The Seychelles Financial Services Authority (FSA) is taking decisive action against unregistered virtual asset service providers (VASPs) within its borders. Renowned for its crypto-friendly atmosphere, Seychelles has emerged as a preferred destination for global crypto companies, primarily owing to its relaxed Know Your Customer (KYC) guidelines and lenient virtual asset regulations.

A joint press release, issued on November 20 by the FSA in collaboration with the registrar of companies, identified 50 unlicensed companies allegedly providing VASP services without proper authorization. These entities are accused of flouting Seychelles' anti-money laundering and counter-terrorism financing (AML/CFT) guidelines.

The FSA underscored the inherent risks of engaging with unregistered VASPs, emphasizing the challenge of monitoring their activities, ensuring compliance, and safeguarding consumers. Seychellois citizens were strongly urged to abstain from transactions with these unlicensed companies and to promptly report any associated activities to the relevant authorities.

"The FSA and ROC strongly advise consumers to remain cautious about the risks and potential financial loss and damage that can be incurred when dealing with VAs or VASPs which are either not registered or authorized as VASPs service providers under any law, especially the Seychelles laws," the FSA stated.

Despite being a haven for international businesses seeking refuge from stringent regulations, Seychelles lacks clearly defined laws governing virtual assets and service providers. The island nation hosts major crypto exchanges like Binance, KuCoin, and OKEx, but is yet to establish specific regulations for their operations.

In January, the FSA issued a public notice clarifying that it had not licensed any international crypto companies operating within Seychelles, emphasizing its limited oversight. Consumers were advised to educate themselves about the associated risks of dealing with virtual assets.

A national AML/CFT committee inquiry revealed the presence of unlicensed VASPs in Seychelles offering enhanced anonymity to customers, thereby violating global AML/CFT guidelines. Responding to heightened complaints of crypto-related activities resulting in financial losses, Seychelles announced plans to regulate virtual assets, with a legislative framework expected to be finalized in early 2024.

Despite being underregulated, with cryptocurrencies not recognized as regulated currency by the central bank, Seychelles continues to attract attention. The country hosts one crypto exchange, with over 40 ICO campaigns based in the region. Currently, the finance ministry and capital market regulator are collaborating on a crypto-policy framework, exploring the possibility of either licensing or prohibiting crypto-trading platforms. This move follows various trading scams and the ongoing investigation into the $10-billion OneCoin scam, where the financial crime investigation unit is scrutinizing Bitcoin transfers since the parent company's registration in Seychelles.