Virtual Asset

🔹 Definition

A Virtual Asset (VA) is defined by the Financial Action Task Force (FATF) as a digital representation of value that can be digitally traded or transferred and can be used for payment or investment purposes. Virtual assets do not have the legal status of fiat currency, but may function similarly in online or decentralized ecosystems.

Common forms of virtual assets include cryptocurrencies (e.g., Bitcoin, Ethereum), stablecoins, and tokenized assets, including those used in DeFi (Decentralized Finance) platforms.

🔹 Frequently Asked Questions (FAQs)

Q1: How are virtual assets different from digital currencies or e-money?

• Virtual assets are typically decentralized, not issued by central banks or guaranteed by governments
• E-money is a regulated digital representation of fiat currency, typically issued by licensed financial institutions
• Central Bank Digital Currencies (CBDCs) are not classified as virtual assets—they are official legal tender

Q2: What are common examples of virtual assets?

• Cryptocurrencies: Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC)
• Stablecoins: USDT (Tether), USDC (Circle), DAI
• Non-fungible tokens (NFTs) when used for value transfer
• Security tokens and utility tokens issued on blockchain platforms
• Wrapped assets and governance tokens used in DeFi protocols

Q3: Why are virtual assets significant in AML/CFT compliance?

• VAs offer anonymity, speed, and global reach, making them vulnerable to misuse
• Used for ransomware payments, sanctions evasion, terrorist financing, and fraud
• FATF and national regulators require Virtual Asset Service Providers (VASPs) to implement:
  • KYC/CDD procedures
  • Transaction monitoring
  • Travel Rule compliance
  • Suspicious transaction reporting

Q4: Who are Virtual Asset Service Providers (VASPs)?

• Crypto exchanges (centralized or decentralized)
• Custodial wallet providers
• Token issuers or ICO platforms
• DeFi operators, if they maintain control or provide core services
• NFT marketplaces (where value transfer is involved)

Q5: How are virtual assets regulated across jurisdictions?

• In Singapore: regulated under the Payment Services Act (PSA)
• In the EU: governed by MiCA (Markets in Crypto-Assets Regulation)
• In the U.S.: oversight shared among SEC, FinCEN, CFTC, and state regulators
• FATF recommends a risk-based approach, including licensing and supervision of VASPs globally