Tag Archives: Digital Assets

Cryptocurrency Exchange and Trading in Mongolia



Posted by , , ,

As we work with many foreign clients engaged in range of international businesses, one of the comment questions asked by our clients lately is whether cryptocurrency is legal in Mongolia and how it is regulated.

In Mongolia, cryptocurrency trading and exchanges are legal, and the country implemented the Law of Mongolia on Virtual Property Service Providers (VPSP law) which came into force on December 17, 2021.

Along with the rapidly evolving technological processing in the world, the market of crypto is expanding in Mongolia. At the same time, there was a need to create a legal framework for the sector of crypto trading and exchanging in order to prevent from public risks as well as to have required records, suspicious or terrorist-related transactions reports.

Considering these issues, Mongolia has taken an adoptive approach to cryptocurrency regulation by applying legislation mentioned above. The main objective of the VPSP law is to register cryptocurrency exchanging and trading providers, monitor their activities, and determine their legal rights and obligations.

The VPSP law brought cryptocurrency under the regulatory authority of the Financial Regulatory Commission from December 2021, and imposed a requirement from cryptocurrency service provider companies to register and obtain a special license. Moreover, cryptocurrency exchange and trading service provider’s income is taxable and exempt from value added tax.

Mongolia’s New Law on Virtual Assets Providers



Posted by , , , , ,

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.