On-shore VASP in Andorra

Exchange between digital assets and fiat currencies: This covers cryptocurrency exchanges that allow users to buy and sell crypto with traditional money (EUR, USD, etc.).

Exchange between one or more digital assets: This covers crypto-to-crypto exchanges, but modern regulatory frameworks now also include fiat-to-crypto transactions, crypto ETF/ETP creation and redemption models, and broker-dealer or clearing functions as part of digital asset exchange definitions.

Custody and administration of digital assets on behalf of third parties: This covers services where an entity holds or controls private keys for virtual assets on behalf of clients.

Transfer of digital assets is subject to active regulatory development and finalization, with basis transfer rules still being refined and not yet settled like traditional securities.

Issuance and placement of digital assets that qualify as 'digital securities' (e.g., certain STOs, security tokens) remain subject to SEC securities regulation, but other digital assets such as utility tokens, meme coins, and non-security asset-backed tokens are not covered under federal securities laws.

Provision of financial advice related to digital assets is now subject to specific statutory registration and compliance obligations under the Digital Asset Market Clarity Act and IRS mandatory reporting requirements, making the prior generic advisory claim outdated.

VASP licensing rules in relevant jurisdictions require minimum capital that can vary by the services offered and by the applicable regulatory regime; however, the original claim’s specific attribution to Law 35/2022 is not verified from the provided evidence and appears outdated or jurisdiction-dependent.

Minimum initial capital:

There is no specific EUR 125,000 threshold for custody and administration services for virtual assets under Andorra’s Law 24/2022; licensing is based on compliance requirements rather than a fixed monetary amount.

Higher amounts may be required depending on the volume and complexity of operations, or if combined with other licensed activities.

In addition to initial capital, VASPs must maintain sufficient regulatory capital to cover operational risks and ensure continuous solvency.

AML/KYC (Anti-Money Laundering / Know Your Customer):

Andorra is committed to international AML/CFT standards, including those set by the Financial Action Task Force (FATF). VASPs are subject to strict AML/KYC obligations, which align with Law 14/2017, of 22 June, on preventing money laundering and terrorist financing.

Customer Due Diligence (CDD): Implementing appropriate risk-based procedures for identifying and verifying the identity of clients (individuals and legal entities).

Ongoing Monitoring: Continuous monitoring of business relationships and transactions to detect unusual or suspicious activities.

Risk Assessment: Conducting a comprehensive risk assessment of their business, clients, products, and geographies.

Suspicious Activity Reporting (SAR): Reporting suspicious transactions to the Unitat d'Inteligència Financera d'Andorra (UIFAND).

Record Keeping: Maintaining records of client identification, transactions, and due diligence for a specified period.

Designation of an AML Officer: Appointing a qualified AML officer responsible for overseeing compliance.

A significant local presence is typically required. This often includes:

Physical office: Establishing an operational base in Andorra.

Law 14/2017 of 22 June on the prevention and fight against money laundering and the financing of terrorism: This is Andorra's principal AML/CFT law, establishing the general obligations for all obliged entities. It has been subsequently amended to incorporate international recommendations.

Law 9/2023 of 23 March on digital assets: This specific law regulates virtual assets and their service providers, bringing VASPs under the scope of Law 14/2017 and defining the specific licensing and operational requirements for these entities. This law formally identifies VASPs as obliged entities for AML/CFT purposes.

Exchange between virtual assets and fiat currencies.

Exchange between one or more forms of virtual assets.

Transfer of virtual assets.

Custody and/or administration of virtual assets or instruments enabling control over virtual assets.

Participation in and provision of financial services related to an issuer's offer and/or sale of a virtual asset.

Identification and Verification:

Natural persons in Andorra must have their identity verified using reliable, independent source documents, data, or information (e.g., official ID cards, passports), and Andorra now permits digital and remote identity verification methods such as document scanning and biometric liveness checks under its UIFAND-compliant AML framework.

Beneficial Ownership (BO):

Simplified Due Diligence (SDD): May be applied in low-risk situations, where specific conditions are met and there is sufficient assurance that the ML/TF risks are genuinely lower.

Enhanced Due Diligence must be applied according to the risk profile of the client, the business relationship, the product, or, reflecting a risk-based approach rather than a fixed set of mandatory trigger situations.

Evidence fact ad.aml.suspicious-transaction-reports-str-must not found (may have been renamed).

Requirement: Any entity providing custody services for virtual assets on behalf of third parties is considered a "Virtual Asset Service Provider" (VASP) under Ley 28/2022 and must be authorized by the Autoritat Financera Andorrana (AFA).

Definition of Custody: Article 3, point 16 of Ley 28/2022 defines "custodia de activos virtuales" (custody of virtual assets) as the safekeeping or administration of virtual assets or instruments enabling control over them on behalf of third parties.

Ley 28/2022, de 15 de desembre, de representació digital d'actius: Articles 3.16, 5, 8, 9, and subsequent articles detailing VASP authorization.

Autoritat Financera Andorrana (AFA): Regulator responsible for VASP authorization.

Applicants must comply with stringent requirements covering corporate governance, internal controls, risk management, financial resources (including minimum capital), anti-money laundering (AML) and counter-terrorist financing (CFT) policies, and operational integrity.

The AFA will assess the suitability and professionalism of the management and shareholders.

Authorized VASPs providing custody services are subject to fiduciary duties and robust internal control requirements. This implies that client assets must be clearly identifiable, protected from the custodian's own assets, and not be used for proprietary trading or commingled in a way that risks their availability to the client.

Detailed rules on how client virtual assets must be held, distinguished from the custodian's own assets, and protected in the event of insolvency, will be specified in secondary regulations and AFA guidance. This is a common practice where the foundational law sets the principle, and the regulator provides the operational details.

Ley 28/2022 is relatively new, having been approved in December 2022 and entering into force in May 2023.

Ley 28/2022 is Spain's Startups Law, focused on tax incentives and corporate simplification, and does not contain VASP-specific security or risk management requirements in Article 9.1.d. VASP regulation in Spain falls under separate legislation such as Law 10/2010 or Royal Decree-Law 7/2021.

Exemption: There is an annual tax exemption of €3,000 for capital gains derived from the transfer of movable assets. Gains below this threshold are not taxed.

For Belgium (Dutch-speaking region), a 10% capital gains tax on certain financial assets exceeding €3,000 is scheduled to take effect from January 1, 2026, but it is not a current rule and does not apply to all capital gains.

Andorra's IRPF applies a flat 10% rate on most general income for residents, not a progressive rate.

Tax Rate: The general corporate income tax rate in Andorra is 10%.

General rate: 4.5%

Mining/Staking as a Service: This is a complex area globally. If a mining or staking operation is deemed to be providing a direct service to an identifiable recipient in exchange for a fee, it could potentially be subject to IGI. However, in many jurisdictions, mining and staking rewards for validating blocks are often not considered a direct taxable supply of services for VAT purposes due to the lack of a directly identifiable recipient. If a business offers hosting services for mining equipment, those specific services would be subject to IGI.