On-shore VASP in 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):

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.

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.

Pending Custody Legislation:

Segregation of Client Assets Rules:

Cold Storage Mandates:

Qualified Custodian Definitions:

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.

Identification and Verification:

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.

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:

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.

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.

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.

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.

Cryptocurrencies are not explicitly illegal in Bhutan, and while they are not recognized as legal tender or regulated financial assets by the Royal Monetary Authority, certain digital assets are now formally recognized and regulated under the Gelephu Mindfulness City (GMC) special administrative region, which issues licenses for digital asset trading and custody services.

The RMA issued warnings about virtual asset risks prior to April 30, 2025, but on that date it updated its position to permit cryptocurrency trading under a regulatory framework, meaning the RMA now both warns and permits such activities.

Capital gains from the sale of cryptocurrencies are generally subject to the 10% capital gains tax under Bhutan's existing tax code for 'property and other assets,' but Gelephu Mindfulness City (a special administrative region) offers a zero capital gains tax framework for regulated crypto firms operating under its fast-track licensing system.

Bhutan currently has no generally applicable 10% capital gains tax on gains from the sale of shares, land, or buildings; recent Bhutanese sources state that Bhutan has no specific capital gains tax and that, under the Income Tax Act 2025 effective 1 January 2026, there will be no capital gains tax for individuals selling personal assets outside business use, so any remaining capital‑gains‑type taxation is limited and the earlier description of standard 10% rates is no longer accurate.

No Crypto-Specific Reporting: Currently, there are no specific reporting requirements for individuals or businesses regarding their cryptocurrency holdings or transactions in Bhutan.

Department of Revenue and Customs (DRC):