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VASP terms: "providing, on behalf of or for its customer"

The term “providing” encompasses the provision and/or the active facilitation of a service, which refers to the active involvement in the provision of activities or operations covered by the VASP definition. This term excludes however ancillary participants that do not provide or actively facilitate any of the covered activities or operations, such as entities which provide Internet or cloud services (FATF Virtual asset Guidance, §59).

Indeed, firms which merely provide ancillary infrastructure to allow another entity to offer a VASP service will normally not satisfy the VASP definition, to the extent that they also do not engage in or actively facilitate, as a business, any of the aforementioned covered Virtual assets activities or operations for or on behalf of another person:

  • Internet provider (ISPs), or providers of internet network services and infrastructure;

  • Providers of computing resources, including cloud data storage providers;

  • integrity service providers responsible for verifying the accuracy of digital signatures;

  • software developers;

  • hardware wallet manufacturers;

  • providers of unhosted wallets (whose functions are only developing and/or selling software/hardware), etc. (FATF Virtual asset Guidance, §76 and 83).

 

The terms “on behalf of or for its customer” are meant to include any activity, operation or function that may be provided to another person, in the course of a VASP service, as opposed to or on behalf of itself. This person for whom or on whose behalf those services may be conducted may be referred to as a “customer”, “client” or “user” of those services (FATF Virtual asset Guidance, §61). It would seem that fund managers offering investment services in Virtual assets may be understood as performing these investment services on behalf of their “investors” or “unit-holders”, which would then be considered “customers” of the fund managers (Ministry of Justice, ML/TF Vertical risk assessment, p. 9, p. 15 and p.42). The condition “on behalf of or for its customer” further means that certain activities or operations, that are not provided on behalf of someone, do not qualify a person as a VASP - i.e.:

  • individual users that invest or transact in Virtual assets on their own behalf, such as retail investors and merchants;

  • A merchant accepting Virtual assets as a payment for goods and services (by itself, this activity should not require a VASP registration when no activity is performed “on behalf of or for” another person and when this transaction does not involve any exchange VA-to-VA, nor Fiat-to-VA, nor VA-to-Fiat) (FATF Virtual asset Guidance, §84);

  • an exclusively internal transfer of Virtual assets by a single legal person within that legal person (that is, within units of a particular company for example), unless that transfer was for or on behalf of another person in the context of VASP services (FATF Virtual asset Guidance, §61);

  • an entity that offers to its customers a software solution allowing these customers to self-manage Virtual assets, and that does not perform transactions or activities in their name nor on their behalf (Ministry of Justice, ML/TF Vertical risk assessment, p. 9).

This last case may be a source of confusion. Some platforms may provide or actively facilitate, as a business, transactions or activities related to Virtual assets, for or on behalf of another person/customer. In such case, that platform may need a VASP registration.

The terms “for its customer” further imply that the VASP service must be provided “as a business”. Therefore, the entity must carry out this function for or on behalf of another natural or legal person (a) for commercial purposes ; and (b) must do so on at least a sufficiently regular basis, rather than infrequently (FATF Virtual asset Guidance, §60). This condition is meant to exclude individuals who may carry out a function on a very infrequent basis for non-commercial reasons from coverage as VASPs (FATF Virtual asset Guidance, §84).

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