Act).
11. FINANCIAL CONSUMER PROTECTION ACT
A licensee under the Act is also regarded as a “financial services provider” for the purposes of the Financial Consumer Protection Act 2022 (FCP Act) and is thus subject to the provisions of the FCP Act. Every financial services provider shall provide a bi-annual report to the FSA on the policies adopted with respect to financial consumer protection, including: (i) the measures taken to monitor compliance with policies; (ii) financial education activities; (iii) information on the number, type and conclusion of disputes of the financial consumers handled internally; (iv) the activities of agents or third parties acting on behalf of the financial services provider; and (v) any monitoring activity undertaken over such entities (s 8(1) FCP Act). The report for the first half of the year shall be submitted by 15th July of each year and that for the second half of the year shall be submitted by 15th January of the succeeding year (s 8(2) FCP Act).
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