Custodial wallet / SaaS in Belarus

Presidential Decree No. 8 (2017) initially legalized cryptocurrencies and set a framework for activities like mining, exchange, and token creation in Belarus, but subsequent regulatory actions by Belarusian authorities have narrowed its scope by preapproving only 26 specific cryptocurrencies for processing by cryptobanks, imposing restrictions not present in the original decree.

HTP residency is no longer the primary requirement to operate as a digital asset custodian in Belarus; new legislation for 'cryptobanks' has introduced alternative licensing and operational frameworks for digital asset services, including custody.

HTP residency grants the right to engage in activities related to digital tokens, including their storage and transfer.

Applicants for HTP residency must submit a business plan, demonstrate a suitable business model, and comply with HTP's internal rules and oversight, including AML/CFT requirements.

No standalone "custodial license": Belarus does not issue a specific "digital asset custodial license" in the traditional sense, separate from a broader digital asset service provider license.

Relevant Provisions in Decree No. 8: Article 4.2 of Decree No. 8 defines "cryptocurrency exchange operator" and "other operator" as entities engaging in activities like storage, transfer, and exchange of digital signs (tokens). It explicitly states that "storage of tokens on their own accounts for their clients" is an activity permitted for HTP residents.

Decree No. 8's Stance: The decree itself does not explicitly detail strict segregation requirements in the way traditional financial regulations do (e.g., mandating separate legal entities or specific trust accounts for client funds vs. operational funds).

Implicit Expectation/Best Practice: While not explicitly codified in the primary decree, reputable digital asset service providers are expected to employ robust internal controls. Given the HTP's oversight and AML/CFT requirements, ensuring proper accounting and logical segregation of client assets from the firm's own assets would be a strong expectation and potentially an internal HTP guideline or a condition of residency for a particular operator.

HTP Oversight: The HTP administration reviews the business operations and internal policies of its residents. It is highly probable that during the application or ongoing supervision, they would require companies to demonstrate adequate risk management and operational controls for safeguarding client assets, which would typically include some form of asset segregation.

No explicit mandate: Presidential Decree No. 8 does not explicitly mandate specific insurance or bonding requirements for digital asset custodians (HTP residents).

No explicit mandate: Decree No. 8 does not explicitly mandate the use of cold storage or any specific technology for safeguarding digital assets.

Security Expectations: Custodians are generally expected to implement strong security measures to protect client assets. The choice between hot, warm, or cold storage, multi-signature wallets, hardware security modules (HSMs), etc., is typically left to the operator's discretion, based on their risk assessment and technological capabilities. The HTP's oversight would likely focus on the overall security framework and risk management rather than prescribing specific technological solutions.

No specific definition: Belarus does not have a specific legal definition of a "qualified custodian" analogous to those found in other jurisdictions (e.g., the SEC's definition in the US for registered investment advisers).

Functional Equivalent: Within the Belarusian framework, an HTP resident that is authorized by the HTP administration to perform digital asset storage services for clients effectively acts as the qualified custodian. The "qualification" stems from achieving and maintaining HTP residency and adhering to the HTP's supervisory requirements.

Exclusion from HTP residency: This is the most significant regulatory action against licensed entities.

Criminal prosecution: Against individuals or groups operating illegally (outside HTP's framework), engaging in fraud, or money laundering.

Regulator Name: Hi-Tech Park (HTP) Administration

Decree of the President of the Republic of Belarus No. 8 "On the Development of the Digital Economy" dated December 21, 2017 (as amended): This foundational decree legalizes and regulates activities involving digital tokens (cryptocurrencies) for Hi-Tech Park residents, including exchanges, initial coin offerings (ICOs), and other related services. It explicitly mandates that HTP residents engaged in these activities must comply with AML/CFT legislation.

Law of the Republic of Belarus No. 165-Z "On Measures for Preventing the Legalization of Proceeds from Crime, Financing of Terrorist Activities and Financing the Proliferation of Weapons of Mass Destruction" dated June 30, 2014 (as amended): This is the overarching national AML/CFT law that applies to all financial institutions and designated non-financial businesses and professions (DNFBPs) in Belarus, including those operating under Decree No. 8 when conducting financial operations involving virtual assets. It outlines the general principles and specific obligations for AML/CFT compliance.

Regulations and Rules issued by the Hi-Tech Park Administration: The HTP Administration, as the direct regulator of crypto activities, issues specific rules and instructions that elaborate on the AML/CFT requirements for its residents, ensuring compliance with both Decree No. 8 and the general AML law. These typically align with FATF recommendations.

