Resolution of the Board

of the National Bank

of the Kyrgyz Republic

of 3 February 2023
No. 2023-П-14/8-2-(НПА)

On approval of the Procedure for the provision of services

related to virtual assets

In accordance with Articles 5, 9 and 64 of the Constitutional Law of the Kyrgyz Republic "On the National Bank of the Kyrgyz Republic", the Board of the National Bank of the Kyrgyz Republic resolves:

• 1. To approve the Procedure for the provision of services related to virtual assets (attached).

• 2. This resolution shall enter into force upon the expiry of 15 (fifteen) days from the day of its official publication.

• 3. To the Legal Department:

  • from the day of receipt of the relevant documents, within 3 (three) working days, to publish this resolution on the official website of the National Bank of the Kyrgyz Republic;

  • after official publication, to send this resolution to the Ministry of Justice of the Kyrgyz Republic for inclusion in the State Register of Normative Legal Acts of the Kyrgyz Republic.

• 4. To the Payment Systems Department, after official publication, within 3 (three) working days, to bring this resolution to the attention of the Legal Entity Association "Union of Banks of Kyrgyzstan" and commercial banks.

• 5. To entrust control over the execution of this resolution to the member of the Board of the National Bank of the Kyrgyz Republic supervising the Payment Systems Department.

Chairman
K. Bokontaev

Annex
to the resolution of the Board of the National Bank of the Kyrgyz Republic of 3 February 2023 No. 2023-П-14/8-2-(НПА)

PROCEDURE

for the provision of services related to virtual assets

1. General provisions

• 1. The activity of providing services related to virtual assets is a licensed type of activity and is carried out on the basis of a license issued by the authorized state body in the field of virtual assets (hereinafter – the authorized body) in accordance with the legislation of the Kyrgyz Republic in the field of virtual assets.

• 2. A virtual asset service provider (hereinafter – VASP) is a legal entity registered in the territory of the Kyrgyz Republic and providing, as entrepreneurial activity, one or several types of services related to virtual assets, on the basis of a license issued by the authorized body in accordance with the legislation of the Kyrgyz Republic in the field of virtual assets.

• 3. The National Bank of the Kyrgyz Republic (hereinafter – the National Bank) carries out regulation and supervision of the activities of legal entities supervised by the National Bank that provide services related to virtual assets as a VASP in accordance with the requirements established by the normative legal acts of the National Bank.

• 4. Regulation and supervision of the activities of other legal entities providing services related to virtual assets as a VASP shall be carried out by the authorized body in accordance with the legislation of the Kyrgyz Republic in the field of virtual assets and the normative legal acts of the authorized body.

• 5. This Procedure for the provision of services related to virtual assets (hereinafter – the Procedure) establishes minimum requirements for commercial banks (banks) when they provide services related to virtual assets in accordance with the Constitutional Law of the Kyrgyz Republic "On the National Bank of the Kyrgyz Republic", the Law of the Kyrgyz Republic "On Banks and Banking Activity", the legislation of the Kyrgyz Republic in the field of virtual assets and other normative legal acts of the Kyrgyz Republic.

• 6. The effect of this Procedure extends to banks providing services related to virtual assets as a VASP.

• 7. A bank has the right to provide services related to virtual assets as a VASP if it has the consent of the National Bank and has obtained the corresponding license from the authorized body.

• 8. A bank has the right to provide only the following list of services related to virtual assets, in accordance with the established requirements of this Procedure:

  • 1) transfer of virtual assets;

  • 2) storage, management and control of virtual assets;

  • 3) provision of financial services related to the primary placement and (or) sale of virtual assets of the issuer.

A bank is prohibited from providing services related to virtual assets that are not provided for by the legislation of the Kyrgyz Republic and this Procedure, including:

• 1) purchase and sale (exchange) of virtual assets;

• 2) exchange between virtual assets.

