Growth of the Virtual Assets Sector and the Importance of Transparency
The virtual assets sector represents a rapidly growing part of the financial system but remains one of the most vulnerable to money laundering and terrorism financing. The report titled "Targeted Update on the Implementation of FATF Standards on Virtual Assets and Virtual Asset Service Providers" confirmed that many jurisdictions still do not fully implement international standards, creating significant risks for the security of financial operations.
The virtual asset service providers (VASPs) sector in Kyrgyzstan is actively developing. As of August 2024, there are 104 crypto exchanges, 8 crypto trading platforms, and 4 miners operating in the country. The total turnover of virtual asset operations for the first seven months of 2024 amounted to 375.9 billion Kyrgyz soms, which demonstrates a 166% increase compared to the same period of last year. This growth highlights the need for enhanced control and transparency in this sector.
UNODC Support for Strengthening Oversight Activities
UNODC provides significant support to the Kyrgyz Republic in strengthening its oversight capacity in combating the financing of terrorism and money laundering, with financial assistance from the Russian Federation.
On September 18, 2024, a round table was held at the State Financial Intelligence Service under the Ministry of Finance of the Kyrgyz Republic (SFIS) with representatives from the private sector. The event focused on improving transparency and reducing risks in the virtual assets sector. Participants discussed measures to create a more sustainable and trustworthy environment for virtual asset transactions.
Methodological Guidelines for VASPs
The main focus of the meeting was on the Methodological Guidelines for Identifying Suspicious Transactions Involving Virtual Assets, developed with UNODC support. This document is crucial for VASPs, as it helps them to comply with international standards to combat money laundering and terrorism financing. The guidelines include specific indicators of suspicious transactions, recommendations for applying a risk-based approach, and requirements for client registration and monitoring. These measures help to reduce risks and strengthen trust in VASPs by regulatory authorities and clients. Transparency in this sector also helps to enhance the reputation of VASPs, facilitating cooperation with international partners and investors.
Improving Cooperation Between the State and the Private Sector
Participants also emphasized the importance of improving cooperation between state authorities and the private sector for more effective monitoring of suspicious transactions. "Only through joint efforts of state authorities and the private sector we can effectively control activities in the virtual assets sector and ensure its transparency and security," noted SFIS Deputy Chairman Chyngyz Kenenbaev.
Future Steps and UNODC Support
The round table was an important step in developing oversight activities in the virtual assets sector in Kyrgyzstan and strengthening VASPs' capacity in ensuring operational safety and transparency. UNODC reaffirms its commitment to supporting the Kyrgyz Republic in combating money laundering and terrorism financing by facilitating the implementation of international standards and best practices.
For more information about the round table and future initiatives, please contact the UNODC Programme Office in the Kyrgyz Republic.
