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Faroe Islands

Retail_Trading_Status

Allowed-Regulated Unknown
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Analysis ID
#203
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Archived
Created
2025-04-12 06:55
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Live

Executive Summary

Retail cryptocurrency trading is permitted in the Faroe Islands, operating under Danish AML/CFT regulations enforced by the Danish Financial Supervisory Authority (Finanstilsynet). Key legislation includes the Danish Act on Measures to Prevent Money Laundering and Terrorist Financing (Hvidvaskloven), implementing EU AML directives. While individuals are permitted to trade, VASPs are regulated, requiring registration with Finanstilsynet and adherence to KYC/AML procedures. The region is awaiting further regulatory clarity with the upcoming EU Markets in Crypto-Assets (MiCA) regulation.

Key Pillars

  • Primary Regulator: The Danish Financial Supervisory Authority (Finanstilsynet) is the primary regulator, responsible for supervising financial institutions, including VASPs, under the Danish AML Act.
  • AML/CFT Compliance: VASPs are required to register with Finanstilsynet and implement robust AML/CFT procedures, including Know Your Customer (KYC) checks, customer due diligence (CDD), transaction monitoring, and reporting of suspicious activities.
  • Licensing/Registration: While individuals do not need a license to trade crypto, the platforms (VASPs) they use are required to register with the Danish Financial Supervisory Authority.

Landmark Laws

  • Act on Measures to Prevent Money Laundering and Terrorist Financing (Hvidvaskloven)
  • Date of Issue: June 8, 2017 (lov nr. 651 af 8. juni 2017)
  • Summary: Implements EU Anti-Money Laundering Directives and requires VASPs to adhere to AML/CFT procedures.
  • Royal Decree putting Danish AML Act into force for Faroe Islands
  • Date of Issue: 2019
  • Summary: Extends the application of the Danish Act on Measures to Prevent Money Laundering and Terrorist Financing to the Faroe Islands.

Considerations

  • Cryptocurrency investments are considered high-risk, and the Danish Financial Supervisory Authority has issued warnings about their volatility and potential for illicit use.
  • Some local banks might impose restrictions on crypto-related transactions.
  • There are potential vulnerabilities or delays in the full implementation or enforcement of the Danish AML Act in the Faroe Islands compared to mainland Denmark.

Notes

  • The Faroe Islands operate under Danish law concerning financial regulation unless specifically handled differently by Faroese authorities.
  • Some sources note potential vulnerabilities or delays in the full implementation or enforcement of the Danish AML Act in the Faroe Islands compared to mainland Denmark.
  • The upcoming EU Markets in Crypto-Assets (MiCA) regulation is expected to further harmonize and strengthen the regulatory landscape.
  • Landsbanki Føroya is the Central Bank of the Faroe Islands.

Detailed Explanation

Retail cryptocurrency trading is permitted in the Faroe Islands, operating under the regulatory umbrella of Danish law due to the Faroe Islands' status as a self-governing territory within the Kingdom of Denmark. There are no specific Faroese laws banning individuals from buying, selling, or holding cryptocurrencies. The primary regulatory framework stems from the Danish Act on Measures to Prevent Money Laundering and Terrorist Financing (Hvidvaskloven), which implements EU Anti-Money Laundering Directives, including AMLD5 and AMLD6. This act is applied to the Faroe Islands via Royal Decree, such as the 2019 decree putting the Danish AML Act into force for the Faroe Islands. Virtual Asset Service Providers (VASPs), including cryptocurrency exchanges and custodian wallet providers, operating or serving clients within the Kingdom of Denmark (inclusive of the Faroe Islands) are subject to regulation. They must register with the Danish Financial Supervisory Authority (Finanstilsynet) and implement robust AML/CFT procedures like KYC, CDD, transaction monitoring, and suspicious activity reporting. Finanstilsynet is the main supervisory body for financial institutions, including VASPs, under the Danish AML Act, extending its supervision to the Faroe Islands for AML/CFT oversight. While the legal framework applies, some sources indicate potential vulnerabilities or delays in the full implementation or enforcement of the Danish AML Act in the Faroe Islands. The Danish authorities, including Finanstilsynet, have issued risk warnings regarding the high risks associated with crypto investments, citing volatility and the potential for illicit use. Several international cryptocurrency exchanges list the Faroe Islands as a supported country, allowing residents to sign up, complete KYC, and trade cryptocurrencies using methods like bank transfers or credit cards; however, some local banks may impose restrictions on crypto-related transactions. The upcoming EU Markets in Crypto-Assets (MiCA) regulation, once fully implemented across the EU and potentially adopted by Denmark, is expected to further harmonize and strengthen the regulatory landscape.

