Your crypto business may now be regulated…
The Fifth Anti-money Laundering Directive ((EU) 2018/843)) has been implemented into Irish law. This Directive is also known as AMLD V or MLD5.
This will have an impact on some crypto businesses that qualify as virtual asset service providers (VASPs) as they will now be required to register with the Central Bank of Ireland (CBI) and comply with other regulatory obligations.
AMLD V was implemented through the Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Act 2021, which made changes to the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 (2010 Act). The changes applicable to VASPs came into force on 23 April 2021.
This means that VASPs have three months from 23 April 2021 to register with the CBI. Failure to register with the CBI as a VASP is a criminal offence. Additionally, VASPs now have money laundering and terrorist financing (ML/TF) obligations under the Act. Changes in the ownership of VASPs must also be approved by the CBI.
In this article, we discuss which crypto businesses must register with the CBI as VASPs and the implications of the 2010 Act for VASPs.
Who qualifies as a VASP?
VASPs must register with the CBI within three months of 23 April 2021. The Act defines a VASP as a person who provides one or more of the following activities for, or on behalf of, another person:
1. Exchanges between virtual assets and fiat currencies (e.g. exchanging Bitcoin for Euro or vice versa).
2. Exchanges between one or more forms of virtual assets (e.g. exchanging Bitcoin for Ether).
3. Transfers of virtual assets (e.g. transfers from one crypto wallet or account to another).
4. Custodian wallet provider (e.g. storing private keys).
5. Participation in, and provision of, financial services related to an issuer’s offer or sale of a virtual asset or both (e.g. providing financial services for ICOs and IEOs).
So, if a crypto business provides any of these services then it will be a VASP under the 2010 Act and will have to be registered as a VASP with the CBI.
However, “virtual assets” under the Act only includes those crypto-assets that can be both:
1. digitally traded or transferred; and
2. used for payment or investment purposes;
...but it does not include digital representations of fiat currencies, securities or other financial assets.
Accordingly, this definition excludes stablecoins that represent fiat currencies (e.g. Tether) and crypto-assets that tokenise securities (e.g. shares or bonds) or other financial assets (Excluded Virtual Assets).
This means that if a crypto business is only involved with Excluded Virtual Assets then it may not have to register the CBI. We say “may not have to register with the CBI” because there may be other regulatory obligations under other pieces of law that may require registration with the CBI.
