Regulations, recommendations, and policies have become necessary as a result of the rapid maturation of the crypto ecosystem. To explain these changes, as in all areas, appropriate jargon is required.
Examples of such modifications include the Market in Crypto Assets (MiCA) framework, part of the European Commission’s digital finance package, and the Financial Action Task Force’s (FATF’s) Recommendation 16, also known as the Travel Rule.
In the most recent FATF update, businesses that provide virtual asset services for or on behalf of another person are referred to as virtual asset service providers (VASPs). On the other hand, these businesses are referred to as crypto asset service providers (CASPs) by MiCA.
In order to help you figure out where your company fits into these categories, we’ll go over these similarities and differences in detail below.
What Is a VASP?
The FATF [1] defines VASP activities as the following:
- the exchange between virtual assets and fiat currencies,
- the exchange between one or more forms of virtual assets,
- the transfer of virtual assets,
- the safekeeping and/or administration of virtual assets or instruments enabling control over virtual assets,
- the participation in and provision of financial services related to an issuer’s offer and/or sale of a virtual asset.
Different regions use different terms when referring to VASPs; for example
- Australia uses the term crypto asset secondary service providers (CASSPrs),
- The US refers to VASPs as digital asset exchanges,
- In France, digital asset service provider (DASP) is the favoured term,
- Canada favours the term crypto asset trading platforms (CTP), and
- Japan prefers crypto exchange service providers (CESP).
The FATF’s definition covers the fundamental activities of a typical VASP. However, the definition is neither as explicit as the MiCA definition below nor covers crypto advisory services.
What Is A CASP?
CASP activities, according to MiCA [2], include:
- the custody and administration of crypto assets on behalf of third parties,
- the operation of a trading platform for crypto assets,
- the exchange of crypto assets for fiat currency that is legal tender,
- the exchange of crypto assets for other crypto assets,
- the execution of orders for crypto assets on behalf of third parties,
- the placing of crypto assets,
- the reception and transmission of orders for crypto assets on behalf of third parties,
- providing advice on crypto assets.
In a nutshell, if a business provides any of the below services to citizens in Europe, it is deemed a CASP:
- offering custody and administration of crypto assets on behalf of a third party,
- offering a crypto exchange service or running an exchange,
- offering crypto advisory services or information defined as advice on investing in crypto assets. This does not include portfolio management services.
In addition, the MiCA framework sought to be as future-proof as possible when defining CASPs and included provisions for brand-new markets, safeguarding the sector from any exceptions or loopholes.
Service Provider for Crypto Assets or Virtual Assets?
The FATF’s term “virtual asset service provider” (VASP) is more commonly used outside of the European Union (EU). In contrast, CASP is the preferred term within the EU.
Using “VASP” and “CASP” interchangeably is acceptable when casually discussing these businesses. However, when talking in a more formal setting, it is essential to keep in mind that the definition provided by MiCA is more expansive than that provided by the FATF and includes additional elements that the FATF definition does not cover.
Additionally, your company is considered a CASP if it is based in the EU and engages in any activities outlined above as crypto services by MiCA.
If your company is based outside the EU, you will probably be familiar with the FATF’s definition of a VASP. Even if your company provides the services defined by MiCA, using the FATF’s definition of VASP to refer to your business is acceptable if you do not provide services within the EU.
So, CASP or VASP?
MiCA is a European framework that applies to the 27 EU nations. Outside of Europe, it is not applicable.
Recommendation 16 from the FATF is merely a suggestion or guiding principle. It is neither a regulation nor a law. The FATF’s recommendations aim to provide nations with a framework for tackling terrorist financing and money laundering. Governments and unions can apply the FATF’s definition or, like the EU, develop their own.
Because jurisdictions aim to incorporate FATF recommendations into their local laws, the majority of the time, countries that implement their own definition are more stringent than the FATF’s.
[1] FATF (2021), Updated Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers, FATF, Paris,
www.fatf-gafi.org/publications/fatfrecommendations/documents/Updated-Guidance-RBA-VA-VASP.html
[2] REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on Markets in Crypto-assets, and amending Directive (EU) 2019/1937
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About The Author
21 Analytics is a Swiss technology company headquartered in Zug. Its core offering is a software solution ensuring financial intermediaries’ compliance when transacting with crypto assets. 21 Analytics leverages our founders’ decade of experience working in crypto to build the highest quality software and provide exceptional consulting services.
To learn more visit: www.21analytics.ch.
