The Financial Services Commission, FSC, is currently conducting a risk assessment on virtual assets service providers, or VASPs, which deal in digital currencies or cryptocurrencies and tokens.
And new regulations are coming to police the activity of the digital asset providers, most of which currently appear to be offshore.
Maurene Simms, principal adviser to the governor of the Bank of Jamaica and prime contact to the Caribbean Financial Action Task Force, CFATF, indicates that the VASP sector is currently unregulated and there is no structured data collection mechanism in place.
Currently, VASPs engaged in securities trading activity fall under the FSC’s jurisdiction, but that will change once the regulatory functions of the financial watchdog are merged with the central bank, a process that is in its early stages, but expected to make serious headway in 2025.
The policing of VASPs is one of the anti-money laundering measures mandated by the Financial Action Task Force. So far, it’s given Jamaican a failing grade on that front due to the recent rise in VASP activity.
“There is insufficient information on the size and structure of the sector, population of service providers, extent of services being offered and the risk profiles of clients and service providers,” said Simms.
“It should nevertheless be noted that the Securities Act places some limitations on VASPs, in that the statute requires a VASP to be licensed under the Securities Act, where funds are being used for investment purposes,” she told the Financial Gleaner.
Through the use of a web-scraping tools and online searches, the FSC has 18 businesses that are engaged in virtual asset services, but only one of those entities is registered with the Companies Office of Jamaica, she said.
The other 17 are overseas, web-based providers with no physical office or location in the country. However, “some of these overseas VASPs have local sub-agents”, Simms noted.
Otherwise, no financial institution in Jamaica currently offers virtual asset services.
“Further, financial institutions have indicated that none of their customers have declared that they offer VA services,” she said.
For the most part, the CFATF representative, Jamaicans who utilise virtual asset services engage with foreign VASPs, some of which are incorporated and licensed in their jurisdiction.
Among Jamaicans, from research done by the FSC, virtual assets are mainly used as either a type of investment, or a means of exchange for settlement purposes. As the Jamaican investor becomes more sophisticated and search for diversification of investment portfolios, there appears to be a growing interest in the use of crypto assets, Simms said.
In response to the requirements of the Financial Action Task Force, Jamaica will be introducing VASP legislation, which will include provisions to mitigate and manage the risks. Importantly the legislation will also include market conduct and consumer protection provisions geared towards safeguarding the interests of potential investors, the CFAFT representative outlined.
Under the current twin-peaks financial reform programme, the job of policing the market conduct for VASPs would continue to reside with the FSC.
“The proposed VASP legislation is also expected to designate certain VA services as regulated activities. Therefore, any person offering these services as a business, is required to be licensed by the regulator,” Simms said.