AI Trading

Since the dawn of modern technology, there has been a meteoric growth in the number of people who act as the source of such innovation too. There is no question that we live in a society dominated by service providers and that our lives revolve around the work that they perform. Service providers are playing their role across a variety of industries, including healthcare, the cloud computing industry, the internet, digital currencies, and so many more.

It is general information amongst all of us that the idea of digital assets, and cryptocurrencies in particular, as well as the manner in which the world is gradually heading toward them, are becoming more prevalent. When we talk about cryptocurrencies, the subject of virtual asset service providers, also known as VASPs, always comes up as a topic of conversation. The process of making these virtual assets accessible to its clients includes the participation of VASPs, which is an essential step in the process.

However, are you familiar with the concept of a VASP and the role that they play? And if you’re fascinated by cryptocurrencies, why should you make an effort to learn about them? Have you heard of the word “VA” or “FATF” before? These phrases have a tight connection to VASP, and the subsequent page in this guide will explain more about them. This article will provide you with all of the information that you need, so keep reading, and you’ll learn all that’s essential.

What is a Virtual Asset?

AI Trading

Before we can move onto the main topic of our discussion, the VASPs, let us first understand what exactly a Virtual Asset is and how it actually works. As per a known regulatory firm named FATF, virtual assets, in actuality, are digital representations of value that may be bought, sold, and transferred electronically. These assets might likewise be of great help and support while dealing in financial operations like investing or making payments, purchasing or buying online products or trading one for another.

The expanded breadth of responses to ‘what is a virtual asset?’ likewise features the option for adding all cryptocurrency transactions with other varieties of properties such as ICO (initial coin offering) units. This also stresses the importance of utility tokens and cryptocurrency transactions underpinned by commodities or cash. It is also essential to keep in mind that tokens which are employed in virtual services are not regarded as a VA.

Virtual service token, on the other extreme, are an electronic version of value that cannot be transferred or exchanged with a 3rd person under any circumstances, and since they aren’t interchangeable, they don’t classify the criteria of being a VA. These digital tokens serve the sole purpose of providing easy accessibility to a certain program, business, facility, functionality, etc., to their respective owners.

Introduction to Virtual Asset Service Provider

The organizations that deal in crypto assets and all other digital assists like commodities, stocks, options or forex may be described to it as Virtual Asset Service Providers (VASPs) or as money transmitters as they are closely involved in the dealing of changeable electronic currencies. VASPs are also referred to as “money carriers” or “money transporters” by a few people, and thus, these words are used interchangeably.

These organizations are strongly regulated by governmental bodies such as AML/CFT as they act as “money carriers”, and it is their sole responsibility to ensure that all the money is sent from purchaser to buyer in the safest way conceivable. Hence, VASPs are subject to stringent protocols, all of which are necessary to abide by.

As per the Financial Action Task Force, a VASP is a company that engages in the transfer of information, assets or fiat currency, trading of digital commodities or exchanging one for the other, trading of virtual assets and lastly, in the storage and management of assets on behalf of their customers.

Moreover, functions of a VASP cover a wide range of things and are not merely limited to trading; for instance, provision of incentives or keeping clients updated with the economic market is likewise a part of their everyday responsibilities. The concept of VASPs takes into account a wide variety of cryptocurrency-related firms, including marketplaces, ATM companies, wallet administrators, and hedge fund managers, all of which have their individual essential roles to play. The FATF also suggests that virtual account service providers (VASPs) should be required to adhere to the same severe AML/CTF and KYC standards as conventional monetary organizations.

Moreover, it should be noted that the Financial Action Task Force’s description of a VASP is not merely tied to the legal form of the body managing finances and related stuff; rather, it is also about how exactly an individual is utilizing his digital asset and for what precise purpose. Additionally, FATF considers any entity that is conducting any of the operations mentioned above, whether legally or naturally on behalf of someone else, is considered as a Virtual Asset Service Provider, no matter what technology, equipment or method he is employing to carry out these activities.

This implies that the classification of some businesses dealing with digital assets, such as miners, as VASPs is open and dependent on the actions and roles, they engage in. Although the actions of a single miner might not be sufficient to label that miner as a VASP, the acts of a mining pool would be provided that the pool participated in one of the operations described in the previous section.

