On-shore VASP in Chile

Ley N° 21.521 (Fintech Law):

Comisión para el Mercado Financiero (CMF):

The CMF has already published its specific regulations regarding VASPs under the Fintech Law, which is now in effect.

Exchanges: Platforms facilitating the exchange between virtual assets and fiat currencies, or between one or more forms of virtual assets.

Custody Providers: Entities providing safekeeping or administration of virtual assets or instruments enabling control over virtual assets on behalf of natural or legal persons.

Payment Processors (Crypto-related): If they facilitate the transfer of VAs or stablecoins, or perform services similar to payment service providers using VAs, they would fall under the VASP definition. The law specifically includes "platforms that offer any type of payment initiation service."

Deloitte Article: "Chile publishes its new Fintech Law: key takeaways" (January 2023) - English summary of the law.

UAF Circular N° 57 (Circular N°57 de la UAF): This is the most crucial piece of regulation for VASPs. Issued by the UAF, Circular N° 57 (published in October 2020) explicitly designates "Providers of Virtual Asset Services" (PSAV) as obligated entities under Law N° 19.913. This means VASPs must comply with all AML/CFT obligations applicable to other financial institutions.

Ley N° 19.913, que Crea la Unidad de Análisis Financiero y Modifica Diversas Disposiciones en Materia de Lavado y Blanqueo de Activos (Law N° 19.913, which Creates the Financial Analysis Unit and Modifies Various Provisions Regarding Asset Laundering and Blanqueo de Activos): This is the main AML/CFT law in Chile, establishing the UAF and defining the framework for preventing and prosecuting money laundering and terrorist financing.

Identification and Verification:

Individuals: Obtain and verify identity (e.g., full name, ID number, date of birth, nationality, address, contact information) using reliable, independent source documents, data, or information.

Legal Entities: Obtain and verify legal form, name, address, contact information, legal representative(s), and information on beneficial ownership.

Beneficial Ownership: Identify and verify the natural person(s) who ultimately own or control the customer, or the natural person(s) on whose behalf a transaction is being conducted.

Purpose and Nature of Business Relationship: Understand the purpose and intended nature of the business relationship or transaction.

Ongoing Monitoring: Continuously monitor the business relationship and transactions to ensure they are consistent with the VASP's knowledge of the customer, their business, and risk profile, including the source of funds.

Politically Exposed Persons (PEPs): Implement enhanced due diligence (EDD) measures for PEPs, including obtaining senior management approval for establishing business relationships and taking reasonable measures to establish the source of wealth and source of funds.

Risk-Based Approach: Apply CDD measures according to the level of risk associated with the customer, product, service, or geographic area. Higher risk scenarios require Enhanced Due Diligence (EDD).

Source of Funds/Wealth: For high-risk customers or transactions, VASPs must take reasonable measures to establish the source of funds and, where appropriate, the source of wealth.

Obligation to Report: VASPs are required to report any operation, transaction, business, or activity that they identify as unusual or suspicious, as well as any attempts to carry out such activities, regardless of the amount.

Circular N° 49 de la UAF: Establishes general instructions on risk management and prevention of ML/FT for obligated entities, including policies, procedures, internal controls, and designated compliance officers.

Circular N° 50 de la UAF: Provides instructions for identifying Politically Exposed Persons (PEPs).

Circular N° 51 de la UAF: Establishes instructions regarding the detection and reporting of transactions related to terrorism financing and compliance with international sanctions lists.

Circular N° 52 de la UAF: Details instructions for conducting risk assessments for ML/FT.

Circular N° 58 de la UAF: Modifies and updates the instructions for reporting suspicious activities (ROS) and other information to the UAF.

UAF Circular N° 79 was issued and became effective on July 11, 2022. This circular brought PSAVs under the scope of AML/CFT obligations in Chile, including the principles of the Travel Rule.

For transfers between VASPs (VASP-to-VASP), the originating VASP must obtain and transmit required originator and beneficiary information for transactions equal to or exceeding USD/EUR 1,000 (or its equivalent in other currencies or virtual assets).

For transfers from an unhosted wallet to a VASP, or from a VASP to an unhosted wallet, VASPs are expected to obtain the necessary originator or beneficiary information as appropriate, often through enhanced due diligence.

Identify the originator of a virtual asset transfer and the beneficiary (name, physical address, national identity number or customer identification number, date and place of birth).

Identify the physical address or other unique identifier of the beneficiary and originator (e.g., wallet address).

Store this information securely and be able to provide it to competent authorities upon request.

