On-shore VASP in Madagascar

Such activities are currently unrestricted but carry significant legal and operational risks due to the absence of specific protections or guidelines.

Such activities may be implicitly restricted or discouraged under broader financial regulations, or even face outright prohibitions from the Central Bank.

No Specific Crypto Licensing Regime: There is no specific law or regulation mandating licenses for cryptocurrency exchanges, custody providers, or virtual asset payment processors in Madagascar, unlike jurisdictions that have implemented frameworks like MiCA (EU), MAS (Singapore), or VARA (Dubai).

Central Bank Caution/Warnings: The Banque Centrale de Madagascar (BCM) – the country's central bank and primary financial regulator – has historically maintained a cautious, if not prohibitive, stance towards cryptocurrencies. They have likely issued public warnings about the risks associated with virtual assets, including price volatility, lack of consumer protection, and potential for illicit finance. These warnings often imply that crypto is not recognized as legal tender and regulated financial institutions should not facilitate their use.

AML/CFT Implications: While there are no crypto-specific AML/CFT regulations, Madagascar, as a member of the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) and subject to FATF recommendations, has general anti-money laundering and combating the financing of terrorism (AML/CFT) laws. The Cellule de Renseignement Financier (CRF) is Madagascar's Financial Intelligence Unit.

In the absence of specific VASP regulations, these general AML/CFT laws could be interpreted to apply to entities dealing with virtual assets, especially if they interact with the traditional financial system. However, without specific guidance, the application remains ambiguous.

FATF Recommendation 15 specifically calls for countries to regulate and supervise VASPs for AML/CFT purposes. Madagascar is expected to implement these recommendations, which could lead to future regulations.

Registration vs. Licensing Regime: Currently, neither a dedicated registration nor a licensing regime for VASPs exists in Madagascar.

Exchanges (Fiat-to-Crypto/Crypto-to-Crypto): There are no specific licenses required. However, if an exchange facilitates fiat currency transactions (e.g., MGA deposits/withdrawals), it might inadvertently touch upon existing payment services regulations overseen by the BCM, potentially requiring a payment service provider license for the fiat portion of its operations.

Custody Providers: No specific licenses are required for virtual asset custody.

Payment Processors (Virtual Assets): No specific licenses are required for processing payments in virtual assets. Similar to exchanges, if these services involve conversion to or from fiat currency, they may fall under existing electronic payment service regulations.

Capital Requirements: Sufficient capital to cover operational risks, ensure solvency, and protect customer assets (amounts would vary based on the scope of services).

AML/KYC Compliance: Robust Anti-Money Laundering (AML) and Know Your Customer (KYC) policies and procedures, including transaction monitoring, suspicious activity reporting, and customer due diligence, in line with FATF recommendations.

Local Presence: Typically, a locally incorporated entity (e.g., a company registered in Madagascar) with a physical presence and local management.

High Regulatory Risk: Operating a cryptocurrency business in Madagascar currently carries significant regulatory risk due to the absence of clear rules. This can lead to uncertainty regarding legality, potential for sudden regulatory changes, or difficulties in interacting with traditional financial institutions.

Evolving Landscape: The global regulatory landscape for virtual assets is rapidly evolving. Madagascar, like other countries, is under pressure from international bodies (like FATF) to address VASP regulation. This situation could change at any time with the introduction of new laws or decrees.

Loi n° 2018-043 du 19 décembre 2018 relative à la lutte contre le blanchiment de capitaux et le financement du terrorisme (Law No. 2018-043 of December 19, 2018, on the Fight against Money Laundering and the Financing of Terrorism).

This law is the cornerstone of Madagascar's AML/CFT framework. It defines the obligations of reporting entities, establishes the powers of the Financial Intelligence Unit (FIU), and outlines the criminalization of money laundering and terrorist financing.

While it may not explicitly name "Virtual Asset Service Providers," the broad definitions within such laws typically encompass entities that facilitate financial transfers, exchanges, or safekeeping of value, which can include virtual assets. VASPs are often implicitly or explicitly considered reporting entities under the "other financial institutions" or "designated non-financial businesses and professions" categories, especially regarding FATF Recommendation 15.

Identification and Verification:

For individuals: Obtain and verify identity using reliable independent source documents (e.g., national ID card, passport), including full name, date of birth, address, and nationality.

For legal persons/arrangements: Obtain and verify legal name, legal form, proof of existence, powers that bind the legal person, and the identity of persons holding senior management positions.

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 Intended Nature of Business Relationship: Understand the rationale behind the customer's transactions and the nature of their relationship with the VASP.

Ongoing Monitoring: Conduct ongoing due diligence on the business relationship and scrutiny of transactions undertaken throughout the course of that relationship to ensure that the transactions are consistent with the VASP's knowledge of the customer, their business and risk profile, including, where necessary, the source of funds.

Risk-Based Approach: Apply CDD measures on a risk-sensitive basis:

Simplified CDD: May be applied where the risks of money laundering or terrorist financing are identified as low.

Enhanced CDD (EDD): Required for higher-risk situations, such as:

Customers from high-risk jurisdictions.

Politically Exposed Persons (PEPs), their family members, and close associates.

Complex or unusually large transactions.

Transactions involving new technologies or anonymous transactions where the risks are deemed higher.

Source of funds and source of wealth verification may be required for EDD.

Obligation to Report: VASPs, as reporting entities, are legally obligated to report any suspicious transactions or activities to the Financial Intelligence Unit (FIU), regardless of the amount involved. This includes transactions that are unusual, lack clear economic rationale, or appear to be connected to money laundering or terrorist financing.

Timeliness: Reports must be made promptly, usually within a few days of the VASP becoming aware of the suspicion.

No Tipping-Off: Reporting entities and their employees are prohibited from disclosing to the customer or to third parties that a suspicious transaction report is being, or has been, submitted to the FIU.

Customer Identification Data: All records obtained through CDD processes (identification documents, beneficial ownership information, account opening forms).

Transaction Data: Records of all domestic and international transactions, including the nature of the transaction, amount, date, parties involved, and any associated messages or instructions.

Business Correspondence: Relevant business correspondence, including records of analysis performed for suspicious transaction reports.

Duration: Records must typically be kept for at least five (5) years after the business relationship has ended or after the date of an occasional transaction.

SAMIFIN (Service d'Analyse et de Traitement du Renseignement Financier)

Not Legal Tender: Cryptocurrencies are not recognized as legal tender in Madagascar.

No Official Recognition or Supervision: The BCM explicitly stated that it does not recognize, regulate, or supervise cryptocurrencies or their underlying technologies.

High Risk: The BCM highlighted the risks associated with cryptocurrencies, including price volatility, lack of consumer protection, potential for fraud, and use in illicit activities.

No Specific Framework: There is no specific legal or regulatory framework governing the issuance, trading, or custody of cryptocurrencies in Madagascar.

Custodial License Requirements: There are no specific licenses required for entities wishing to provide cryptocurrency custody services, as such services are not officially recognized or regulated.

Segregation of Client Assets Rules: Without a regulatory framework for digital assets, there are no specific rules mandating the segregation of client digital assets from the custodian's own assets.

Insurance/Bonding Requirements: There are no specific insurance or bonding requirements for digital asset custodians.

Cold Storage Mandates: There are no specific mandates for the use of cold storage (offline storage) for digital assets. Operational security measures would be at the discretion of the service provider, if any exists.

Qualified Custodian Definitions: There is no legal or regulatory definition of a "qualified custodian" in the context of digital assets.