In October 2019, Mongolia was placed on the list (by the International Organization for Financial Action Task Force (FATF)) of countries having strategic deficiencies in their regimes to combat money laundering, terrorist financing, and the financing of the proliferation of weapons of mass destruction. 1 year later in October 2020, it was successfully removed from the list.
In the process of delisting, number 15 of the 40 technical and professional recommendations issued by theFATF addressed the issue of “monitoring, regulating and registering virtual asset service providers, and providing a legal framework for this type of relations.” In this context, countries are undertaken to assess the risks of money laundering, financing of terrorism and proliferation of weapons of mass destruction in connection with new technology-based products and services, more specifically virtual assets, and to establish a legal framework. Accordingly, the Parliament of Mongolia has adopted a “Law on Virtual Asset Service Providers” on December 17, 2021, and the law came into force on February 25, 2022. Upon entry into force of the law, the legal environment forthe Financial Regulatory Commission of Mongolia /hereinafter referred to as the “FRC” or as referred to herein/ toregister Virtual Asset Service Providers that meet the requirements under the law and the regulations issued in accordance with it, and to conduct risk-based inspections of their activities are established.
There are several cryptocurrency trading websites and one ATM in Mongolia, and the related services are neither recognized or accepted as payment services in Mongolia nor are under the supervision and regulation of any organizations such as the Bank of Mongolia and the Financial Regulatory Commission. In particular users tradebitcoins and other cryptocurrencies on an exchange basis only as per their discretion through websites. In other words, the auction is based on trading principles, market principles or the law of supply and demand, and the reactions of traders. Lately there has been an increase of raising capital from the domestic market through IEO and ICO. For instance, the number of tokens in the domestic market has increased from 4 to 41 in the last quarter of 2021 (Lemon Press, 2021) creating substantial risks in the market.
For more information or any queries, please feel free to contact V.Bolormaa, Partner, and T.Buyanjargal, Associate, of GRATA International Law Firm by firstname.lastname@example.org, email@example.com or +976 70155031.
This legal alert was prepared by Umguulliin “GRATA International Mongolia” LLP, the Mongolian office of GRATA International, an international law firm that has its branches in 20 countries around the world. The material contained this alert is provided for general information purposes only and does not contain a comprehensive analysis of each item described. Before taking (or not taking) any action, readers should seek professional advice specific to their situation. No liability is accepted for acts or omissions taken in reliance upon the contents of this alert.
 “The FATF Recommendations” 2022