• 9. In the event of a violation by a bank of the requirements of this Procedure, the National Bank has the right to apply measures of influence in accordance with the normative legal acts of the Kyrgyz Republic and to initiate the procedure for suspension/revocation of the bank's license with the authorized body.

2. Terms and definitions

• 10. The terms and definitions used in this Procedure shall be understood in the meaning in which they are used in the legislation of the Kyrgyz Republic in the field of virtual assets.

3. Procedure for obtaining the consent of the National Bank for applying to the authorized body in the field of virtual assets for obtaining a license

to carry out the activity of a virtual asset service provider

• 11. A bank must obtain the consent of the National Bank to carry out activity as a VASP.

After obtaining the consent of the National Bank, the bank shall apply with an application for the issuance of a license to carry out activity as a VASP to the authorized body in accordance with the requirements of the legislation of the Kyrgyz Republic in the field of virtual assets and the normative legal acts of the authorized body.

• 12. To obtain the consent of the National Bank to carry out activity as a VASP, the bank must submit a package of documents to the National Bank, including:

  • an application for consideration of the issue of granting consent to carry out activity as a VASP, signed by the chairman of the bank's board and sealed with the bank's seal;

  • a detailed extract from the minutes of the meeting of the board of directors, which contains the decision of the board of directors authorizing the carrying out of activities as a VASP, as well as information that the board of directors has conducted a comprehensive analysis of the proposed operations and their impact on the bank's activities, and that the bank has identified the risks associated with the new operations, based on the conclusion of the risk management service – a copy certified by the bank's seal;

  • the approved business plan of the bank for carrying out activities as a VASP, containing an economic justification for the need to carry out such activities, a marketing plan for the implementation of measures, forecast economic calculations, a risk management strategy;

  • the organizational structure of the bank, revised in connection with the planned expansion of the bank's activities (if necessary);

  • a profitability forecast related to the proposed operations;

  • internal regulatory documents regulating the procedure for carrying out activities as a VASP and including elements of the internal control system;

  • the existence of rules and procedures regulating the procedure for ensuring information security (cybersecurity) and business continuity;

  • the existence of an internal control program, internal rules and procedures for financial monitoring and other procedures aimed at preventing the legalization (laundering) of criminal proceeds, the financing of terrorist activities and the financing of the proliferation of weapons of mass destruction in accordance with the current legislation of the Kyrgyz Republic.

• 13. The National Bank has the right to conduct a check of the bank's readiness to carry out activities related to virtual assets.

• 14. The period for consideration by the National Bank of an application for obtaining consent to carry out activities as a VASP is 30 (thirty) calendar days.

The decision of the National Bank to grant the application/to refuse to grant the application for obtaining the consent of the National Bank is taken by the deputy chairman/member of the Board of the National Bank supervising issues of banking supervision and licensing.

The National Bank shall notify the bank in writing of the decision taken within 3 (three) working days from the date of the decision.

• 15. Documents submitted to the National Bank in accordance with this Procedure and containing more than one sheet must be described sheet by sheet, bound, numbered, signed and duly certified. If necessary, at the request of the National Bank, individual documents must be provided in electronic form.

• 16. The period for consideration of documents by the National Bank does not include the time spent by the applicant on revising the documents, as well as the period of the check specified in paragraph 14 of this Procedure.

If the documents received by the National Bank do not meet the requirements imposed by the National Bank, the calculation of the period for consideration of the documents begins from the date the National Bank receives documents that satisfy the imposed requirements.

• 17. Additional/revised documents taking into account the comments must be provided to the National Bank within a period of not more than 10 (ten) working days from the day the bank receives the documents for revision.

4. Requirements for banks providing services

related to virtual assets

• 18. Services related to virtual assets are provided on specialized platforms.

• 19. The bank has the right to provide one or several services specified in paragraph 20, and/or under an agreement with a VASP as an agent in accordance with the requirements of this Procedure.

• 20. The bank, if it has a license from the authorized body in the field of virtual assets, has the right to provide the following services:

  • 1) transfer (movement) of virtual assets (movement from one address or account of a virtual asset to another) on behalf of and in the interests of the client through specialized platforms.

