A Virtual Asset Service Provider (VASP) is a regulatory term defined by the Financial Action Task Force (FATF) for any business conducting financial activities involving virtual assets (cryptocurrency) on behalf of customers. The VASP framework brings crypto businesses under the same AML and counter-terrorism financing requirements as traditional financial institutions.
FATF'S DEFINITION
According to FATF Recommendation 15, a VASP conducts one or more of: exchange between virtual assets and fiat currencies, exchange between different virtual assets, transfer of virtual assets, safekeeping or administration of virtual assets, and participation in financial services related to token offerings.
WHO QUALIFIES AS A VASP
Cryptocurrency exchanges (Binance, CoinDCX, Coinbase, WazirX, ZebPay). Crypto custodians and wallet services. OTC desks. Crypto ATM operators. DeFi protocols (debated — FATF suggests sufficiently decentralised protocols may not qualify). NFT platforms (potentially, when facilitating financial transactions). Crypto payment processors.
INDIA: FIU-IND REGISTRATION
India brought VASPs under PMLA in March 2023. All VASPs in India must: Register with FIU-IND (Financial Intelligence Unit), implement KYC/AML programmes, report suspicious transactions, maintain records for 5 years, and comply with the Travel Rule for transactions above ₹50,000.
THE TRAVEL RULE
FATF's Travel Rule requires VASPs to collect and transmit originator and beneficiary information for transfers exceeding $1,000. This mirrors wire transfer requirements for banks. Implementing Travel Rule compliance between different VASP systems is technically complex — solutions include Notabene, Sygna Bridge, and VerifyVASP.
Terms in addition to the Virtual Asset Service Provider (VASP)
A blockchain is a subset of a distributed database. The Bitcoin inventors originally prototyped the system in 2008. This modern database is made up of separate blocks that are connected together in a chronological chain. Blockchains may be used to store a wide range of data types. It has mostly been utilized as a public ledger for bitcoin transactions to date. A peer-to-peer network comprised of independent nodes uses a consensus process to ensure the blockchain's security and legitimacy. Each node in the network keeps a public and immutable copy of the data.
2 Factor Authentication is a security measure with two layers. It is used by the majority of cryptocurrency exchanges. To log in, you must provide not only a password, but also a code obtained, for example, from the Google authenticator.
An airdrop is a method of distributing coins. End users can typically obtain coins for free or in exchange for doing a small task, such as subscribing to a newsletter, sending a tweet, or inviting others via a personal affiliate link. Cryptocurrency airdrops — the act of depositing cryptocurrency into public crypto wallets — are utilized as a marketing, liquidity creation, and network bootstrapping technique for many different types of blockchain initiatives.
Altcoin - "alternative coin" - is any kind of digital currency other than Bitcoin. Since the launch of Bitcoin, the world's first digital currency, many altcoins (as well as supporting blockchains) have been created. Altcoin digital currencies share many similarities to Bitcoin, but consistently and have significant differences. There are about 20,000 altcoins, and this number is expected to grow significantly in the coming years. Altcoins often develop Bitcoin features. Ethereum, currently the most widely used blockchain, supports digital contracts and separate applications where Bitcoin does not. Altcoins are also often created to cater to the needs of different users. The Litecoin blockchain, for example, can process payments quarterly for the duration of Bitcoin.
Cold storage is the way to store cryptocurrency offline. The word refers to the use of offline wallets that are not connected to the internet. Cold storage is the most secure way to keep cryptocurrencies since an offline currency becomes less likely to be hacked and stolen. Paper wallets, printed renditions of private keys, and offline hardware and software wallets are all examples of cold storage.
