In recent years number of companies and organizations have come out and sold various “coins” and tokens. Although virtual asset services have the advantage of using technological advances to increase access to finance at low cost, the process of trading coins and tokens is carried out in very short term and at high prices. As a result, special legal regulations became necessary due to high risk of possible increase of cybercrimes, and as consequence individuals and investors to become victims of cybercrimes, or even unknowingly get involved in money laundering and terrorist financing crimes said lawmakers. Thus, the first draft of Law on Virtual asset service providers was submitted by the Government on May 12, 2021 and the parliament adopted it on December 17, 2021. The law came into force on February 25, 2022.
Pursuant to law public offerings and trading of virtual assets now can be done only through companies registered as virtual asset service providers. Companies that want to provide virtual asset services and that meet requirements set in law and ancillary regulations on combating money laundry, terrorist financing and risk mitigation can be registered with Financial Regulatory Commission (FRC) as virtual asset service providers. Once registered virtual asset service providers shall be obliged to identify its customers, determine the legality of their assets, and inform customers in advance about risks of becoming victims of technical and fraudulent crimes in the process of possessing and trading of virtual assets.
Pursuant to law eight ancillary regulations must be adopted, which are currently being developed by FRC. FRC is currently conducting survey on some of the draft regulations. You can read the draft regulations (only Mongolian versions are provided) (the link http://www.frc.mn/a/3910) and send your proposal by March 27, 2022.
FRC shall not register any company as virtual asset service provider within four months from the date the law came into force. This period is given for FRC to develop and adopt aforementioned ancillary regulations. Companies that provided virtual asset services before the law was adopted shall satisfy all requirements set in law and ancillary regulations within three months after expiration of the four-month period and may be registered with FRC as virtual asset service provider.
The law expressly provides that registration of a company as virtual asset service provider is not considered as guarantee for the virtual asset. The government shall not be responsible for any damages resulting from activities related to virtual asset service, and public offerings and trading of virtual assets through a company not registered as virtual asset service provider is prohibited.
An individual or legal entity that violates the law shall be subject to liability specified in Criminal Code or Law on Infringements. Administrative penalty for violation of law for individuals is fine in the amount equal to from 1 million MNT up to 3 million MNT, for legal entities is fine in the amount equal to from 10 million MNT up to 200 million MNT.
So, it looks like in October virtual asset market will start to be more regulated and well-ordered.