Summary Points

Here's a bullet-point summary of the retail cryptocurrency trading status in the Faroe Islands, designed for quick comprehension:

Retail Cryptocurrency Trading in the Faroe Islands: Regulatory Overview

I. Regulatory Status:

  • Allowed-Regulated: Retail cryptocurrency trading (buying, selling, and holding) is permitted for individuals in the Faroe Islands.
  • No Specific Ban: There is no specific Faroese legislation prohibiting individual crypto trading.

II. Key Regulatory Bodies & Roles:

  • Danish Financial Supervisory Authority (Finanstilsynet):
    • Primary supervisory body for financial institutions, including Virtual Asset Service Providers (VASPs).
    • Responsible for AML/CFT oversight, extending to the Faroe Islands.
    • Issues risk warnings about cryptocurrency investments.
  • Landsbanki Føroya (Central Bank of the Faroe Islands):
    • Primary source for Faroese financial stability information.
  • Faroese Authorities:
    • Supervise pension funds and life insurance companies in the Faroe Islands.

III. Important Legislation & Regulations:

  • Danish AML Act (Hvidvaskloven):
    • Key legislation governing AML/CFT, implemented in the Faroe Islands via Royal Decree.
    • Implements EU Anti-Money Laundering Directives (AMLD5, AMLD6).
  • Royal Decree (2019):
    • Specifically puts the Danish AML Act into force for the Faroe Islands.
  • EU Markets in Crypto-Assets (MiCA) Regulation (Future):
    • Expected to further harmonize and strengthen the regulatory landscape once implemented across the EU and potentially adopted by Denmark.

IV. Requirements for Compliance (Primarily for VASPs):

  • Registration: VASPs operating or serving clients in the Kingdom of Denmark (including the Faroe Islands) are typically required to register with Finanstilsynet.
  • AML/CFT Procedures: VASPs must implement robust AML/CFT procedures, including:
    • Know Your Customer (KYC) checks
    • Customer Due Diligence (CDD)
    • Transaction monitoring
    • Reporting of suspicious activities

V. Notable Restrictions or Limitations:

  • Bank Restrictions: Some local banks might impose restrictions on crypto-related transactions.
  • Risk Warnings: Finanstilsynet has issued warnings about the high risks associated with investing in cryptocurrencies (volatility, potential for illicit use).
  • Potential Implementation Gaps: Some sources note potential vulnerabilities or delays in the full implementation or enforcement of the Danish AML Act in the Faroe Islands compared to mainland Denmark.

VI. Recent Developments or Changes:

  • Application of Danish AML Act: The Danish AML Act applies to the Faroe Islands through Royal Decree.
  • Future MiCA Implementation: The upcoming EU Markets in Crypto-Assets (MiCA) regulation is expected to impact the regulatory landscape.

VII. Relevant Links:

Full Analysis Report

Okay, here is the comprehensive report on the current status of retail cryptocurrency trading in the Faroe Islands.

Report on Retail Cryptocurrency Trading Status in the Faroe Islands

Topic: Retail_Trading_Status
Description: Assess whether individual citizens and residents in the country are legally permitted to buy, sell, and hold cryptocurrencies. Detail the regulatory environment surrounding this activity (e.g., KYC/AML requirements imposed on platforms, general warnings issued).

1. Current Status: Allowed-Regulated

2. Detailed Narrative Explanation:

Individual citizens and residents in the Faroe Islands are generally permitted to buy, sell, and hold cryptocurrencies. There is no specific legislation in the Faroe Islands banning this activity for individuals. However, the regulatory environment is shaped by the Faroe Islands' status as a self-governing territory within the Kingdom of Denmark and the application of Danish financial regulations, particularly concerning Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT).

