Mongolia was released from the “Grey list” of the Financial Action Task Force (FATF) in 2020. In accordance with the FATF Recommendation 15, there is a need to regulate monitoring activities in order to ensure registration of actions related to the virtual assets and to counter money laundering and financing of terrorism. Therefore, it is working with relevant authorities to develop a draft law to regulate the operation of virtual assets in pursuant with the FAFT recommendation and submit it the Parliament of Mongolia.
Virtual asset service is a technology-based constantly renewing activity. Thus, in the first phase, the draft law provides registration of virtual asset service providers operating in Mongolia and control of their operations within the framework of counter money laundering and financing of terrorism.
However, the law does not regulate protection of customers rights, cyber security and other potential risks. Therefore, the citizens are advised to sell, buy, invest or trade virtual assets such as domestic and international cryptocurrencies and tokens based on receipt of sufficient information about potential risks when involved in virtual asset services.
Since it is highly risky due to dramatic fluctuation of the value of virtual assets depending on international standards, domestic legislation and demand of market participants, the citizens can lose or suffer from loss of all of their investments.
While, the “electronic money” specified in the Law on the National Payment system is a payment instrument, which is equally valued as tugriks, cashed back and approved by the Mongol bank. Its operation is regulated by the Law on the National Payment System and the “Regulation on electronic money” issued by the Mongol Bank and it is possible for a legal entity that satisfies the corresponding requirements to issue “electronic money” upon obtaining permission.
Please note that the virtual assets such as cryptocurrencies and tokens do not have characteristics of “electronic money”, so they are not subject to the supervision and regulation of the Mongol Bank and their legal environment is uncertain.