The speed and dynamism with which the tokenized economy is developing raises questions about the conscious and secure use of technologies and the VASP Virtual Asset Service Provider plays a central role in this scenario.

It sounds like a complicated nomenclature that we need to understand in the cryptographic universe that is increasingly present in our daily lives, but VASP is a simple term and symbolizes the main actor in the digital economy.

Companies that operate businesses with digital assets.

A Virtual Asset Service Provider is an entity that offers services related to virtual assets – where cryptocurrency and tokens are the major symbols – which can include exchange, custody, transfer, trading and other services related to digital assets.

It plays the essential role of materializing the credibility that the approved and ongoing cryptoasset regulations are defining.

But what are the responsibilities of a VASP and who can carry out this activity in Brazil?

What benefits do they bring to tokenized businesses?

BLOCKBR, a company that develops tokenization infrastructure, will talk about VASP and its strong impact on token economics!

BUT WHAT EXACTLY ARE DIGITAL ASSETS?

This question is frequently asked even by professionals accustomed to the financial market or by investment agents who see cryptoassets as a fertile ground for business opportunities.

However, it is still a question of clearly defining what a virtual asset is and differentiating the types of digital assets in terms of their purpose – and this is a source of confusion that can hinder analysis and business.

The Virtual Assets Legal Framework defines a digital asset as a digital representation of value that can be traded or transferred by electronic means and used to make payments or for investment purposes, not including national currency and foreign currencies; electronic currency.

Thus, we are talking about the following digital media defined as assets:

CRYPTOCURRENCIES

Digital currencies are the first known form of digital asset, with the emergence of bitcoin and all the cryptocurrencies that followed, forming a market that reached almost US$9 trillion in trading value by 2023.

Initially created to be decentralized means of payment and revolutionize countries’ monetary systems, they have also gained the status of a volatile financial asset vulnerable to speculative bubbles.

Each digital currency has a value linked to its own appreciation on the market.

TRANSACTIONAL TOKENS

This is the category that is bringing about a real revolution in the way business is done in every possible sector of activity. After all, it is possible to tokenize everything, creating cryptographic representations of goods, rights and projects that can be offered on the market.

Among the many benefits of the transactional token is the possibility of fractionating the object of tokenization and trading at lower values, democratizing access for small and medium-sized investors to inaccessible assets such as real estate and agricultural crops.

There are different types of business token, among them:

• Real asset tokens;
• Fixed income tokens;
• Utility tokens;
• Security tokens.

Unlike cryptocurrencies, tokens are not an asset in themselves with their own market value, but rather a representation of the asset backed by them, with the advantage of making trading more agile, transparent and secure.

WHAT ARE VASP

Virtual Asset Service Provider can be translated as digital asset service provider and the meaning makes the main objective clear: these are the entities or companies that offer services related to virtual assets – cryptocurrencies and tokens – to the market.

As we can see, VASPs play a central role in the cryptomarket, as they are links between those who offer digital assets in the most different business models and users and investors.

VASPs can be centralized or decentralized digital platforms and, on a global scale, are subject to local digital asset regulations – a key aspect for each country to promote:

• The entry of virtual assets into the economy in a transparent and structured way;
• The incentive for companies to adopt crypto-business;
• Encouraging people through the credibility transmitted.

With the advent of blockchain technology in the creation of digital currencies and trading tokens, the financial market has witnessed a significant transformation in the way assets are transacted and managed.

A key element of this evolution are tokenizers, companies that specialize in digitizing real and financial assets, such as real estate and bonds, and turning them into tradable digital tokens.

The VASP Registry is emerging as a crucial component for ensuring compliance and integrity in transactions with digital assets.

WHAT ACTIVITIES DEFINE A VASP COMPANY

To apply for registration as a digital asset service provider, the company must be involved in one or more of the activities listed below.

• Exchange between fiat money and tokens and cryptocurrencies;
• Direct exchange between one or more digital assets;
• Custody and administration of digital assets;
• Participation in financial services related to cryptoassets;
• Provision of services aimed at generating offers of virtual assets;
• Payment processing integrated with cryptocurrencies;
• Crypto financial services – loans, margin trading, etc.