  • Legal Framework: The Faroe Islands generally operate under Danish law concerning financial regulation unless specific areas are devolved or handled differently by Faroese authorities. Key Danish legislation, such as the Act on Measures to Prevent Money Laundering and Terrorist Financing (Hvidvaskloven), which implements the EU's Anti-Money Laundering Directives (including AMLD5 and subsequent amendments like AMLD6), has been put into effect in the Faroe Islands via Royal Decree.
  • AML/CFT Regulation: Under this framework, entities providing services related to virtual currencies, known as Virtual Asset Service Providers (VASPs), are subject to regulation. This includes cryptocurrency exchanges and custodian wallet providers. These entities, if operating or serving clients within the Kingdom of Denmark (which includes the Faroe Islands), are typically required to register with the Danish Financial Supervisory Authority (Finanstilsynet) and implement robust AML/CFT procedures. These procedures mandate Know Your Customer (KYC) checks, customer due diligence (CDD), transaction monitoring, and reporting of suspicious activities. While individuals themselves don't need a license to trade crypto, the platforms they use are regulated, creating a regulated environment for the activity.
  • Supervisory Authority: The Danish Financial Supervisory Authority (Finanstilsynet) is the primary body responsible for supervising financial institutions, including VASPs, under the Danish AML Act. Its supervisory scope extends to the Faroe Islands for many financial activities, including AML/CFT oversight for relevant entities. Some sources note potential vulnerabilities or delays in the full implementation or enforcement of the Danish AML Act in the Faroe Islands compared to mainland Denmark, but the legal framework itself applies.
  • Risk Warnings: While trading is allowed, Danish authorities, including Finanstilsynet, have issued warnings about the high risks associated with investing in cryptocurrencies, advising caution due to volatility and potential for illicit use.
  • Practical Situation: Several international cryptocurrency exchanges list the Faroe Islands as a supported country, allowing residents to sign up, undergo KYC verification, and trade cryptocurrencies using methods like bank transfers or credit cards, although some local banks might impose restrictions on crypto-related transactions.

In summary, retail crypto trading is permitted in the Faroe Islands. It is not unregulated; rather, it falls under the Danish AML/CFT regulatory framework applicable within the Kingdom, primarily imposing obligations on the service providers facilitating these transactions. The upcoming EU Markets in Crypto-Assets (MiCA) regulation, once fully implemented across the EU and potentially adopted within the Kingdom of Denmark, is expected to further harmonize and strengthen the regulatory landscape.

3. Relevant Text Excerpts:

  • On Legality and Availability:

    • "Yes, buying Bitcoin is legal in Faroe Islands. You can safely buy and sell cryptocurrency using a Faroese crypto exchange... Most people, on most exchanges, [need ID]" (Invezz)
    • "Bitcoin is legal in the Faroe Islands and can be used to purchase goods and services... There is no specific regulation regarding Bitcoin in the Faroe Islands. However, the Danish Financial Supervisory Authority has issued a warning that Bitcoin investments are risky and advised caution when investing." (SMEStreet)
    • "Bitget is legally accessible in Faroe Islands. You can buy Bitcoin in Faroe Islands through Bitget." (Bitget Guide)

  • On Regulation and AML/CFT:

    • "In medfør af § 85 i lov nr. 651 af 8. juni 2017 om forebyggende foranstaltninger mod hvidvask og finansiering af terrorisme (hvidvaskloven)... bestemmes, at lov om forebyggende foranstaltninger mod hvidvask og finansiering af terrorisme skal gælde for Færøerne i følgende affattelse:" [Pursuant to § 85 of Act No. 651 of 8 June 2017 on preventive measures against money laundering and financing of terrorism (the Money Laundering Act)... it is determined that the Act on preventive measures against money laundering and financing of terrorism shall apply to the Faroe Islands in the following version:] (Finanstilsynet - Royal Decree putting Danish AML Act into force for Faroe Islands, 2019)
    • "The Danish Financial Supervisory Authority exercises money laundering and terrorist financing supervision of providers of virtual wallets and currency exchange..." (Politiets Efterretningstjeneste - Danish Security and Intelligence Service, referring to Danish AML Act application)
    • "...vulnerabilities relating to... the delayed implementation of the Danish Anti-Money Laundering Act are particularly relevant [in the Faroe Islands]..." (Politiets Efterretningstjeneste - noting potential implementation gaps despite legal applicability)
    • "Finanstilsynet fører også tilsyn med finansielle virksomheder i Grønland og på Færøerne, bortset fra pensionskasser og livsforsikringsselskaber på Færøerne, der er under tilsyn fra færøske myndigheder." [The Danish FSA also supervises financial companies in Greenland and the Faroe Islands, except for pension funds and life insurance companies in the Faroe Islands, which are supervised by Faroese authorities.] (Danish Ministry of Justice - National AML/CFT Strategy 2022-2025)
    • "Across the European Union, crypto regulations are currently governed by the 5th Anti-Money Laundering Directive, which brought crypto-to-fiat exchanges and custodial wallets into scope... Since Denmark is a member of the European Union, it is bound by the EU's Anti-Money Laundering Regulations." (ComplyAdvantage / Freeman Law - explaining the EU/Danish AML context)

  • On Future Regulation (MiCA):

    • "However, this will change when the new EU Markets in Crypto-Assets Regulation (MiCA) has been implemented. This will enable the Danish Financial Supervisory Authority to perform financial [supervision]." (Politiets Efterretningstjeneste)

4. Direct URL Links:

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