Identification and Verification of Customers:

For Individuals: Obtaining and verifying name, date of birth, place of residence, citizenship, passport details (series, number, date of issue, issuing authority), and sometimes tax ID number. Verification must be based on reliable, independent source documents or data.

For Legal Entities: Obtaining and verifying legal name, registration number, legal form, address of incorporation, proof of existence, details of directors/managers, and beneficial ownership information.

Identification of Beneficial Owners: VASP must identify and verify the identity of the beneficial owner(s) of the customer, regardless of the ownership structure. For legal entities, this means identifying individuals who ultimately own or control more than a certain percentage (e.g., 25%) of the entity, or who otherwise exercise control.

Purpose and Intended Nature of Business Relationship: Understanding the customer's business activities, the purpose of their transactions, and the intended nature of the ongoing relationship.

Ongoing Monitoring: Continuously monitoring the business relationship and transactions to ensure they are consistent with the VASP's knowledge of the customer, their business, and risk profile. This includes scrutinizing transactions for unusual patterns.

Risk-Based Approach: VASPs must implement a risk-based approach to CDD. This means:

Enhanced Due Diligence (EDD): Must be applied to higher-risk situations, such as transactions involving Politically Exposed Persons (PEPs), customers from high-risk jurisdictions (as identified by FATF or national authorities), complex or unusually large transactions, or situations where there are suspicions of money laundering/terrorism financing. EDD involves obtaining additional information, conducting more rigorous verification, and requiring higher-level management approval.

Source of Funds/Wealth: For high-risk clients or transactions, VASPs are expected to take reasonable measures to establish the source of funds or source of wealth.

Reporting Obligation: Any transaction or attempted transaction that the VASP suspects to be related to money laundering, financing of terrorism, or financing the proliferation of weapons of mass destruction, regardless of the amount, must be reported.

Reporting Authority: The reports are submitted to the Financial Monitoring Department of the State Control Committee of the Republic of Belarus.

Timing: Reports must be made without delay, typically within 24-48 hours of forming a suspicion.

No Tipping-Off: VASPs and their employees are prohibited from informing the customer or any third party that a suspicious transaction report has been or will be made.

Customer Identification Records: All documents and information obtained during the CDD process, including identity documents, beneficial ownership information, and risk assessments.

Transaction Records: Details of all virtual asset transactions, including dates, types of assets, amounts, parties involved (senders and recipients), wallet addresses, and any relevant messages or references.

Business Correspondence: Records of communications related to customer due diligence and transactions.

Suspicious Transaction Reports: Copies of all STRs submitted, along with supporting documentation and internal decision-making processes.

Hi-Tech Park Administration (HTP):

Role: The HTP Administration is the primary direct regulator for companies operating within its jurisdiction, including those involved in virtual asset activities. It grants residency status, sets specific rules and requirements for crypto operations under Decree No. 8, and oversees their adherence to these rules, which encompass AML/CFT obligations. The HTP conducts audits and inspections of its residents.

Financial Monitoring Department of the State Control Committee of the Republic of Belarus (FIU):

Entity Targeted: WhiteBird LLC (the Belarusian legal entity associated with the WhiteBIT crypto exchange). Violation Type: Failure to comply with the requirements for Hi-Tech Park residency and the norms of Decree No. 8. While specific details are often not fully disclosed by HTP, such exclusions typically stem from operational deficiencies, non-compliance with AML/CFT standards, or failure to meet the requirements of the special legal regime. Penalty Amount: Loss of HTP residency (effectively, revocation of its operating license in Belarus). No specific monetary fine for the exclusion itself is usually reported. Outcome: WhiteBird LLC was excluded from the HTP. This led to WhiteBIT announcing the cessation of services for residents of Belarus as of March 2024.

Entity Targeted: Individuals and organized criminal groups operating unregistered crypto exchanges, engaging in investment fraud schemes involving crypto, or using crypto for money laundering. Violation Type: Illegal entrepreneurial activity (operating a crypto exchange without HTP registration), fraud, money laundering, theft of crypto assets. Penalty Amount: Varies greatly. These are criminal cases, leading to arrests, investigations, and potential imprisonment, confiscation of assets, and restitution orders. The "penalty amount" is not a fixed fine but relates to the scale of the illicit activity (e.g., millions of dollars laundered or stolen) and subsequent asset seizures. Outcome: Arrests, initiation of criminal proceedings, asset seizures (including crypto and traditional assets), and potential convictions with prison sentences.

Outcome: Arrests, initiation of criminal proceedings, asset seizures (including crypto and traditional assets), and potential convictions with prison sentences.