On May 17, 2021 Law 1072 “Law of Amendments and Additions to Law No. 977, Law Against Money Laundering, Financing of Terrorism and Financing of the Proliferation of Weapons of Mass Destruction and addition to Law No. 561 General Law of Banks, Non-Banking Financial Institutions and Financial Groups” (hereinafter the “Law”) entered into force in Nicaragua. In addition to including modifications in some matters related to money laundering prevention regulations, it introduced a very important concept with the addition of the term “virtual assets” which the Law defines as: “a digital representation of value that can be traded or transferred digitally and can be used for payments or investments. Virtual assets do not include digital representations of fiat currency, securities and other financial assets.”
Through this reform, powers are granted to the Central Bank of Nicaragua (BCN) to regulate the commercial activity and the authorization of licenses and registration of operation of virtual asset service providers (VASPs), specifically to approve the provisions deemed necessary to regulate the authorization and operations of providers and keep a registry of these; authorize, modify, restrict, extend, suspend or cancel the licenses or registrations of operations of VASPs and establish other provisions applicable to these; maintain and publish on its official website the respective updated official list of the providers whose operating license or registration has been authorized or cancelled; and take the necessary actions to identify and sanction, as appropriate, the persons who are carrying out activities as PSAV and fail to comply with their obligations and require their registration and license in the corresponding cases.
The amendment also modifies Law No. 561, General Law of Banks, Non-Banking Financial Institutions and Financial Groups and adds the power for banks to provide virtual asset services. Financial institutions that are duly authorized to operate as such and that among their operations are authorized to provide virtual asset services, may offer such services without the need to obtain an operating license to be a provider of such services. However, they must register with the BCN by presenting the respective resolution issued by its supervisory authority and must comply with the rest of the provisions applicable to them under the Law and those issued by the BCN.
The powers granted to the BCN in this Law are complemented by the Regulation of Financial Technology Providers of Payment Services, which came into force on September 28, 2020 through Resolution CD-BCN-XLIV-1-20 issued by the Board of Directors of the Central Bank of Nicaragua, since some of the means of payment used through financial technology are virtual assets, such as electronic money and virtual currencies.
Finally, this reform includes Virtual Asset Service Providers as regulated entities supervised by the Financial Analysis Unit (UAF) and therefore, in addition to the authorization of the BCN, they must obtain their registration with the UAF.