Virtual currency providers to be supervised by the FIN-FSA – briefing for virtual currency providers on 15 May
The Act on virtual currency providers1 (572/2019) enters into force on 1 May. In accordance with the Act, the Financial Supervisory Authority (FIN-FSA) will act as the registration authority and supervisory authority for virtual currency providers.
The FIN-FSA will register:
- virtual currency exchange services
- custodian wallet providers
- issuers of virtual currencies
Registration will ensure that providers comply with their statutory requirements concerning, among other things:
- reliability of the provider (incl. fit and proper requirements)
- holding and protecting client money
- segregation of client money and own funds
- marketing of services
- compliance with AML/CFT regulation.
Going forward, only virtual currency providers meeting statutory requirements are able to carry on their activities in Finland. Virtual currency providers which do not comply with statutory requirements will be prohibited from continuing their business activities, enforced by a conditional fine.
Briefing for the sector on 15 May 2019
The FIN-FSA will arrange a briefing directed to the sector on Wednesday 15 May at 1–3:30 p.m. in the Bank of Finland's auditorium at Rauhankatu 19, Helsinki. The event will cover, for example,
- the FIN-FSA's position on when virtual currency providers must apply for registration in Finland
- the steps and schedule of the registration procedure
- requirements concerning virtual currency providers, including draft FIN-FSA regulations and guidelines applicable to virtual currency providers.
The event is primarily intended for virtual currency providers already operating in the market or planning to provide services. Authorities and representatives of relevant advocacy organisations are also welcome to the event. You may register for the event through the following link. We will confirm your eligibility to participate separately.
The Act is based on EU's anti-money laundering legislation
All EU member states must include services related to virtual currencies within the scope of AML/CFT legislation by 10 January 2020. The requirement is based on amendments of 30 May 2018 to the EU Anti-Money Laundering Directive, i.e. the Fifth Money Laundering Directive. Although the requirement of registration and supervision of virtual currencies stems from the EU level, national registration does not mean nor provide a so-called EU passport, i.e. the right to provide services in other EU countries on the basis of registration granted in one member state.
It has been internationally acknowledged that virtual currencies and related services involve a high risk of money laundering and terrorist financing. Extension of the scope of application of the Act on the prevention of money laundering and terrorist financing (444/2017) to virtual currency providers will improve authorities’ possibilities to take action and obtain information related to the prevention, investigation and uncovering of money laundering and the financing of terrorism.
Regulation will not introduce investor protection to virtual currency services
Virtual currencies have particularly gained attention as investment objects. In spite of the upcoming supervision and registration, the characteristics of virtual currencies and the risks related to virtual currency investments remain unchanged. The risks include sudden major fluctuations in value, data security threats pertaining to exchange services and custodian wallet providers, and the nature of several virtual currencies as speculative investments not involving any inherent source of return. The FIN-FSA encourages investors to carefully assess the risks related to virtual currencies before making an investment decision. The FIN-FSA has already in the past issued a warning on risks related to virtual currencies in Press release 22 November 2017 - 17/2017.
The primary objective of the adopted Act is to introduce virtual currency providers into the scope of anti-money laundering regulation. There are no statutory requirements for virtual currency providers for example regarding risk management, and no capital requirements are imposed. These are examples of typical areas of supervision by the FIN-FSA regarding other types of supervised entities. Therefore, the regulation proposed for virtual currency providers should not be compared as such to regulation concerning other financial market participants, since the area now falling within the supervision of the FIN-FSA is much narrower compared to other financial market participants.
For further information, please contact
Hanna Heiskanen, Senior Digitalisation Specialist, tel. +358 9 183 5202 or hanna.heiskanen(at)fiva.fi
1 In accordance with the Act, a virtual currency refers to a value in a digital form which:
- is not issued by a central bank or another authority and which is not legal tender;
- can be used by a person as a means of payment; and
- can be transferred, stored, and traded electronically.