Crypto-funded debit card in Seychelles

Virtual Asset Service Providers Act, 2022 (VASP Act 2022): This is the cornerstone legislation specifically regulating VASPs. It mandates licensing, registration, and compliance with AML/CFT obligations for entities engaged in virtual asset services.

Anti-Money Laundering and Countering the Financing of Terrorism Act, 2020 (AML/CFT Act 2020): This is the overarching AML/CFT legislation in Seychelles, applying to all designated non-financial businesses and professions (DNFBPs) and financial institutions, which now explicitly includes VASPs. The VASP Act builds upon and references the requirements of this broader AML/CFT Act.

Financial Intelligence Unit Act, 2006 (as amended): This Act establishes the Financial Intelligence Unit (FIU) and outlines its powers and responsibilities, including receiving and analyzing suspicious transaction reports.

Exchange between virtual assets and fiat currencies.

Identification and Verification of Customers:

Natural Persons: Obtain and verify identity through reliable, independent source documents, such as name, residential address, date of birth, nationality, and official identification numbers.

Legal Persons/Arrangements: Obtain and verify identity information such as name, legal form, proof of existence, powers that regulate the legal person, names of directors/partners, and the address of the registered office or place of business.

Beneficial Ownership Identification: Identify and verify the identity of the beneficial owner(s) of the customer. For legal persons, this typically involves identifying individuals who ultimately own or control more than 25% of the entity.

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

Ongoing Monitoring: Continuously monitor the business relationship, including scrutiny of transactions undertaken throughout the course of the 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.

Enhanced Due Diligence (EDD): Apply EDD for higher-risk scenarios, including:

Transactions with Politically Exposed Persons (PEPs).

Business relationships or transactions with persons from high-risk jurisdictions identified by FATF or the domestic AML/CFT framework.

Complex, unusually large transactions, and all unusual patterns of transactions that have no apparent economic or lawful purpose.

Specific virtual asset activities deemed higher risk.

Identifying the source of funds and source of wealth when dealing with higher-risk customers or transactions.

Reporting Obligation: A VASP must immediately report to the FIU when it knows, suspects, or has reasonable grounds to suspect that funds or other assets are proceeds of a criminal activity, or are related to terrorist financing, or other money laundering activities.

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

CDD Records: All records obtained through CDD procedures (e.g., copies of identification documents, account files, business correspondence).

Transaction Records: Records of all domestic and international transactions, including the amount, currency, and type of virtual asset, transaction dates, and parties involved.

Financial Services Authority (Virtual Assets) Act, 2023 (VA Act 2023): This is the cornerstone legislation. It provides for the licensing, regulation, and supervision of VASPs and activities related to virtual assets.

Exchange between virtual assets and fiat currencies.

Apply to the FSA for a VASP license.

Meet specific capital requirements.

Satisfy "fit and proper" person tests for directors and senior management.

Implement robust AML/CFT policies and procedures in accordance with the AML/CFT Act 2020.

Have sound governance, risk management, and operational systems.

Segregation of Client Funds: The requirement for VASPs to segregate client funds from operational funds (Section 19 of the VA Act) helps protect user assets, including those held for redemption.

Consumer Protection: Licensed VASPs are subject to consumer protection principles, ensuring fair dealing and transparency. If a stablecoin is marketed as being redeemable for a specific asset (e.g., fiat currency) at a certain ratio, the issuer, being a licensed entity, would be legally obligated to honour these redemption terms.

Regulator Name: Financial Services Authority (FSA) Seychelles

Issuing Public Warnings: Against entities operating without a license or misrepresenting their licensing status in Seychelles, often encompassing investment schemes, forex, and implicitly, crypto-related activities.

Cease and Desist Orders: Mandating unauthorized entities to stop operations.

License Revocations/Suspensions: For non-compliance within the broader financial services sector, which can indirectly affect entities dealing with virtual assets.

Example from late 2021 (close to 3-year window): The FSA issued a notice regarding the revocation of the financial services license of IBANERA Ltd. in December 2021. While IBANERA was a payment solutions provider, such companies often interact with digital assets. The revocation indicated failure to comply with certain regulatory requirements.

Professional Trading/Mining/Business Activity: If an individual engages in crypto activities (e.g., active day trading, extensive mining operations, providing crypto-related services) in a manner that constitutes a regular business or employment, the profits derived from these activities could be classified as business income or employment income. This income would then be subject to the standard personal income tax rates (Progressive tax rates apply to employment income; business income is subject to Business Tax). However, the definition of "business" for crypto activities by individuals can be nuanced.

Domestic Companies (Companies incorporated under the Companies Act 2017, conducting business in Seychelles): These companies are subject to the standard corporate business tax rates, which can range from 0% (for the first SCR 1,000,000 of taxable income for local businesses) up to 33% for larger profits, depending on the business's taxable income and type. If a domestic company is engaged in crypto-related services within Seychelles, its profits would be taxed accordingly.

Services Related to Virtual Assets: However, services related to virtual assets (e.g., exchange fees charged by a VASP, custodial services, advisory services) provided by a GST-registered business in Seychelles would generally be subject to the standard GST rate of 15%.

Regulatory Reporting (Crucial for VASPs): While not strictly tax reporting, it is vital to understand that businesses dealing with virtual assets in Seychelles are subject to significant regulatory reporting requirements under Anti-Money Laundering (AML) and Counter-Financing of Terrorism (CFT) frameworks.

The Financial Services Authority (FSA) and the Financial Intelligence Unit (FIU) regulate Virtual Asset Service Providers (VASPs). VASPs are required to:

Register or obtain a license from the FSA (if required based on their activities).

Implement robust AML/CFT policies and procedures.