Rapidly evolving technological advancements have drastically shifted the notion of financial services and financial markets. As a result, newly emerged financial products and related services such as blockchain, bitcoin, cryptocurrency, and virtual assets enable a global transfer of value using innovation and technology.
The 15th recommendation of the 40 recommendations provided by the Financial Action Task Force (FATF) stipulates the countries to develop a framework that evaluates risks of and combat ML/FT activities conducted through new technologies, more specifically virtual assets.
In compliance with this recommendation, by the Bank of Mongolia (BOM) Governor’s decree A-23 from January 27, 2020, a working group was formed with the goal of conducting a “Gap analysis on regulating financial services related to virtual assets, developing a proposal for improving the legal framework and amending the respective legal acts per international standards and recommendations”.
The group consists of BOM and the Financial Information Unit (FIU) staff who collaborated with an international consultant specialized in-laws on virtual assets and hired with the financial support of the SFFS project sponsored by the World Bank.
As a result, the working group has developed a draft law on virtual asset services providers (VASP) and draft amendments to the related laws in compliance with the Law on laws and international best practices and standards.
The FIU presented the drafts to the 15 members of the Cooperation Council – the main body to conduct AML/CFT activities – and for the public discussion. In addition, members of the Government of Mongolia, corresponding government agencies, and 22 non-government organizations provided their inputs in the draft legislation.
A passing of the bill will not only establish a legal framework to regulate virtual assets but also comply with the FATF recommendations, attract foreign investment, lower costs of financial services by diversifying the range of possible financial products, legal protection of ownership, and reduce risk of ML/FT activities.