What is VASP? Definition and Examples

What is a Virtual Asset Service Provider (VASP)?

A Virtual Asset Service Provider (VASP) business may conduct one or several activities. For example they may be responsible for an internal exchange of virtual assets like Bitcoin or Ethereum, but depending on the VASP, they may also facilitate the conversion of virtual assets to traditional currencies such as USD or EUR, or vice versa, as well as handling the sending and receiving of virtual assets in a secure and efficient manner. Another thing that a VASP may decide to perform is safekeeping and/or custodial wallets for virtual assets which includes providing secure storage solutions, including custodial wallet services to better protect users' virtual assets from unauthorized access or theft. 

How Do VASPs Work?

VASPs actually play a global role in the virtual asset ecosystem. They facilitate transactions on behalf of their clients, act as intermediaries between users and blockchain networks, assures KYC (Know Your Customer) compliance to meet anti-money laundering (AML) and counter-financing of terrorism (CFT) regulations and maintain and safeguard clients’ virtual assets in custodial wallets. Furthermore, they often offer advisory services and financial solutions for token offerings or trading.

Why Are VASPs Important?

There is more to the global role that VASPs play we have covered in the previous section. They principally act as the entry and exit points between traditional financial systems and blockchain-based economies. 

Thanks to VASPs, users can buy and sell cryptocurrencies like Bitcoin and Ethereum on trusted platforms. In addition to the trade of cryptocurrencies they can take advantage of market opportunities. This is achieved by allowing users to participate in DeFi protocols or Initial Coin Offerings (ICOs). They can explore innovative financial opportunities, include earning interest, staking or supporting new blockchain projects thanks to what VASPs can offer. 

Of course, being able to securely store their digital assets in the wallets can’t go unmentioned but these wallets also bring other advantages. For example, they can also transfer funds across borders quickly and relatively cheap since they bypass traditional banking fees and delays. All of these makes them attractive targets for money laundering, fraud and sanctions evasions.

What Are the Global Regulatory Standards for VASPs?

Since 2019, the Financial Action Task Force (FATF) has extended its Recommendation 15 to specifically address Virtual Asset Service Providers (VASPs), ensuring these entities follow the same robust standards as traditional financial institutions. This move reflects the growing importance of regulating the virtual asset ecosystem to prevent misuse for money laundering or terrorist financing. There are several key obligations under this guidance. 

First and foremost, all VASPs operating within FATF member jurisdictions must go through licensing and registration. They must also implement AML/CFT (Anti-Money Laundering/Countering the Financing of Terrorism) programs. Moreover, they must maintain ongoing customer due diligence (CDD) by monitoring transactions to detect and asses risks. Another thing that they are responsible for is the suspicious transaction reporting (STR). The last standard for VASPs is the compliance with the Travel Rule, which we will expand on in the following section but basically it consists of mandating the collection and secure transmission of critical customer information.

Travel Rule for VASPs

The aim of the FATF Travel Rule is to improve transparency in virtual asset transfers and deterring illicit activities. Under this rule, VASPs must collect, retain and transmit customer information like sender and recipient names, wallet address/account ID, national ID/passport and purpose of the transaction if the transaction exceeds the limit of 1000 USD/EUR.

Country-by-Country Regulatory Examples (2025 Update)

What Are Examples of Virtual Assets?

AML/CFT Compliance Obligations for VASPs

VASPs are subject to nearly identical AML obligations as traditional financial institutions. 

Firstly, you must comply with KYC (Know Your Customer) by collecting and verifying customer ID’s, classifying their risk and doing periodic profile updates. Another obligation is to respect CDD (Customer Due Diligence) by carrying out source of funds checks and examining purposes of the transactions.

Furthermore, real-time monitoring for transactions for anomalies, reporting to the local Financial Intelligence Unit (FIU) and maintaining logs for 5 to 10 years must be conducted to adhere to Suspicious Activity Reporting (SAR/STR).

Sanctions & PEP Screening must also be regularly carried out through checking customers and wallet addresses against global sanctions lists (e.g., OFAC, UN), screening against Politically Exposed Persons (PEPs) and monitoring adverse media exposure. Lastly, the travel rule implementation plays an important part in these obligations and it should be executed by integrating technology solutions to exchange required sender/receiver information during transfers and ensuring compatibility with OpenVASP, TRISA or other similar networks. 

Key Risks and Red Flags for VASPs

For example, structuring transactions into smaller amounts to avoid reporting thresholds or using mixing services or privacy-focused coins like Monero and Zcash to make it difficult to trace funds on the blockchain are common methods to come across. Moreover, users may utilize wallets or decentralized exchanges (DEXs) which allow them to transact without providing identifying information. In addition to the trickeries like this, regular transactions with countries or regions with weak regulatory oversight is also possible.

How Do Virtual Asset Service Providers Fight Fraud?

First of all, your business can leverage automated solutions like Sanction Scanner to improve efficiency and accuracy, thanks to their tools providing real-time screening of users, wallets, and transactions against global sanctions lists, PEPs, and adverse media.

Furthermore, you may consider developing and implementing a comprehensive AML compliance program. Of course, the content of the program may vary but it is safe to say that it should include clear policies and procedures by appointing a dedicated compliance officer to oversee all AML efforts, ensure adherence to regulations and act as a point of contact for regulatory authorities. 

These risks need to be checked regularly, so it would be sensible to conduct risk assessments to identify and address vulnerabilities within your organization. In addition to broader business-wide risks, customer-specific risks shouldn’t go unnoticed so that you can ensure your AML measures remain strong and aligned with regulatory requirements. 

Each employee has an indispensable role in fighting fraud so it is essential to raise their awareness by training them. This part is especially crucial for the employees involved in onboarding new customers and monitoring transactions, since they must be vary of potential red flags, conduct regulatory updates and know how to respond to these suspicious activities. crLastly, timely reports of Suspicious Transaction Reports (STRs) and Travel Rule information should be submitted to appropriate authorities if you wish to be certain of compliance and support the broader effort to combat financial crimes.