On-shore VASP in Maldives

Exchanges (Crypto-to-Crypto or Crypto-to-Fiat):

Pure Crypto-to-Crypto: Currently, there is no specific license required from the MMA for a platform exclusively facilitating crypto-to-crypto trades. However, such entities would still be subject to general AML/CFT obligations if identified as VASPs under Maldivian law.

Crypto-to-Fiat (or Fiat-to-Crypto): If an exchange involves the exchange of fiat currency (Maldivian Rufiyaa - MVR or other fiat currencies) for virtual assets, or vice-versa, it could potentially fall under existing financial services regulations, such as those for money services businesses or payment service providers. This would require an appropriate license from the MMA for those traditional activities. The scope of these existing licenses might need to be interpreted or expanded to explicitly cover VA activities.

Capital Requirements: There are no specific capital requirements for VASPs as VASPs yet. However, if a business falls under an existing financial license (e.g., payment service provider, money service business), then the capital requirements for that specific license would apply.

AML/KYC (Anti-Money Laundering / Know Your Customer): This is the most crucial requirement for any entity dealing with virtual assets in the Maldives, regardless of licensing. VASPs are expected to:

Implement robust KYC procedures for all customers.

Conduct ongoing customer due diligence.

Monitor transactions for suspicious activity.

Maintain records for a specified period.

Report suspicious transactions (STRs) to the Financial Intelligence Unit (FIU) of the Maldives Monetary Authority.

Implement sanctions screening.

Appoint an AML Compliance Officer.

Adhere to the "Travel Rule" as per FATF guidance.

Local Presence: For any financial service that requires an MMA license (e.g., payment services), a physical local presence, typically in the form of a locally incorporated entity and local management, is usually mandatory. For purely crypto-related activities without a specific license, a local presence might not be legally mandated but is generally advisable for effective AML/CFT compliance and to engage with regulators.

For existing regulated activities: If your VASP business model falls under an existing MMA license (e.g., payment service provider), you would follow the application process for that specific license. This typically involves submitting a detailed business plan, financial projections, governance structure, fit and proper assessments for key personnel, and demonstrating compliance with relevant regulations.

For purely crypto activities: For now, the focus would be on ensuring full compliance with the Maldivian AML/CFT Act and engaging proactively with the MMA and FIU regarding your operations and compliance framework.

Maldives Monetary Authority (MMA): The central bank and financial regulator.

Prevention of Money Laundering and Financing of Terrorism Act (No. 10/2014): This is the core AML/CFT legislation in the Maldives. VASPs, even without specific licensing, are expected to comply with its provisions.

Financial Action Task Force (FATF) Recommendations: The MMA and the Maldivian FIU base their AML/CFT expectations for VASPs heavily on FATF standards, particularly Recommendation 15 and its Interpretive Note.

Processing payments in MVR (or other fiat) for goods/services, with crypto merely as an underlying settlement layer: This would likely require a payment service provider license from the MMA under the existing payment systems framework.

Processing payments solely in crypto: If a service exclusively processes payments in virtual assets without touching fiat currency in the Maldives, there isn't a specific license. Again, AML/CFT obligations would still apply.

Adopted: Yes, the Maldives has adopted the FATF Travel Rule through the Regulation on Virtual Asset Service Providers (VASPs) issued by the Maldives Monetary Authority (MMA).

Effective Date: The VASP Regulation was approved by the MMA Board on 1st December 2022 and officially came into force on 1st January 2023. This regulation mandates VASPs to comply with AML/CFT obligations, including those related to the Travel Rule.

Threshold: Transactions equal to or greater than MVR 15,000 (Maldivian Rufiyaa) or its equivalent in USD 1,000.

Collection of Required Information: For any VA transfer equal to or exceeding the threshold, VASPs must obtain and hold the following accurate and meaningful information:

Name of the originator.

Originator's wallet address (if applicable).

Originator's physical address or unique customer identification number, or date and place of birth, or national identity number (e.g., passport number, ID card number).

Name of the beneficiary.

Beneficiary's wallet address (if applicable).

Beneficiary's unique customer identification number, or physical address, or date and place of birth, or national identity number (e.g., passport number, ID card number).

Transmission of Information: The originator VASP must transmit the required information to the beneficiary VASP immediately and securely with the VA transfer.

Secure Record-Keeping: VASPs must maintain records of all collected information for at least five years, and these records must be readily available to the MMA or FIU upon request.

