In recent years, virtual asset service providers have attracted increasing attention from finance and technology professionals and regular users. This growing interest is driven not only by the opportunity to invest, but also by privacy, technological innovation, and the global availability of cryptocurrencies. In 2022, Kyrgyzstan adopted the Law «On Virtual Assets», which regulates relations arising from the turnover of virtual assets, that is, their creation, release, storage, and circulation. This article considers key requirements of the legislation of the Kyrgyz Republic for implementing activities of virtual asset exchange operator and virtual asset trading operator.
Pursuant to Kyrgyz laws, the virtual asset trading operator is a virtual asset service provider offering an electronic platform and providing services, directly facilitating transactions with virtual assets. While the operator of a virtual asset exchange is a virtual asset service provider that provides services for buying and selling (exchanging) virtual assets and (or) exchanging virtual assets on its behalf. In order to carry out the activities of a crypto trading operator and/or crypto exchanger, it is necessary to register a legal entity on the territory of the Kyrgyz Republic and obtain a license issued by the Financial Market Regulation and Supervision Service of the Ministry of Economy and Trade of the Kyrgyz Republic (hereinafter «Financial Market Supervision»).
Crypto exchangers:
The virtual asset exchange operator purchases, sells virtual assets for national currency, foreign currency, electronic money, international electronic money, and exchanges virtual assets of one kind for virtual assets of another type. The legislation of the Kyrgyz Republic establishes requirements for the minimum authorized capital of exchange operators, which should not be less than 400,000 calculated indicators[i], that 40,000 (forty million) soms in cash as at the date of application. Payment of the authorized capital is confirmed by a letter or bank certificate. It should be noted that the use of funds received on credit, pledge, and other attracted funds for the charter capital formation is not allowed.
Moreover, the virtual asset exchange operator must establish a sufficient level of knowledge and competence for transactions, as well as to collect and store full identification information about the customer, contact data, contract with a client within five calendar years. The operator is obliged to make and keep records of negotiations, correspondence and data related to the client’s transactions. We remind you that according to the personal data legislation, before the collection of any information, it is necessary to obtain written consent for the collection and storage of the above-mentioned data from customers.
Crypto trading operator:
The virtual asset trading operator provides services that facilitate centralized (storage in its wallets and through smart contracts) or decentralized (network-based blockchain using the platform) transactions with virtual assets, the transactions and trading sessions of which are publicly disclosed by notifying the bidders on place and time of the tendering, the list and quotation of virtual assets, the results of the trading sessions. This article aims to draw attention to the fact that the structure of the centralized trading operator must include functional departments of listing, trade, information technology and security, clearing and identification of customers (KYC), internal control (compliance control).
A natural person is allowed to tender, conducted by the virtual assets trading operator, only if there is a qualification certificate of qualified investor of virtual assets issued by the Financial Market Supervision. The trading operator is obliged to monitor transactions with virtual assets that go through digital wallets to detect violations of the law and to keep the data for 5 years. The centralized trading operator is obliged to keep the necessary and accurate information related to each sender and recipient of transfers, transactions with virtual assets, and to provide such information to the Financial Market Supervision upon request.
The minimum authorized capital for a virtual asset trading operator is set at 100,000 (one hundred million) soms. Futhermore, when a trading operator holds users’ assets on its balance sheets, it is obliged to provide separate accounting and storage of financial assets of the trading operator, electronic virtual assets, money held by the trading operator. Joint storage of money, virtual assets of two or more clients is not allowed.
To obtain a license to conduct activities of crypto exchangers and crypto trading operators, a legal entity must submit to the Financial Market Supervision a full package of documents in accordance with the Regulations approved by the Cabinet of Ministers of the Kyrgyz Republic. It should also be noted that the legislation establishes requirements for shareholders or participants of crypto exchangers and crypto trading operators, the details of which should be presented in the questionnaire when submitting documents for obtaining a license.
The deadline for consideration of the submitted documents by the Financial Market Supervision is 30 (thirty) calendar days. During the documents review of the crypto trading operators the Financial Market Supervision has the right to make a preliminary check of the performance of automated systems and compliance of documents.
After obtaining a license, operators of exchange and trading of virtual assets are obliged to submit monthly operational reports to the Financial Market Supervision and quarterly financial statements prepared in accordance with the International Financial Reporting Standards.
[i] In accordance with the Resolution of the Jogorku Kenesh dated 15 June 2006 No. 1115-III, since 1 January 2006 the amount of the calculated indicator is 100 soms.