Seychelles, a crypto-friendly jurisdiction, is considering legislation to rein in digital asset firms

By: Mark Jessy

April 8, 2023 6:40 AM

According to the country's finance minister, complaints concerning crypto activity in Seychelles are on the rise.

Seychelles, the legal home of several crypto firms, is drafting a national policy on virtual assets, which will result in a legal framework for local governments to safeguard the public. This comes as municipal authorities grapple with an increase in concerns about cryptocurrency.

According to the Seychelles News Agency, Finance Minister Naadir Hassan announced the policy ideas when speaking to members of the National Assembly about virtual assets and cryptocurrencies.

He observed that in the recent five to seven years, the global financial system has seen a shift, particularly in payment methods.

"The transition involves bitcoin, a virtual currency that symbolizes the worth of something that you're buying or holding in your possession," he explained.

Hassan cited a study from the Financial Services Authority Seychelles that showed an increase in complaints concerning cryptocurrency operations in the country, particularly from investors who lost money.

"We are aware that several Seychelles-based and Seychelles-registered multinational commercial corporations are involved in bitcoin activities. It, like any other method of payment, can be used to finance illegal operations such as money laundering. It is important to remember that the Seychelles' Central Bank does not recognize cryptocurrency as legal cash. "Anybody who trades in it does so at their own peril," Hassan warned.

He remembered that in 2018, there were 28 complaints, five of which were related to cryptocurrency operations. In 2019, it was nine out of 27; in 2020, it was eight out of twelve; and in 2021, it was 23 out of 27.

"This demonstrates a rise in these activities by IBSs [International Business Companies], and Seychellois are seeking for more methods to invest, and the authorities [are] aware that the public and businesses are more interested in having activities using cryptocurrencies," he said.

Hassan further stated that local and foreign agencies had requested information on numerous Seychelles-registered companies engaged in "illegal operations involving bitcoin."

He went on to say that without the framework, investors have no legal protection. The new framework will include legal procedures for registering enterprises that deal with digital assets, as well as license requirements.

Seychelles has become a global refuge for crypto enterprises seeking to avoid rigorous restrictions due to its loose know-your-customer processes.

Randolf Samson, director of the National Anti-Money Laundering and Counter-Terrorism Financing Committee, previously told→ reporters that crypto platforms register in Seychelles because "there is no framework that would otherwise deter them."

The country has been home to some of the world's largest cryptocurrency companies, including Binance, BitMEX, KuCoin, and OKEx.

While there is no additional information on what the framework contains at this time, it is unclear whether it will be robust enough to deter firms from flocking to the Island as they are now doing.