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In order to verify compliance with the applicable legal and regulatory provisions governing money laundering and terrorist financing (ML/TF), entities that conduct any of the following activities involving virtual assets must register with the BoP: (1) exchange services between virtual assets and fiat money or between one or more virtual assets; (2) virtual asset transfer services; and (3) services of safekeeping, or safekeeping and administration of virtual assets or of instruments that enable the control, ownership, storage or transfer of these assets, including private encrypted keys.¹

As it pertains to cryptoassets, ESMA has identified a number of concerns. These concerns and 'gaps' fall under two categories:

• for cryptoassets that qualify as financial instruments under MiFID, there are areas that potentially require interpretation or reconsideration of specific requirements to allow for an effective application of existing securities and financial regulations
• where these assets do not qualify as financial instruments, the absence of applicable financial rules leaves investors exposed to substantial risks. At a minimum, ESMA believes that AML requirements should apply to all cryptoassets and activities involving cryptoassets. There should also be appropriate risk disclosure in place, so that consumers can be made aware of the potential risks prior to committing funds to cryptoassets ¹

In light of the above, it may prove useful to distinguish between different types of tokens (or rather, the rights and obligations associated with their issuance and possession) underlying the transactions. The approach taken by the BoP and the EBA should be considered where tokens are used primarily for payment. However, where tokens are more similar to securities, the approach taken by the CMVM and ESMA should be considered.¹

As a result of the recent changes to the AML Directive, law 58/2020 of 31 August 2020 extended its scope to virtual currencies (namely cryptocurrency exchanges and wallet providers that offer custodial services) and required them to register with the BoP and follow KYC and AML procedures with regard to their clients and transactions.¹

Digital assets in Portugal

Fintech in Portugal

Fintech in other countries

Notes

1. https://thelawreviews.co.uk/title/the-financial-technology-law-review/portugal