Bhutan

**For the Public and Licensed Financial Institutions:** The Royal Monetary Authority of Bhutan (RMA) has adopted a cautious and prohibitive stance. There is **no legal framework to permit or regulate private crypto trading, exchanges, or virtual asset service providers (VASPs)** for the general public. Licensed financial institutions (banks, non-bank financial institutions) are generally **prohibited** from dealing with virtual assets, processing transactions related to them, or providing services to crypto businesses. This effectively acts as a de facto ban on public participation in the unregulated crypto market.

**For State-Owned Entities:** In contrast, Bhutan has strategically engaged with cryptocurrency through **Druk Holdings & Investments (DHI)**, the sovereign wealth fund. DHI has been involved in Bitcoin mining and holds significant crypto assets, indicating a state-controlled, strategic adoption rather than an open market approach.

**Royal Monetary Authority of Bhutan (RMA)**:

Role: Bhutan's central bank and primary financial regulator. It is responsible for monetary policy, financial sector supervision, and payment systems. The RMA is the main body overseeing financial regulation, while the Gelephu Mindfulness City (GMC) has introduced a regulated framework offering quick licenses and zero-tax incentives for crypto firms, shifting from a purely restrictive posture on cryptocurrencies.

**Website:** Royal Monetary Authority of Bhutan

**Druk Holdings & Investments (DHI)**:

**Role:** The commercial arm of the Royal Government of Bhutan, managing the nation's portfolio of state-owned enterprises. While not a *regulator* in the traditional sense, DHI's direct involvement in virtual assets dictates a significant part of Bhutan's practical stance on crypto, showing a selective, state-controlled adoption.

**Website:** Druk Holdings & Investments

**Royal Monetary Authority Act of Bhutan (2010):** This foundational Act grants the RMA broad powers to regulate financial institutions, manage monetary policy, and oversee payment systems. The RMA utilizes this authority to issue circulars and public notices concerning risks associated with virtual assets. While not directly naming crypto, it provides the legal basis for the RMA's supervisory and prohibitive actions.

*Note:* A direct URL to the full text of the latest consolidated Act might require searching Bhutanese legal archives, but its existence is well-established and forms the basis for RMA's regulatory powers. The RMA website provides information on its mandate.

**RMA Circulars and Public Notices:** The RMA has issued warnings and advisories to the public and financial institutions concerning the risks of cryptocurrencies, highlighting their unregulated nature, volatility, and potential for fraud and money laundering. These directives effectively prohibit licensed financial institutions from facilitating crypto-related transactions. Specific circular numbers and dates are often for internal circulation or specific institutions, but the general public advisories are consistent.

Crypto Trading: For the general public in Bhutan, crypto trading is heavily restricted and effectively prohibited through the formal financial system. The RMA's stance discourages and prevents licensed financial institutions from processing transactions related to virtual assets. This means individuals cannot easily buy or sell cryptocurrencies via traditional banking channels within Bhutan.

Crypto Exchanges: There are no licensed or regulated cryptocurrency exchanges operating for the public within Bhutan. The regulatory environment does not support their establishment or operation for public access. Any involvement would be considered operating outside the formal financial system and could carry significant risks for participants.

**Royal Monetary Authority (RMA) of Bhutan Website:** https://www.rma.org.bt/

**Anti-Money Laundering and Countering Financing of Terrorism Act of Bhutan (AMLCFT Act) 2018:** This is the cornerstone legislation for AML/CFT in Bhutan. While it may not explicitly name "cryptocurrency" or "virtual assets" in all its provisions, its broad definitions and regulatory scope are intended to cover evolving financial instruments and services that fall under the FATF's purview.

**AML/CFT Guidelines for Financial Institutions (2018):** Issued by the RMA, these guidelines provide detailed instructions and requirements for financial institutions to implement the provisions of the AML/CFT Act. While not specifically named for VASPs, these guidelines generally apply to any entity falling under the scope of "financial institutions" or "reporting entities" for AML/CFT purposes.