Transmit this information to the beneficiary VASP immediately and securely.

Any entity intending to provide virtual asset custody services in Chile must register with the Financial Market Commission (CMF) via the Financial Services Register, as established by the Fintech Law.

Authorization and Registration: Providers of virtual asset services, including custody, must obtain authorization and be registered with the CMF.

Requirements: The Ley Fintech explicitly mandates the segregation of client assets from the VASP's own assets.

Prohibition of Commingling: Entities providing custody services for virtual assets are prohibited from mixing client assets with their own proprietary assets.

Identification: Client assets must be clearly identified as belonging to clients and separated from the VASP's balance sheet.

Protection in Insolvency: This segregation aims to protect client assets in case of the VASP's insolvency or bankruptcy.

Capital and Guarantees: Regulated entities, including VASPs offering custody, must maintain adequate own capital and provide guarantees to back their operations and cover potential liabilities. These requirements are intended to protect clients and ensure the stability of the service provider.

Risk Management: Implement comprehensive risk management policies, including operational, technological, and cybersecurity risks.

Technology and Cybersecurity: Implement strong cybersecurity measures and IT infrastructure to protect client assets and data.

Capital Requirements: Meet minimum capital requirements, which will be specified in the CMF's secondary regulations.

Anti-Money Laundering (AML) / Counter-Terrorist Financing (CTF): Comply with existing AML/CTF regulations, aligned with FATF recommendations, which are enforced by the Financial Analysis Unit (UAF) in Chile.

Chile's regulatory framework under Resolution 79/2025 imposes strict oversight and reporting obligations on digital marketplaces and payment facilitators, with punitive enforcement measures (e.g., anti-avoidance rules) to combat non-compliance, tax evasion, and fraud—not merely preventative warnings.

For the relevant Chilean offense, Article 161-A of the Chilean Penal Code establishes a fixed statutory penalty range: imprisonment of reclusión menor in any of its degrees plus a fine of 50 to 500 UTM, increased to reclusión menor in its maximum degree plus a fine of 100 to 500 UTM if the same person both obtains and discloses the material; penalties are therefore not left open-ended to generic criminal charges, asset freezes, and restitution alone but are set by law within these ranges.

Annual Income Tax Return (Form 22): All income derived from cryptocurrencies, including capital gains from occasional sales, habitual trading profits, mining income, staking rewards, etc., must be declared in the annual personal income tax return (Form 22, "Declaración Anual de Impuestos a la Renta") submitted in April each year.

Foreign Assets (Form 2897): If cryptocurrencies are held outside Chile and their value exceeds certain thresholds (currently US$50,000 equivalent), they must be reported on Form 2897 ("Declaración Jurada Anual sobre Inversiones en el Extranjero") as part of a general requirement to declare foreign assets.

Entity Targeted: Individuals associated with "Mind Capital" in Chile, notably promoters and recruiters of the scheme. Violation Type: Alleged multi-level marketing scheme, fraud (estafa), swindling, and illegal banking activities, using cryptocurrencies as a facade. Outcome: Criminal proceedings are ongoing against several individuals involved in promoting and operating the scheme within Chile. The goal is to prosecute those responsible and recover funds for victims.

Entity Targeted: Chilean individuals and entities linked to the international "Generación Zoe" and "IM Forex" schemes. Violation Type: Alleged pyramid scheme, fraud (estafa), swindling, and illegal financial operations, misleading investors with promises of high, guaranteed returns using crypto as an investment vehicle. Penalty Amount: Criminal charges have been filed, leading to arrests and asset seizures. Specific penalties (prison sentences, restitution) are pending final judicial decisions. Outcome: Several individuals have been arrested and charged in Chile for their roles in promoting and operating the scheme. The primary operator of Generación Zoe, Leonardo Cositorto, was arrested in Argentina and is facing charges there. Chilean authorities continue to investigate and prosecute local affiliates. Penalty Amount: No direct penalties attached to a warning. Penalties would come from future enforcement actions under the new FinTech Law, once fully implemented. Outcome: Increased public awareness about crypto risks. The FinTech Law now requires Virtual Asset Service Providers (VASPs) to register with the CMF and comply with various regulations (e.g., AML/CFT, consumer protection). This will enable direct regulatory enforcement actions in the future against non-compliant entities.

Outcome: Increased public awareness about crypto risks. The FinTech Law now requires Virtual Asset Service Providers (VASPs) to register with the CMF and comply with various regulations (e.g., AML/CFT, consumer protection). This will enable direct regulatory enforcement actions in the future against non-compliant entities.