New bill to regulate virtual assets

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Although Mongolia was removed from the FATF’s gray list, it remains committed to implementing FATF Recommendation 15 and creating a national legal framework governing virtual asset relations. In this regard, a bill on virtual asset service providers is being developed.

The bill aims to formulate the definition of virtual assets in accordance with international standards, and bring general and additional requirements related to the registration and monitoring of service providers in line with international standards. It provides for taxation of income from sale and services, creation of a legal framework for exemption of a financial service provider from VAT and imposition of penalties on violators.

In Mongolia, virtual assets and cryptocurrencies are not regulated by law and are not officially considered a payment tool. Also, Mongol Bank does not issue permits or monitor its activities. Blockchain-based cryptocurrencies are not used to pay for goods and services in Mongolia, and citizens voluntarily use them as a trading tool.

Although the Civil Code of Mongolia contains provisions on intangible assets, there are no detailed regulations on virtual assets. The General Taxation Law does not provide for taxation of e-assets, but for taxation of income from sale and lease of intangible assets.

Moreover, the Anti-Corruption Law, Law on Regulating Public and Private Interests in Public Service, and the Law on Preventing Conflicts of Interest do not require the registration of virtual assets in declaration of assets and income. There is no provision to issue, regulate and monitor licenses for service providers.

There is an international standard for virtual financial service providers to report suspicious transactions, commercial identification, customer identification, money laundering, and regular terrorist financing risk assessments. However, the current law does not regulate cryptocurrencies. The bill initiators believe that this situation leads to the misuse of technological solutions and increases the risk of economic harm and danger.

Therefore, in order to create a legal environment for virtual asset-related activities in Mongolia, implement the recommendations of the FATF and prevent poor assessment of money laundering and terrorist financing risk assessments, the bill on virtual asset providers is being drafted.

Misheel Lkhasuren