For instance, in accordance with the guidelines imposed by FinCEN, a mining pool contractor could not be regarded as a financial transmitter when the only thing they did was transfer simulated investments to the pool representatives in order to disperse the number of dollars that they had obtained because these transactions are essential to the rendering of services.

Nevertheless, given a situation where the manager of a pool offers facilities like safeguarding or maintaining digital money wallets in place of the pool’s participants, then the manager would be regarded a VASP as he is directly dealing in account-based financial transportation as per the standards set by FATF. Moreover, if a mining pool conducts its operations in compliance with the recommendations of the FATF, then it may be considered a VASP.

Origin of VASPs

When understanding about VASPs for the very first time, the very immediate thought that appears in the thoughts of every newbie is where they came from. The Financial Action Task Force (also known as FATF) is the organization that presented the idea of a Virtual Asset Service Provider, and that’s where this notion actually entered the financial market. But what is the FATF exactly?

When it pertains to virtual asset service providers, the Financial Action Task Force is without question among the phrases that are talked about more than any other. Anti-Money Laundering or AML fans may be familiar with the FATF and the duties it serves. Despite this, a significant portion of the global public does not understand who or what FATF is or what it does.

In reality, the Financial Action Task Force is a multinational organization that was established in 1989 by its constituent areas. It is the primary responsibility of the Financial Action Task Force to provide governments with recommendations about anti-money laundering (AML), including countering the funding of terrorist initiatives and so forth. Moreover, one of the most acknowledgeable aspects of the FATF recommendations is the concept of virtualized assets which we just discussed in the section earlier.

Mutual assessments are a process in which governments that are participants of the Financial Action Task Force (FATF) are evaluated to see whether or not they comply with FATF guidelines. It is also vital to highlight those states and territories are put under a significant amount of pressure to generate positive achievements in the context of the organization’s mutual assessments. Nevertheless, the participating countries are free to modify their already in place norms and legislation as well as easily incorporate any necessary rule as an act in implementing the system.

In June of 2019, the FATF published a study where they provided a comprehensive guide surrounding the idea of VASP and their related functions, operations and regulations. It likewise provided an overview of a number of criteria VASP has to pass with the primary goal of addressing and overcoming a variety of questions and concerns raised by companies in the context of digitized property and computerized money.

Moreover, FATF has declared that anyone who engages in any activity specified by FATF as just a legitimate or naturalized enterprise will qualify as a VASP. This means that anybody who engages in these activities might be considered a VASP. The technique that they use in order to deal with operations involving virtual assets doesn’t have any bearing on whether or not they qualify as VASPs or not.

The Financial Action Task Force (FATF) has lately provided regulations on the characteristics of virtual assets as well as a Virtual Asset Service Provider too, and so it can be noted that FATF has been closely related to VASPs in terms of regulating them and legalizing all that they are currently working with.

VASP and Decentralized Exchange (DEX)

According to the recommendations provided by the FATF, decentralized exchanges (DEXs) should indeed be controlled in the same manner as a VASP. If an entity is facilitating or conducting the interchange or transmission of wealth, whether it be in the form of a VA or conventional fiat money, then that entity is considered a VASP. This requirement fits a DEX, along with any other kind of decentralized (distributed) software (DApp), as well as all their proprietors and administrators.

Similarly, an individual who establishes a DEX may well be considered a VASP if they participate as a company in supporting or performing the actions that were initially identified on account of some other individual.

There is a dire need for countries to be prepared to figure out how to manage risks in the most effective way possible, regardless of whether the VASP financial structure is centralized or decentralized. In its May 2019 guidelines, FinCEN made it clear that DApps are subject to the same statutory regulations as other technological organizations like CVC kiosks which collect and send currency, independent of whether or not they have been run for revenue.

Therefore, when decentralized applications (DApps) undertake financial transactions, the concept of “money transmitter” would extend to the DApp itself, the owners and administrators of a DApp, or perhaps both. Hence, all those who are involved in DApps or even DEXs should consider themselves as legit VASPs and hence, they should abide by all regulations adhered to their principal operation.