Reporting: VASPs are required to file Suspicious Transaction Reports (STRs) to the Financial Intelligence Unit (FIU) in cases where they suspect money laundering or terrorist financing, regardless of the transaction amount.

Prevention of Money Laundering and Financing of Terrorism Act (Act No. 10/2014): This overarching AML/CFT law provides for penalties including:

No specific "custody license": The Maldives does not currently have a dedicated license type explicitly for "cryptocurrency custodian."

VASP Registration/Licensing: However, entities providing custodial services for virtual assets would likely fall under the definition of a Virtual Asset Service Provider (VASP) as defined by the AML/CFT Act and subsequent regulations. VASPs are subject to AML/CFT obligations and may require registration or licensing with the MMA/FIU.

The definition of a VASP, consistent with FATF standards, includes entities that conduct one or more of the following activities or operations for or on behalf of another natural or legal person:

Exchange between virtual assets and fiat currencies.

Exchange between one or more forms of virtual assets.

Transfer of virtual assets.

Safekeeping and/or administration of virtual assets or instruments enabling control over virtual assets. (This is where custody falls)

Participation in and provision of financial services related to an issuer’s offer and/or sale of a virtual asset.

No explicit mandates: There are no specific regulatory mandates in the publicly available Maldivian virtual asset framework that explicitly require the segregation of client digital assets from the custodian's proprietary assets.

No explicit requirements: There are currently no specific regulatory requirements for cryptocurrency custodians in the Maldives to hold insurance or bonding for potential losses (e.g., due to hacks, operational errors, or insolvency).

No specific mandates: The Maldivian regulatory framework does not include specific technical requirements or mandates for the use of cold storage (offline storage) for client digital assets. Custodians are expected to implement appropriate security measures, but the specifics of how they secure assets (e.g., hot vs. cold storage percentages) are not dictated by regulation.

No specific definition: The concept of a "qualified custodian" as seen in some jurisdictions (e.g., under the U.S. Investment Advisers Act) does not have a specific definition or regulatory framework within the Maldives' virtual asset laws.

Regulator Name: Maldives Monetary Authority (MMA)

MMA's Consistent Position: The Maldives Monetary Authority has repeatedly stated that cryptocurrencies are not recognized as legal tender in the Maldives. They also do not provide licenses or regulatory oversight for any cryptocurrency-related activities or businesses operating within the country.

Public Advisories: The MMA has issued warnings to the public about the inherent risks of cryptocurrencies, including price volatility, cybersecurity risks, potential for fraud, and the absence of consumer protection. These advisories are the primary "action" taken by the regulator concerning crypto.

Lack of Licensed Entities: Since no crypto businesses are licensed by the MMA, there are no regulated entities for the MMA to "enforce" against in the traditional sense (e.g., for non-compliance with licensing conditions or specific crypto-related regulations). Any potential criminal activity involving crypto would fall under general criminal law enforcement by the police, rather than specific financial regulatory enforcement.

Businesses (Business Profit Tax - BPT):

Applicability: The Business Profit Tax (BPT) is levied on the profits of businesses conducted in the Maldives. If an entity (e.g., a company registered in the Maldives) engages in activities like cryptocurrency trading, mining, or offering crypto-related services (e.g., exchange services, wallet services), the profits generated from these activities would be subject to BPT.

Tax Rate: The standard Business Profit Tax rate is 15% on taxable profits exceeding MVR 500,000. Profits up to MVR 500,000 are exempt.

Cryptocurrency as a "Good" or "Service": There is no specific guidance from the Maldives Inland Revenue Authority (MIRA) on whether cryptocurrency itself constitutes a "good" or "service" for GST purposes, or if it falls under an exempt category like financial services or currency.

Services Related to Cryptocurrency: If a business provides specific services related to cryptocurrency (e.g., fees charged by a cryptocurrency exchange for facilitating trades, consulting services related to blockchain technology), these services would generally be subject to GST if the provider is registered for GST and the services are supplied in the Maldives.

GGST Rate: 8% (for most goods and services)

TGST Rate: 12% (for tourism-related goods and services)

If a business is engaged in cryptocurrency activities and is subject to Business Profit Tax, it must adhere to standard BPT reporting requirements. This includes:

None Currently: The Maldives currently does not have any specific tax legislation or regulations dedicated to cryptocurrencies or virtual assets. The government and regulatory bodies are still in the early stages of understanding and potentially regulating this nascent industry.