Stricter regulations for crypto service providers (VASPs) expected

23/08/2023 | Article | Prestataires de services sur actifs numériques (PSAN)

Par Stoil Petrov et Lia Lazaridi | NSP Avocats

What is a VASP?

Article L. 54-10-2 of the French Monetary and Financial Code defines the services that qualify an entity as a Digital Asset Service Provider (VASP). These services include:

• Custody of digital assets on behalf of third parties

• Buying or selling digital assets for fiat currency

• Exchange of digital assets

• Operation of a trading platform
  

Registration as a VASP with the French Financial Markets Authority (AMF) is mandatory to provide such services in France. The registration process is governed by:

• Article D. 54-10-2 of the Monetary and Financial Code

• AMF Instruction DOC-2019-23
  

To date, nearly 90 companies have been registered as VASPs with the AMF, with some being removed for non-compliance.

Towards stricter obligations

Recent legislative developments, including the DDADUE law of March 9, 2023, aim to strengthen requirements for future VASPs that did not submit a complete application before July 1, 2023.

From January 1, 2024, VASPs will be required to:

• Implement enhanced security measures

• Establish robust internal control systems

• Ensure the security and reliability of IT infrastructure

These measures respond to the growing number of disputes involving financial scams linked to crypto platforms.

What about already registered VASPs?

The law does not apply retroactively, meaning currently registered VASPs are not directly affected.

However, the AMF may influence their obligations through regulatory guidance and evolving doctrine.

AMF positions and recommendations, once approved, carry significant weight and may evolve over time.

Applicants must:

• Implement AML/CFT procedures

• Adapt internal processes to risk levels

• Detect suspicious transactions

Platforms must also distinguish between ongoing business relationships and occasional clients.

A regulatory framework facing evolving risks

Despite regulatory efforts, fraud schemes continue to evolve, often involving complex structures aimed at deceiving investors.

Client identity verification can be carried out through certified electronic systems approved by authorities such as ANSSI.

NSP NSP Avocats remains available to assist you with any legal questions related to your situation.

Do not hesitate to contact us.