WHAT IS THE VASP REGISTER

Registration for VASP companies is an attestation of the tokenization companies‘ compliance with the rules defined by the regulatory bodies of the financial system (BACEN) and the monetary system (CVM).

WHAT ARE THE OBJECTIVES OF THE VASP REGISTER

By establishing clear and transparent guidelines, the VASP credential aims to:

• Ensuring the compliance of the activities of cryptomarket companies;
• Boosting the confidence of companies and investors;
• Promote the construction of a secure and regulated cryptographic business environment;
• Require VASP to implement robust due diligence procedures;
• Reduce the possibility of fraud and other illicit activities with cryptocurrencies and tokens;
• Support ethical innovation and sustainable growth in the digital asset market;
• Encourage the participation of serious and committed companies through a clear and transparent regulatory framework;

By achieving these objectives, the register protects individual investors, strengthens market integrity and promotes the sustainable and healthy growth of the digital asset ecosystem.

WHAT ARE THE RESPONSIBILITIES OF VASP-REGISTERED COMPANIES?

By obtaining the VASP license, a company also acquires a status of ethical and institutional soundness in the market and must meet various requirements to operate in a regular manner, including:

• Comply with strict cyber security standards;
• Use anti-money laundering (AML) mechanisms;
• Use mechanisms to combat the financing of terrorism (CFT);
• Acting in an absolutely ethical manner with suppliers and clients.

By avoiding illegal and speculative activities and acting within the ethical standards of the market, the company licensed as a VASP will be an agent preserving a regulated and safe environment, which will boost the adoption of digital assets within a safe environment for doing business.

WHO CAN HAVE A VASP REGISTRATION

The purpose of registering a digital asset service provider is to certify the operational and ethical integrity of:

• Cryptocurrency exchanges (digital currency brokers);
• Asset and project tokenization companies;
• Platforms for selling business tokens (utility tokens, NFTs and others);
• Platforms for selling investment tokens (security tokens, asset-backed tokens and others).

WHAT ARE THE RESPONSIBILITIES OF A VASP IN THE DIGITAL ECONOMY?

In order to achieve the goals set by the cryptomarket regulatory authority and operate within the security and integrity standards expected by the market, the VASP company has a series of objective responsibilities to fulfill.

Let’s talk about the main ones.

REGULATORY COMPLIANCE

• Comply with the laws and regulations defined and applicable in the country in relation to the cryptoassets market;
• Obtain the necessary permits and licenses for regular operation;
• Implement compliance policies;
• Produce regular reports for the supervisory authorities.

IDENTITY VERIFICATION (KNOW YOUR CUSTOMER)

• Collect personal information from all customers;
• Verify the identity of customers as defined in regulations;
• Carrying out due diligence procedures.

TRANSACTION MONITORING

• Monitor all transactions and identify suspicious or non-compliant activity;
• Track high-value transactions to detect unusual patterns of activity;
• Notify the competent authorities if necessary.

CUSTODY OF DIGITAL ASSETS

• Storing and protecting the digital assets of providers and customers;
• Implement high-level security;
• Ensuring the immediate availability of assets for customer handling.

ANTI-FRAUD AND ILLICIT MECHANISMS

• Implement appropriate measures to detect and prevent suspicious activity;
• Cooperate with the authorities in investigating and combating illegal activities.

HOW THE VASP REGISTRATION PROCESS IS GOING IN BRAZIL

VASP licensing is part of a large framework of rules and regulations being drawn up by BACEN, the body appointed to regulate the cryptoassets market.

We can see the process of strengthening the Brazilian cryptomarket in a few phases:

CRYPTOCURRENCY LAW

In December 2022, Law 14.478/22, known as the Cryptocurrency Law, was sanctioned, with a set of important changes for the cryptoassets market and which brought them great visibility in society.

The important impact of improvements over time was the natural selection of companies through the set of legal and fiscal requirements that would be established from regulation to give integrity and security to crypto transactions and increase people’s trust.

