Virtual Asset Service Provider (VASP)
A Virtual Asset Service Provider (VASP) is a natural person or business that facilitates services related to virtual assets, such as cryptocurrencies, non-fingible tokens (NFTs), or other blockchain-based assets. VASPs offer services such as the trading, custody, exchange, or transfer of virtual assets. Just like other financial service providers, VASPs must assess and mitigate risks associated with virtual assets through robust Customer Due Diligence (CDD) and transaction monitoring controls. This includes ensuring compliance with Know Your Customer (KYC) protocols, performing Enhanced Due Diligence (EDD) for higher-risk clients, and reporting suspicious transactions to relevant authorities. However, it is worth noting that regulations regarding VASPs can vary greatly in scope and adoption depending on the given jurisdiction.
Since the person in question doesn’t show up on any watchlists, their account is created. They can now transfer some funds from their main bank account into the VASP and then use them to buy different cryptocurrencies. The VASP will in turn create a crypto-wallet where these currencies will be stored. And if the person decides to sell their cryptocurrencies or transfer them to a different wallet at some point, the VASP also handles the entire process.
Digital Asset Service Provider
-
-
VASP
Examples
A person wants to get into the cryptocurrency space. To do so, they first find a reputable VASP to process, store, and transfer different virtual assets in a safe and secure manner. Once they’ve found their VASP of choice, they open an account, where they’re asked to provide verification documentation. This is so that the VASP can perform eKYC and stay compliant with AML/CFT regulations.
FAQ
Is VASP regulated?
Just like other financial service providers, VASPs must comply with AML/CFT regulations, as covered in FATF’s Updated Guidance for a Risk-Based Approach for Virtual Assets and Virtual Asset Service Providers. However, jurisdictional differences can be observed, with some countries having more lax systems in place.
What are the risks of using a VASP?
Using a VASP can come with risks such as cybersecurity threats, regulatory uncertainty, and exposure to market volatility. However, these risks aren’t native to only VASPs but rather all financial institutions.
What does a VASP do in the cryptocurrency industry?
A VASP plays a crucial role in the cryptocurrency industry by allowing users to trade, store, and transfer digital assets in a safe and secure manner.
