Understanding Virtual Asset Service Providers (VASPs)
What Are Virtual Asset Service Providers (VASPs)?
A Virtual Asset Service Provider (VASP) is any entity that facilitates transactions involving virtual assets, such as cryptocurrencies. The Financial Action Task Force (FATF) defines VASPs as businesses that conduct activities like:
- Exchanging virtual assets for fiat currency or other virtual assets
- Transferring virtual assets between parties
- Safeguarding or administering virtual assets for clients
- Providing financial services related to the issuance or sale of virtual assets
Examples of VASPs
- Cryptocurrency Exchanges: Platforms like XBTO Hub, Binance, Coinbase, and Kraken allow users to buy, sell, and trade digital assets.
- Custodial Wallet Providers: Services like MetaMask Institutional and Fireblocks store and manage crypto assets on behalf of clients.
- Crypto Payment Processors: Companies like BitPay and CoinPayments enable merchants to accept cryptocurrency as payment.
- OTC Trading Desks: Over-the-counter (OTC) brokers like Cumberland facilitate large-volume crypto trades outside regular exchanges.
- DeFi Platforms (if custodial): Some decentralized finance (DeFi) platforms that maintain custodial control over user funds can fall under the VASP definition. Examples include Nexo and Celsius, which provide crypto lending and interest-earning services while holding user assets in custody.
Why Do VASPs Matter?
VASPs play a crucial role in the cryptocurrency ecosystem and are subject to regulations similar to traditional financial institutions. They must comply with laws such as:
- Know Your Customer (KYC) – Verifying the identity of users to prevent fraud and illegal activities.
- Anti-Money Laundering (AML) – Monitoring and reporting suspicious transactions to authorities.
- Counter-Terrorist Financing (CTF) – Ensuring that virtual assets are not used to finance illegal activities.