Centralized exchange in Cabo Verde

The Banco de Cabo Verde (BCV), the central bank, has repeatedly issued public warnings regarding the risks associated with cryptocurrencies.

It has clarified that cryptocurrencies are not legal tender in Cabo Verde.

The BCV has stated it does not authorize, supervise, or license entities that deal exclusively with virtual assets, but it has actively issued public warnings and interventions (e.g., regarding OPTCOIN), indicating some regulatory oversight through public communications and evolving legal frameworks for digital currency.

Lack of Dedicated Licensing Regime:

There are no specific laws or regulations that define a licensing framework for crypto exchanges, custody providers, or payment processors as distinct categories of financial institutions.

Neither a specific licensing nor a dedicated registration regime for Virtual Asset Service Providers (VASPs) exists in Cabo Verde.

Entities wishing to operate a business (including a crypto-related one) would need to comply with general company registration laws in Cabo Verde, but this is distinct from obtaining a financial services license.

If a company were to deal with fiat currency in a way that constitutes a traditional financial service (e.g., remittances, payment processing of traditional money), then those specific activities would fall under the BCV's existing licensing requirements for financial institutions, which are separate from crypto activities.

Cabo Verde has updated its AML/CFT laws to align with FATF recommendations, which include virtual assets and VASPs.

Key Law: Lei n.º 1/IX/2021, de 16 de março, on the Prevention and Combat of Money Laundering and the Financing of Terrorism, explicitly defines "Ativo Virtual" (Virtual Asset) and "Prestador de Serviços de Ativos Virtuais" (Virtual Asset Service Provider) and subjects them to AML/CFT obligations.

Specific AML/CFT Requirements for VASPs (as "Reporting Entities"):

Customer Due Diligence (CDD/KYC): Implementing robust KYC procedures to identify and verify the identity of customers, including beneficial owners. This means collecting name, address, date of birth, national ID, etc.

Enhanced Due Diligence (EDD): For higher-risk customers or transactions.

Record-Keeping: Maintaining records of customer identification data and transaction details for a specified period (typically 5-7 years).

Suspicious Transaction Reporting (STR): Reporting any suspicious transactions or activities to the UIF without delay.

Risk Assessments: Conducting a thorough assessment of money laundering and terrorist financing risks associated with their business operations, customers, products, and services.

Internal Controls: Establishing and maintaining appropriate internal policies, procedures, and controls to mitigate ML/TF risks, including the appointment of an AML compliance officer and staff training.

No specific "crypto custody license" currently exists.

However, any entity providing services that involve holding or managing financial assets, even digital ones, could potentially be deemed to be operating within the scope of existing financial services laws and regulations. This might necessitate obtaining a general financial services license or authorization from the Banco de Cabo Verde (BCV) if their activities are interpreted to fall under the definition of banking, investment services, or payment services.

Entities offering services involving fiat currency exchange or payment processing related to digital assets in Cape Verde are subject to a dedicated legal framework that classifies crypto-assets under existing financial categories including 'payment tokens,' rather than merely falling under general payment services regulations by likelihood.

Segregation of Client Assets Rules:

While there are no specific crypto-custody segregation rules, the general principles of financial prudency and client protection applicable to traditional financial institutions in Cabo Verde would likely require segregation of client funds/assets from the operational capital of the service provider. This is a fundamental principle to prevent misuse of client assets and protect them in case of insolvency.

No specific insurance or bonding requirements for crypto custody.

Cold Storage Mandates:

There are no specific mandates for cold storage of digital assets.

Identification and Verification:

Enhanced Due Diligence (EDD): Required for higher-risk customers or transactions, including:

Reporting Obligation: Immediately report any transaction (or attempted transaction), regardless of the amount, that the VASP suspects to be related to money laundering, terrorist financing, or proliferation financing.

Retention Period: Records must be retained for at least five (5) years after the business relationship ends or after the date of an occasional transaction. These records must be readily available to competent authorities upon request.

Unidade de Informação Financeira (UIF) – Financial Intelligence Unit:

Foundational Law: The legal framework for virtual assets (VAs) and Virtual Asset Service Providers (VASPs) in Cabo Verde was established by Decree-Law No. 5/2020 of January 27, 2020. This law defines VAs and VASPs, brings them under the supervision of the Banco de Cabo Verde (BCV), and subjects them to anti-money laundering and combating the financing of terrorism (AML/CFT) obligations.

Travel Rule Implementation: The specific requirements for the FATF Travel Rule, including the collection and transmission of originator and beneficiary information, are detailed in Instruction No. 3/2021 of January 28, 2021, of the Banco de Cabo Verde. This instruction operationalizes the AML/CFT obligations for VASPs, including those related to the Travel Rule.

Zero Threshold for Custodial Transfers: For transfers between VASPs (or from a VASP to a non-custodial wallet when initiated by a VASP customer), the full Travel Rule information is generally required for all transactions, regardless of amount.

Collect and Retain Information: Obtain and retain the required originator and beneficiary information for all virtual asset transfers.

Transmit Information: Ensure that transfers of virtual assets are accompanied by the necessary originator and beneficiary information to the beneficiary VASP (or to the non-custodial wallet owner, if applicable).

Secure Transmission: The information must be transmitted securely and reliably. The instruction does not prescribe a specific technical solution (e.g., TRISA, OpenVASP, SYGNA), but requires the capability and execution of transmitting this data.

Risk-Based Approach: VASPs must implement a risk-based approach to monitor transactions and report suspicious activities to the Financial Information Unit (FIU) of Cabo Verde.

Administrative fines under Cape Verde Law 133/V (Data Protection) range from CVE 1 million to CVE 100 million for first offenses and from CVE 100 million to CVE 300 million for repeat violations, with the specific amounts varying by severity and recurrence.

Primary Regulator: The Banco de Cabo Verde (BCV) is the central bank and the main authority responsible for overseeing financial institutions and monetary policy. It is also the most likely body to address issues related to virtual assets and cryptocurrencies from a financial stability and consumer protection perspective.

Regulatory Stance and Warnings (General "Actions"):

Issuing warnings to the public about the risks of unregulated virtual assets.