By Hans Doringo
The Aurora Pacific Economic Zone and Freeport Authority (APECO), a state-owned and controlled corporation, issued regulations governing the licensing of Virtual Asset Service Providers (VASP) for offshore financial services last September 9, 2021.
As part of their mandate to develop Aurora Pacific Economic Zone and Freeport (APEZF) into a financial and investment center, APECO is allowing to grow a financial technology ecosystem in the region by issuing a license to VASP that would engage in exchanging, transferring, and safekeeping of virtual assets (VAs).
The agency stated that the license allowing companies to engage in various VA transactions within the Aurora Ecozone will only be limited to offshore companies or businesses outside the country. Fully licensed offshore VASPs will have to pay USD 19,000 as annual licensing fee.
To determine if the applicant falls within the definition of the agency for VASP, APECO will conduct a Pre-application Initial Assessment Request (PIAR) with PIAR fee amounting to USD 1,500.00, as stated in the regulation.
During the PIAR, APECO will consider the following factors in determining whether the proposed VA service or business qualifies for a license: the maturity and operability of the blockchain technology used, type of customer they will engage with, variety of products and VA services offered, level of interaction with other regulatory agencies, vulnerability to money laundering and illicit activities and the scale of business activity.
Aside from that, the agency will also be asking a few questions to determine the risk and complexity of the applicant’s proposed virtual assets services.
After the completion of PIAR, the applicant will proceed to the actual application for license where they are required to submit the requirements listed in the regulation and pay the non-refundable application fee in the amount of USD 8,000.00. A review and evaluation of the application will follow once all the requirements are fulfilled.
Once licenses are given, APECO offshore VASPs are expected to observe the following fundamental regulatory principles indicated in the regulation:
- Licensed VAPSs must deliver their services with honesty and integrity
- Licensed VASPs must regard interest and communicate fairly with their customers
- Licensed VASPs must maintain adequate financial and non-financial resources
- Licensed VASPs must provide an effective management of its services
- Licensed VASPs must set a plan for the protection of customer’s assets
- Licensed VASPs must have an effective corporate governance arrangements
- Licensed VASPs must keep it systems maintained to high standards
- Licensed VASPs must have ways to lower the risks of illicit activities such as money laundering and terrorist financing. Furthermore, it should observe FATF Guidance for Virtual Assets and Virtual Asset Service Providers.
- Licensed VASPs must have contingency arrangements for orderly dissolution of its business
Meanwhile, APECO also included in the said regulation the transactional requirements needed for VA transfer amounting to USD 1,000 or more or otherwise known as Travel Rule. Duly licensed VASPs must obtain and hold verified originator and beneficiary data, which will be then submitted to beneficiary institutions.
The required information the VASP must obtain are the following: originator and beneficiary’s name, account number where such an account is used to process the transaction.
Aside from that, the VASP must also gather information about the originator’s physical address, birthday and birthplace, and national identity number or customer identification number that uniquely identifies the originator to the ordering institution.
According to the regulation, The VASP must transmit this information immediately and safely. Moreover, the entities should protect the integrity and availability of the required information for VASPs to facilitate the recordkeeping and the use of such information.
VASPs are also mandated to protect the said data from unauthorized disclosure.
This article is published on BitPinas: Aurora Economic Zone APECO Issues Rules for Offshore Virtual Asset Service Provider License