“Cryptocurrencies developed quite fast, but the laws of many countries are not up to date with this type of activity”

Seychelles’ finance ministry and capital market regulator are now working on a crypto-policy framework, according to local reports. The island nation is on its way to either prohibit or license crypto-trading platforms as registered international businesses.

The development comes on the back of several trading scams, along with the ongoing investigation into the $10-billion OneCoin scam. The country’s financial crime investigation unit is probing the transfer of 230,000 Bitcoins since the parent company was registered in Seychelles.

However, it is often difficult to trace where these companies are based. Randolf Samson, Director of the National Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) Committee (NAC), told reporters that cryptocurrency platforms register as International Business Companies (IBC) in Seychelles.

Even so, he added, the actual activity happens online and often outside its jurisdiction. The exec went on to say,

“The reason why they use Seychelles is because we do not have a framework that would otherwise discourage them.”

According to the official, trading platforms can be licensed only after a detailed risk assessment. On the contrary, they can face a banning order if more risks than benefits are found in the assessment.

“If the incorporation or licensing brings too much risks and bad reputation, we will simply prohibit the activity.”

Ergo, there is a good reason why the country’s administration is clamping down on illicit activities by companies registered in its jurisdiction, Samson concluded.

Currently, the jurisdiction is underregulated and cryptocurrencies are not treated as a currency to be regulated by the central bank. Despite the fact that the country has only one crypto-exchange, over 40 ICO campaigns are located in the region. What’s more, while the status of cryptocurrencies remains sticky, a Cointobuy survey recently scored Seychelles 2.7/10 on safety.

In the past, the glorified tax haven has also been accused of housing crypto-businesses including Binance, BitMEX, KuCoin, Bilaxy, and OKEx.

Meanwhile, the Financial Services Authority of Seychelles (FSA) has been alerting investors of unauthorized investments and scams on its website. Additionally, the new regulation is expected to bring Seychelles in line with Financial Action Task Force (FATF) standards.

A 2021 report by the FATF and OECD placed the island nation in the category of non-complaint or partially compliant nations.