  • 2) responsible storage and (or) administration (management) of virtual assets or the use of tools allowing control over virtual assets.

Storage, management and control of virtual assets must ensure the safekeeping of virtual assets and (or) tools for controlling virtual assets with the possibility of independent movement of virtual assets in the interests and on behalf of third parties. A bank providing services for the storage, management and control of virtual assets shall move virtual assets only on the condition that such management or movement is carried out in accordance with the instruction of the owner of the virtual asset.

• 3) provision of and (or) participation in the provision of financial services related to the initial placement and (or) sale of virtual assets of the issuer.

A bank carrying out activities for the provision of financial services related to the placement and (or) sale of virtual assets has the right to conclude transactions concerning the placement or sale of virtual assets on behalf of, at the expense of and in the interests of the issuer.

• 21. The conditions for the acquisition and transfer of rights to virtual assets may be expressed in accordance with smart contracts, pre-embedded algorithms and functions of distributed ledger technology and (or) similar technology within which they are created, stored and circulated, if this does not contradict the legislation of the Kyrgyz Republic.

• 22. The relationships of participants in the provision of services related to virtual assets are established in accordance with agreements concluded between the participants that do not contradict the legislation of the Kyrgyz Republic.

• 23. The bank is obliged to ensure a mechanism for storing and transferring a virtual asset in a virtual asset wallet in the bank's software application or another mechanism/media for storing and transferring a virtual asset.

• 24. Accounting of virtual assets must be maintained on special software allowing the accounting of virtual assets, while for accounting purposes it is necessary to take into account the nature of the operations carried out.

• 25. The bank is obliged to maintain separate records of virtual assets for each type (name) of virtual asset and holder of the virtual asset.

• 26. The bank must ensure the safekeeping of virtual assets transferred to it for storage by the holders of virtual assets.

• 27. When providing services related to virtual assets, the bank must comply with the requirements of the legislation of the Kyrgyz Republic in the field of combating terrorist financing and legalization (laundering) of criminal proceeds (hereinafter – CFT/AML).

• 28. The bank must ensure the confidentiality and storage of data on holders of virtual assets and conducted operations using virtual assets. Information on holders of virtual assets and their operations may be provided to third parties only in accordance with the legislation of the Kyrgyz Republic.

• 29. The bank must take all necessary measures to protect the database on virtual assets from unauthorized access.

• 30. The bank is responsible for the security and reliability of the provided services related to virtual assets.

• 31. The bank must have internal regulatory documents (regulation, policy, operational rules, procedure, etc.) governing the process of providing services for virtual assets, risk management, including information security, dispute resolution for erroneous or unauthorized operations, including in the part of CFT/AML, as well as ensure their compliance.

• 32. The bank must ensure quality management of risks related to their activities, which includes the distribution of responsibilities in the field of CFT/AML and the appointment of responsible employees from among the management responsible for ensuring compliance with established requirements; continuous training of employees; an internal independent audit service to verify the proper functioning of the system.

• 33. The bank is obliged to conduct proper customer due diligence in accordance with the legislation of the Kyrgyz Republic on CFT/AML.

• 34. The bank must keep up to date the documents, data or information obtained and collected in the process of proper customer due diligence in accordance with the period established in the legislation of the Kyrgyz Republic on CFT/AML.

• 35. The bank must keep records of operations and information obtained in the process of proper customer due diligence, containing at least:

  • the name of the sender (i.e., the client sending the transfer);

  • the sender's account number, if such an account was used in the operation process (for example, the identification number of the virtual asset wallet);

  • the physical (geographic) address of the sender or the client identification number, date and place of birth;

  • the name of the recipient;

  • the recipient's account number, if such an account was used in the operation process (for example, the identification number of the virtual asset wallet);

  • detailed information about individual operations.

• 36. The bank must provide to the National Bank information on the provided services related to virtual assets, no later than the 10th day of the month following the reporting month, in accordance with the form established in Appendix 1 of this Procedure.