The Financial Institutions Act of Bhutan (1999, amended 2017) provides a framework for financial institutions, but for crypto/VASPs, Bhutan has introduced a fast-tracked licensing regime in Gelephu Mindfulness City that supersedes or supplements the general Act for virtual asset service providers.

**Individuals:** Collecting and verifying the customer's name, date of birth, nationality, unique identification number (e.g., citizenship ID), residential address. This typically involves using reliable, independent source documents, data, or information.

**Legal Persons/Entities (e.g., companies):** Collecting and verifying the legal name, legal form, proof of existence, powers governing the entity, address of registered office, and names of directors and senior management.

**Beneficial Ownership:** Identifying and verifying the natural persons who ultimately own or control the customer, or the natural person on whose behalf a transaction is being conducted.

**Purpose and Intended Nature of Business Relationship:** Understanding the purpose and intended nature of the business relationship.

**Ongoing Due Diligence:** Conducting ongoing monitoring of the business relationship and transactions to ensure they are consistent with the entity's knowledge of the customer, their business, and risk profile, including the source of funds.

**Risk-Based Approach:** Applying CDD measures based on the risk associated with the customer, product, service, or jurisdiction. This means:

**Simplified CDD:** For lower-risk situations.

**Standard CDD:** For typical relationships.

**Enhanced CDD (EDD):** For higher-risk situations, such as customers from high-risk jurisdictions, Politically Exposed Persons (PEPs), or complex transactions. EDD would involve obtaining additional information, increasing transaction monitoring, and obtaining senior management approval.

**Obligation to Report:** Any transaction (regardless of amount) where there are reasonable grounds to suspect that it may be linked to money laundering, terrorist financing, or other criminal activity must be reported.

**No Tipping-Off:** Reporting entities and their employees are prohibited from disclosing to the customer or any third party that an STR has been or will be filed.

**Reporting Mechanism:** Reports are submitted to the FIU (which is housed within the RMA) in a prescribed format.

**Customer Identification Data:** Records of all customer identification and verification documents (e.g., copies of ID, beneficial ownership information).

**Correspondence:** Records of business correspondence relating to customers.

**Duration:** Records must generally be kept for a minimum of **five (5) years** after the business relationship has ended or after the date of the transaction.

**Licensing:** As of current public information, Bhutan does not have a distinct licensing framework specifically for VASPs. However, depending on the nature of their activities (e.g., if they provide services similar to traditional financial institutions), they may be required to obtain a license under the Financial Institutions Act or operate under specific regulatory guidance from the RMA.

**FATF "Travel Rule":** The FATF's Interpretive Note 15 (Recommendation 16) requires VASPs to obtain and transmit originator and beneficiary information for virtual asset transfers. While not explicitly codified in Bhutanese law for VASPs, the RMA would likely expect VASPs to comply with this as part of their broader AML/CFT obligations, consistent with international standards.

**Emerging Landscape:** Bhutan has shown interest in blockchain technology (e.g., potential CBDC projects). The regulatory landscape for private virtual assets is likely to evolve. VASPs should monitor pronouncements from the RMA for any new circulars, guidelines, or legislative developments.

**Financial Institutions Act of Bhutan 1999 (and subsequent amendments):** This act governs financial institutions, and VASPs, if defined as financial institutions or subject to similar obligations, would fall under its regulatory ambit.

**Royal Monetary Authority Act of Bhutan 1982:** Establishes the RMA as the central bank and financial regulator.

**FATF Recommendations:** Bhutan is expected to comply with the FATF's standards, particularly **Recommendation 15**, which states that countries should regulate VASPs for AML/CFT purposes, license or register them, and subject them to effective systems for monitoring and ensuring compliance. This includes requirements for customer due diligence (CDD), record-keeping, and suspicious transaction reporting (STR).