The main points of the law are:

• The creation of the figure of the digital asset service provider, the VASP, as a way of clearly delimiting and identifying the legal figure of companies in the sector;
• The delimitation of the CVM to regulate the crypto market as securities;
• The trend that BACEN will be the regulator of the crypto market in general;
• Definition of rules and conditions for granting an operating license.

QUADRO JURÍDICO DO MERCADO DE CRIPTOMOEDAS

In June 2023, the Crypto Legal Framework came into force, a long-awaited step for the market as it effectively deals with the creation of crypto market regulation based on the guidelines defined in the law.

The concept of digital asset service provider was consolidated, but as there was a legal deadline of 180 days from the date of enactment of the law to begin the legal framework and BACEN was appointed regulator late, the definition of rules to become VASP was postponed.

As a result, any requirement for companies in the crypto sector to be authorized to operate has been suspended until BACEN establishes the final rules. They are expected to be officially released in the first half of 2024.

This decision does not invalidate the legality of tokenization companies and cryptoasset brokers that are already operating, as investors and clients are legally protected by the definition of crimes involving digital assets.

WHAT ARE THE BENEFITS OF THE VASP REGISTRY FOR TOKENIZERS?

When the cryptomarket began to take shape in 2008 with the creation of bitcoin and the thousands of digital currencies that followed, the concept of decentralization was the main premise.

Operating without control and regulation of the banking and monetary systems, allowing people to use money more freely, without geographical barriers, costs or regulatory limitations was the great revolution – and it continues to exist.

After all, among the many advantages of buying tokenized assets are:

• Total availability without the limit of banking hours;
• The possibility of international business;
• Democratization with the fractionation of virtual assets;
• Reduced operating costs.

It therefore seems contradictory even for current and future VASP companies to welcome the regulation of digital assets.

However, it comes at an opportune moment when the digital asset market is growing exponentially and adding more sectors, including the very resistant financial market.

The tokenization of everything is a reality and will provide more security and liquidity for businesses around the world.

Establishing clear rules aimed at customer security and transaction transparency is a fundamental condition for overcoming a preconceived notion of digital activities, especially in Brazil.

Cryptocurrency crimes are unfortunately common all over the world, such as the FTX case and others that call into question the ethics and governance capacity of the market.

The VASP register and other measures, especially the criminalization of illegal activities with cryptoassets, will make bad players visible and make them give up their illegal activities and reinforce the image that the crypto market is made up, for the most part, of serious and qualified companies.

Another benefit is that it fuels healthy competition between VASPs so that providers and customers benefit the most and feed back into the market with their satisfaction and trust.

The great liquidity and profitability potential of tokenized businesses is to be thanked!

TOKENIZE ASSETS WITH BLOCKBR AND BOOST YOUR RESULTS!

Tokenization is a reality in the market, with an increasing number of companies and people generating revenue with tokens. Recent actions by BACEN and the digital real are increasing the credibility of the technology.

For the success of your project, it is essential to have an adequate and efficient tokenization infrastructure for the financial and other markets, comprising:

• Technical, fiscal and legal feasibility study;
• Issuance of tokens and smart contracts with transparent governance;
• Distribution of tokens on a simple and secure sales platform;
• Efficient and assertive tokenization governance.

Discover BLOCKBR’s infrastructure work for regulated and unregulated markets through an All-In-One platform that offers interoperability between assets and investors.

You don’t want to see your competitor get ahead to make more money.

Or do you want to?

BLOCKBR is a fintech specialized in building infrastructure that allows a simplified migration to tokenization, meeting the needs of a highly regulated environment.

Our main mission is to develop autonomy for the capital market so that it can move, grow and potentially access digital assets. We develop legal and technological solutions that create opportunities and simplify the way in which financial services will operate, from the structuring and new roles of the agents involved to the management and supply of these assets, generating efficiency, lower costs and greater speed of liquidity.

We take care of the entire technological infrastructure for tokenization and regulation, simplifying your life so that you can take care of your customer relationship.

Visit http://www.blockbr.com.br or @blockbr_ on social media and find out more!