• 37. In order to expand the range of provided services related to virtual assets, the bank has the right to engage as an agent only other VASP on the basis of a concluded agreement and in accordance with the legislation of the Kyrgyz Republic.

• 38. The National Bank, on the basis of regular reports, as well as during inspections, exercises control over compliance with the operational rules and requirements of this Procedure.

• 39. In case of revocation of the license or permitting documents for carrying out VASP activities, as well as voluntary termination of activity as a VASP, the bank must notify the National Bank thereof no later than 3 (three) working days from the moment of termination of activity as a VASP.

5. Basic requirements

for bank agents carrying out VASP activities

• 40. In order to expand public access to the provided services related to virtual assets, the bank has the right to engage as an agent legal entities carrying out activities as VASP, to provide on behalf of the bank only the following services:

  • 1) transfer of virtual assets;

  • 2) provision of financial services related to the initial placement and (or) sale of virtual assets of the issuer.

• 41. The agent on behalf of the bank has the right to provide only those services related to virtual assets that are provided for in the agreement with the bank, this Procedure and the legislation of the Kyrgyz Republic.

The agent is prohibited from providing services related to virtual assets that are not provided for by the agreement with the bank, this Procedure and the legislation of the Kyrgyz Republic.

• 42. The agent must have internal regulatory documents (regulation, policy, operational rules, procedure, etc.) governing the process of providing services for virtual assets, including risk management, including information security, dispute resolution for erroneous or unauthorized operations, as well as ensure their compliance.

• 43. The agent must ensure proper management of risks related to their activities, with a clear distribution of responsibilities in the field of CFT/AML and the appointment of responsible employees from among the management responsible for ensuring compliance with established requirements; continuous training of employees; an internal independent audit service to verify the proper functioning of the system.

• 44. The agent is obliged to conduct proper customer due diligence in accordance with the legislation of the Kyrgyz Republic on CFT/AML.

• 45. The agent is obliged to provide the bank with access to information on holders of virtual assets and operations in real time.

• 46. The agent must ensure the confidentiality and storage of data on holders of virtual assets and conducted operations using virtual assets. Information on holders of virtual assets and their operations may be provided to third parties only in accordance with the requirements of the legislation of the Kyrgyz Republic.

• 47. The agent must take all necessary measures to protect the virtual asset database from unauthorized access.

• 48. The agent is responsible for the security and reliability of the services provided related to virtual assets.

• 49. The bank bears responsibility for the services provided by agents related to virtual assets.

• 50. The bank must provide to the National Bank information about agents providing services related to virtual assets, no later than the 10th day of the month following the reporting month, in accordance with the form established in Appendix 2 of this Procedure.

6. Final provisions

• 51. A bank providing services related to virtual assets must exercise control over compliance by virtual asset holders and agents with the terms of the relevant contracts and the legislation of the Kyrgyz Republic.

• 52. Disputes arising in the sphere of virtual asset circulation shall be resolved in the manner established by the legislation of the Kyrgyz Republic.

Appendix 1
to the Procedure for the provision of services related to virtual assets

REPORT

on the activity of the bank in the provision of services related to virtual assets

Name of the bank

Reporting period: (DD.MM.YYYY)

Name of the virtual asset

Number of virtual asset wallets

Volume of virtual assets

(number of tokens)

Volume of transfers carried out using virtual assets

Volume of operations related to the primary placement and (or) sale of virtual assets of the issuer

Total

Appendix 2

to the Procedure for the provision of services related to virtual assets

REPORT

on the activity of the bank's agent in the provision of services related to virtual assets

Name of the bank's agent

Reporting period: (DD.MM.YYYY)

Name of the agent

Name of the virtual asset

Number of virtual asset wallets

Volume of virtual assets (number of tokens)

Volume of transfers carried out using virtual assets

Volume of operations related to the primary placement and (or) sale of virtual assets of the issuer

Total