**Obligation:** All financial institutions and entities operating within Bhutan, including any VASPs (even if not explicitly licensed as such, they are expected to adhere to these principles), must comply with UN sanctions. This means they cannot deal with individuals, entities, or groups designated on the **UNSC Consolidated List**.

**Sanctioned Entity Screening:** VASPs must screen their customers (senders and recipients of virtual assets) against the UNSC Consolidated List before facilitating any transaction.

**Transaction Monitoring:** Implement systems to monitor transactions for any links to sanctioned entities or activities.

**Asset Freezing:** If a VASP identifies virtual assets belonging to, or controlled by, a designated person or entity, those assets must be frozen immediately, and the authorities (likely the Financial Intelligence Unit and the RMA) must be notified.

**Prohibition of Services:** No services, direct or indirect, should be provided to designated individuals or entities.

**UN Security Council Consolidated List:** https://www.un.org/securitycouncil/content/un-sc-consolidated-list

Extraterritorial Reach: OFAC sanctions apply to all U.S. persons (including entities incorporated in the U.S. and their foreign branches), transactions involving a U.S. nexus (e.g., using U.S. dollar clearing, U.S.-based servers, or U.S. IP addresses), and sometimes extend to non-U.S. persons engaged in activities that circumvent U.S. sanctions (secondary sanctions).

**Implications for Bhutanese VASPs:** A Bhutanese VASP, even if not directly a U.S. person, would risk severe penalties if it facilitates transactions involving OFAC-sanctioned individuals, entities, or jurisdictions, especially if those transactions touch the U.S. financial system or involve U.S. technology/services.

**Screening:** Best practice dictates that VASPs globally screen against OFAC's Specially Designated Nationals (SDN) and Blocked Persons List, as well as other relevant OFAC sanctions lists.

**Legal Reference:** U.S. Department of the Treasury, OFAC: https://home.treasury.gov/policy-issues/office-of-foreign-assets-control-sanctions-programs-and-information

**Extraterritorial Reach:** EU sanctions apply to EU nationals, entities incorporated under EU law, and any economic activity within the EU. They can also apply to non-EU persons for certain activities.

**Implications for Bhutanese VASPs:** Similar to OFAC, a Bhutanese VASP dealing with EU-sanctioned individuals, entities, or jurisdictions risks losing access to EU markets and financial services.

**Screening:** Global VASPs typically screen against the EU Consolidated Financial Sanctions List.

**Legal Reference:** European Union Sanctions Map: https://www.sanctionsmap.eu/

**Customer Due Diligence (CDD):** VASPs must perform robust CDD on all customers, including identity verification, understanding the nature of the business, and ongoing monitoring. This CDD process must incorporate screening against relevant sanctions lists (UNSC is mandatory for Bhutanese entities; OFAC/EU is best practice for global operation).

**Beneficial Ownership:** Identification and verification of the beneficial owners of corporate or legal entity customers.

**Source of Funds/Wealth:** Understanding the origin of funds or wealth involved in transactions, especially for high-risk customers or large transactions.

**Risk-Based Approach:** VASPs should adopt a risk-based approach, applying enhanced due diligence (EDD) to customers or transactions deemed higher risk (e.g., those involving high-risk jurisdictions, politically exposed persons, or complex corporate structures).

**Sanctioned Jurisdictions:** VASPs operating in Bhutan (or serving Bhutanese customers) must block or reject transactions originating from or destined for jurisdictions subject to comprehensive UN sanctions (e.g., North Korea, Iran for certain activities) or significant OFAC/EU sanctions.

**High-Risk Jurisdictions:** Beyond sanctioned countries, transactions involving jurisdictions identified by FATF or other international bodies as high-risk for AML/CFT (e.g., those on the FATF "grey list" or "black list") would require enhanced due diligence.

**UNSC Resolutions:** For countries under UN sanctions.

**OFAC/EU Sanctions Programs:** For countries specifically targeted by U.S. or EU sanctions.

**Fines:** Significant monetary penalties for institutions and individuals found in violation.

**Imprisonment:** Individuals involved in serious breaches, particularly those linked to money laundering or terrorist financing, could face terms of imprisonment.