It is necessary to ask questions concerning decentralized exchanges in light of the recent prominence that talks on virtual assets have gained in relation to VASPs. Is it possible that such DEXs may function as models to depict the working of optimal virtual asset service providers? The encouraging part is that decentralized exchanges, often known as DEXs, may unquestionably fulfil the criteria for VASPs.

When particular requirements are met, decentralized exchanges (DEXs), other types of decentralized applications (dApps), and the owners or operators of such applications may become VASPs. So, in light of the question asked, No, VASPs are not the same as decentralized exchanges, and there’s a lot of difference between the two, but a DEX may function as a VASP in many cases, such as when it is dealing with the digital transfer money for any of their clients.

Examples of VASPs

There are many various kinds of companies and digital channels, each of which has the potential to fulfil the function of a VASP or to play a part in the overall process of carrying out an online transaction. Exchanges, including centralized and decentralized, mining communities, investment products, and maybe much more, can fall within this category.

The following are a few instances of firms or venues that meet the criteria to be classified as a VASP. First and primarily, centralized exchanges are deemed to be VASPs since they function as a third person between both the purchasers and the sellers of cryptocurrencies or any other digital asset.

Coinbase and Kraken are good instances of centralized exchanges that are currently in operation. On the other hand, decentralized marketplaces are also regarded to be VASPs since they do not necessitate the participation of an outside party in order to carry out exchanges or operations. Uniswap and Venus are two companies that are instances of decentralized exchanges.

A memorandum of agreement is known as an escrow service, whereby a third party obtains and transfers property or funds on behalf of the principal transacting groups, with the cash management being contingent on settings agreed to by the actual transacting parties.

Escrow services are often used in real estate transactions, and their primary responsibility is to help facilitate the transfer of virtual currencies from one party to another while also guaranteeing that the trade goes through without a hitch. Escrow services for electronic asset transfers are provided by a plethora of organizations, including Escaroo and Bitrated, and all of these are redeemed as virtual service providers.

Last but not least, investment products, also referred to as crypto-tied financial products, are another well-known example of a VASP. These financial products could appear in the shape of securities, such as crypto exchange-traded funds. Because of the proliferation of the concept of virtual assets, these automobiles are gaining popularity and are becoming increasingly widespread. One such illustration is the exchange-traded fund (ETF) known as BITO, which debuted on stock markets in October of 2021.

Now that we are familiar with the components that make up a VASP, let’s move on to figuring out what does not make up a VASP. There are a wide variety of organizations that are not considered VASPs, some of which include but are not confined to the following:

  • Cryptocurrency miners working alone
  • Members of a Cryptocurrency mining pool who participate individually
  • Private investors

To summarize, you really aren’t considered a VASP when you are merely an ordinary person who engages in trades or other forms of participation in the cryptocurrency marketplaces or if you are just validating a permissioned blockchain.


According to the Financial Action Task Force, the phrase “Virtual Asset Service Provider” relates to the interoperability of words such as “virtual asset,” “virtual currency,” and “digital asset.” The concept of VASPs is slowly but surely gaining traction as an increasing number of individuals become aware of their potential and the significant role they have to play in the world.

It is only natural to be curious about the future of VASPs, and if we take into account how adaptable or versatile, they are, we can be certain that they will continue to be in the driver’s seat for some time to come.

AI Trading produces top quality content for crypto companies. We provide brand exposure for hundreds of companies. All of our clients appreciate our services. If you have any questions you may contact us. Cryptocurrencies and Digital tokens are highly volatile, conduct your own research before making any investment decisions. Some of the posts on this website are guest posts or paid posts that are not written by our authors and the views expressed in them do not reflect the views of this website. Herald Sheets is not responsible for the content, accuracy, quality, advertising, products or any other content posted on the site. Read full terms and conditions / disclaimer.

Larry Wright

By Larry Wright

Larry Wright is a Pulitzer Prize-winning journalist and author. He is known for his insightful reporting and his ability to delve into complex issues with clarity and precision. His writing has been widely acclaimed for its depth and intelligence.