Challenges of crypto regulation in Laos

Although it may not be common knowledge, Laos has regulations for cryptoasset mining and trading firms as of November 2021 that aim to protect the interests of both operators and users.

They were issued two months after six companies were granted authorization to trade and mine cryptoassets in a three-year trial. Subsequently, in January 2022, the central bank of Laos licensed two firms on a trial basis to offer crypto-asset trading in the country with the expectation that they will fully comply with regulations regarding cyber security and customer protection.

However, the country’s regulatory regime for Virtual Assets (VAs) and Service Providers (VASPs) appears to remain unsettled.

A mutual evaluation report issued by the Financial Action Task Force (FATF) in August 2023 found significant gaps in the regulation of virtual assets in Laos based on an on-site visit in September 2022. This was not helped by the fact that the relevant regulations they are not considered final, as they are only at the “ministerial level” due to the pilot nature of the ongoing trial.

Other unwanted findings include:

• Laos – both firms and government – ​​did not understand the risks posed by VA, and any relevant measures to mitigate the risks of money laundering and terrorist financing are limited and not risk-based.
• Prohibitions on VA services apply only to trading and do not apply to other activities such as custody, administration and provision of financial services in connection with the offering or sale of the issuer’s VA.
• Oversight and monitoring of the VA sector has yet to begin, and Laos has not taken steps to identify and sanction unlicensed VASPs.

Despite the shortcomings identified by the FATF, it is encouraging to know that Laos is taking small – albeit tentative – steps towards regulating VASPs compared to other Asian countries that have either banned VAs or chosen not to regulate them at all.