**Loss of License/Registration:** If a VASP were to be formally licensed or registered, non-compliance could lead to the revocation of its operating authorization.

**Reputational Damage:** Beyond legal penalties, significant reputational damage can occur.

**UN Security Council Consolidated List:** This is the primary list Bhutanese entities are legally required to screen against.

**OFAC SDN List and other OFAC Sanctions Lists:** While not domestically enforced, these are critical for any VASP seeking to operate internationally or avoid exposure to U.S. financial risks.

**EU Consolidated Financial Sanctions List:** Important for similar reasons related to EU exposure.

Bhutan’s Gelephu Mindfulness City has introduced a fast-track licensing pathway for crypto firms, including custodial services, which streamlines approval and banking access.

**No specific "digital asset custody license" currently exists.**

The Royal Monetary Authority of Bhutan (RMA) issued a formal communication on April 30, 2025, establishing a focused and phased regulatory position on cryptocurrencies, which means digital asset activities are now subject to a specific regulatory framework rather than solely existing financial services licenses such as banking or payments licenses.

Entities providing virtual asset services in Bhutan, including custody, are subject to a specific Digital Asset Trading and Custody Services License regime, not merely AML/CFT registration. This licensing framework inherently includes AML/CFT obligations such as customer due diligence, transaction monitoring, and suspicious transaction reporting, but the primary regulatory obligation is the specialized license, not just AML/CFT requirements alone.

Bhutan's AML/CFT framework, originally under the 2018 Act, has evolved through the completion of a Second National Risk Assessment, with VASPs covered if designated as financial institutions or DNFBPs by the FIU or RMA. The regulatory landscape is now more developed than the initial 2018 Act alone.

**Royal Monetary Authority of Bhutan (RMA):** The central bank and primary financial regulator.

**Segregation of Client Assets Rules:**

**No specific rules for digital asset custody.**

In traditional finance, licensed institutions are typically required to segregate client funds from operational funds. If a licensed Bhutanese financial institution *were* to custody digital assets, general principles of fiduciary duty and client asset protection under their existing licenses might implicitly require some form of segregation, but this would not be specific to digital assets. For non-licensed crypto-specific entities, such rules are generally absent.

**No specific insurance or bonding requirements for digital asset custodians.**

Traditional financial institutions licensed by the RMA might have general insurance requirements, but these typically do not extend to cover novel risks associated with digital assets.

**No specific mandates for the use of cold storage.**

While cold storage is considered a best practice for security in the digital asset industry, Bhutanese regulations do not currently prescribe its use.

**No specific definition for a "qualified custodian" concerning digital assets.**

The concept of a "qualified custodian" (e.g., as defined by the SEC in the U.S.) implies a regulated entity meeting specific financial and operational standards. Without a dedicated regulatory framework for digital asset custody, such a definition does not exist in Bhutan.

Public information exists on specific pending digital asset custody legislation in Bhutan, as BTSE Bhutan received in-principle approval for a digital asset trading and custody services license in May 2026.

The RMA issued a focused and phased formal communication on April 30, 2025, moving from general caution towards a more structured regulatory approach to cryptocurrencies, while still emphasizing their speculative nature and lack of legal tender status in Bhutan.

Bhutan has been exploring a Central Bank Digital Currency (CBDC), the "digital Ngultrum," which is a separate initiative from regulating private cryptocurrencies and their custody.

Any future developments are more likely to first address broader VASP regulation under AML/CFT frameworks before moving to detailed custody rules.

Consult directly with the **Royal Monetary Authority of Bhutan (RMA)** for the most up-to-date guidance and to understand how existing financial laws might apply.

Bhutan's Gelephu Mindfulness City is actively offering fast-track licensing, zero-tax incentives, and bank accounts to attract regulated crypto firms, indicating a specialized regulatory pathway for virtual asset entities rather than a rigid, universally-applied VASP obligation.