DeFi protocol frontend in Turks and Caicos

Exchange between virtual assets and fiat currencies.

Exchange between one or more forms of virtual assets.

Transfer of virtual assets.

Safekeeping or administration of virtual assets or instruments enabling control over virtual assets. (This specifically covers custody providers).

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

Operation of a trading platform for virtual assets. (This covers exchanges).

Exchanges: Clearly require a license for activities like exchanging virtual assets with fiat, exchanging between different virtual assets, and operating a trading platform.

Custody Providers: Explicitly require a license for safekeeping or administration of virtual assets.

Payment Processors: If their processing involves the "transfer of virtual assets" or facilitating payments through virtual assets (e.g., converting fiat to VA for payment, or VA to fiat upon receipt), they will require a license.

General Virtual Asset Business License: A minimum paid-up capital of TCI$500,000.

Restricted Virtual Asset Business License: A minimum paid-up capital of TCI$250,000. (This license may be granted for a more limited scope of activities or under specific conditions).

Customer Due Diligence (CDD): Implementing comprehensive policies and procedures for identifying and verifying customers' identities, including beneficial owners.

Enhanced Due Diligence (EDD): For higher-risk customers, politically exposed persons (PEPs), and complex transactions.

Record Keeping: Maintaining records of customer identification data and transaction details for at least five years.

Transaction Monitoring: Implementing systems to monitor transactions for suspicious activity.

Suspicious Transaction Reports (STRs): Reporting suspicious activities to the Financial Intelligence Agency (FIA) without tipping off the customer.

Risk Assessments: Conducting regular, comprehensive risk assessments of their business, customers, products, and geographies.

Compliance Officer: Appointing a qualified Money Laundering Reporting Officer (MLRO) and Deputy MLRO, responsible for AML/CFT compliance and reporting.

Training: Providing ongoing AML/CFT training to all relevant staff.

Internal Controls: Establishing robust internal controls to mitigate AML/CFT risks.

Registered Office: A VASP must maintain a registered office in the Turks and Caicos Islands.

Resident Agent: A VASP must appoint a resident agent in the Turks and Caicos Islands.

Physical Presence (for certain activities): While not always requiring a full physical office with numerous staff, the FSC typically expects sufficient local substance and management to oversee the licensed activities effectively.

Directors and Senior Management: The FSC requires directors and senior management to be "fit and proper" individuals, demonstrating competence, integrity, and sound financial standing. At least one director must typically be a resident of TCI, or there must be significant local operational oversight.

Key Personnel: The MLRO, Deputy MLRO, and compliance officer positions are critical and subject to FSC approval.

Virtual Asset Service Providers Act 2023 (VASP Act 2023): This is the cornerstone legislation specifically regulating VASPs. It defines what constitutes a VASP, sets out licensing and registration requirements, and crucially, brings VASPs under the existing AML/CFT framework, making them "financial institutions" for AML/CFT purposes.

Proceeds of Crime Ordinance 2017 (as amended): This ordinance defines money laundering offenses, establishes the framework for investigation, seizure, and confiscation of assets derived from criminal activity.

Anti-Money Laundering Regulations 2023: These regulations provide the detailed operational requirements for AML/CFT compliance, including customer due diligence, record-keeping, internal controls, and suspicious transaction reporting.

Terrorism (Prevention) Ordinance 2011 (as amended): This ordinance addresses terrorist financing, defining offenses and establishing mechanisms for freezing assets and reporting suspicious activities related to terrorism.

Financial Services Commission Ordinance 2019 (as amended): This ordinance establishes the Turks and Caicos Islands Financial Services Commission (TCIFSC) and outlines its powers and responsibilities, including supervision of financial institutions and VASPs.

When CDD is Required:

When establishing a business relationship.

When conducting occasional transactions above a specified threshold (e.g., USD 1,000 for wire transfers, or as otherwise prescribed by regulation).

Requirement for Licensing: Any entity providing "custody or administration of virtual assets or instruments enabling control over virtual assets on behalf of another natural or legal person" (as per the definition of a VASP in Section 3 of the VASP Act 2022) is required to be licensed by the TCI FSC.

Holding in Trust & Separate Accounts: A licensed VASP must:

Protection from Insolvency: Client virtual assets held by a VASP cannot be considered assets of the VASP in the event of its insolvency or winding-up, protecting clients from creditors.