Financial Crime World

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Virtual Assets: The Rapidly Evolving Landscape and Regulatory Framework

Papua New Guinea’s (PNG) financial landscape is increasingly intertwined with the rapidly growing world of virtual assets. As a global community, PNG cannot remain immune to the risks posed by these digital currencies and platforms.

Lack of Domiciled VASPs and Merchants in PNG

Unlike other jurisdictions, PNG does not have any domiciled Virtual Asset Service Providers (VASPs) or merchants operating within its borders. This lack of presence may seem trivial, but it highlights the country’s vulnerability to money laundering and terrorist financing (ML/TF) risks posed by virtual assets.

Bank of PNG’s Public Statements

In a public statement, the Bank of Papua New Guinea warned citizens against investing in cryptocurrencies, terming them as “very risky and speculative.” The central bank has also been researching the potential use of blockchain technology to promote financial inclusion. However, this does not imply endorsement or recognition of virtual assets as a legitimate form of currency.

Local Commercial Banks’ Position

Domestic commercial banks in PNG are cautious about their involvement with cryptocurrencies. BSP Financial Group Limited (BSP) and Kina Bank Limited have publicly stated that they will no longer allow VISA cardholders to perform transactions using their cards for cryptocurrency-related activities due to concerns over data authenticity and access.

Virtual Asset Trading Platforms

The survey identified various channels/platforms used globally for virtual asset trading. However, none of these platforms is domiciled in PNG. This raises uncertainties about how PNG nationals may be accessing these online platforms to trade with virtual assets. The medium risk of ML/TF remains due to the lack of cases and consequences.

Survey Findings

The survey results indicate a zero or minimal presence of virtual assets and VASPs in PNG. Key findings include:

  • 96% of respondents reported no VASP customers
  • All respondents confirmed they do not provide exchange services for virtual assets
  • 96% of respondents have not identified any customers using virtual assets
  • 98% of respondents stated their business does not make virtual assets accessible to customers
  • 94% of respondents were unaware of any ML/TF events involving virtual assets in PNG

Conclusion

The survey suggests a low risk of ML/TF relating to VA/VASPs in PNG, with none of the respondents providing exchange services or making virtual assets accessible. However, this does not imply complacency. As the regulatory framework continues to evolve rapidly, it is essential for PNG authorities to remain vigilant and proactive in addressing the risks posed by virtual assets.

Recommendations

  1. Establish a clear regulatory framework governing virtual asset trading and VASPs
  2. Conduct regular monitoring and surveillance of online platforms used for virtual asset trading
  3. Enhance public awareness campaigns to educate citizens about the risks associated with virtual assets
  4. Collaborate with international organizations and neighboring countries to share best practices and address common challenges

By staying ahead of the curve, PNG can ensure a safe and secure financial landscape for its citizens while also reaping the benefits of innovation and technological advancements in the digital age.