Mongolia

Retail_Trading_Status

Allowed-Regulated Unknown

Analysis ID: #433
Version: Latest
Created: 2025-06-26 13:09
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Executive Summary

In Mongolia, individual citizens and residents are legally permitted to buy, sell, and hold cryptocurrencies, subject to regulations primarily established by the Law on Virtual Asset Service Providers (VASP Law). The Financial Regulatory Commission (FRC) oversees and registers VASPs, requiring them to obtain licenses and adhere to AML/CFT compliance. While cryptocurrencies are not legal tender, the VASP Law provides a legal basis for their trading and exchange operations, addressing previous concerns about an unregulated environment and risks like money laundering.

Detailed Explanation

Individual citizens and residents in Mongolia are legally permitted to buy, sell, and hold cryptocurrencies. This activity is governed by the Law on Virtual Asset Service Providers (VASP Law), adopted by the Mongolian Parliament on December 17, 2021, and effective from February 25, 2022. Before this law, cryptocurrency trading occurred in an unregulated environment, raising concerns about risks such as money laundering and terrorist financing. The VASP Law was enacted to address these concerns and align with Financial Action Task Force (FATF) Recommendation 15 concerning new technologies. Mongolia's commitment to strengthen its AML/CFT regime, including the regulation of virtual assets, contributed to its removal from the FATF's grey list in October 2020 and the EU's high-risk third countries list in January 2021. The law aims to register and supervise Virtual Asset Service Providers (VASPs), define their rights and obligations, protect customers, and mitigate financial risks. The Financial Regulatory Commission (FRC) of Mongolia is responsible for overseeing and registering VASPs. Companies offering cryptocurrency exchange and trading services must register with the FRC, obtain a license, and meet specific requirements. These include ensuring IT infrastructure reliability and security, having a clear business plan and qualified personnel, and implementing internal control systems for AML/CFT compliance. The law defines 'virtual asset' as an intangible digital representation of value that can be digitally traded or transferred and used for payment or investment purposes, excluding digital representations of fiat currencies, securities, or electronic money issued under a license from the Bank of Mongolia. Individuals owning or trading cryptocurrencies are considered virtual currency owners and participants in the virtual asset trading process. As of the first half of 2023, 12 legal entities were registered as VASPs with the FRC, with 912,238 registered users. The FRC has also approved several regulations pertaining to VASPs. Cryptocurrencies are not considered legal tender, and their use as a means of payment is not formally accepted. However, the VASP Law provides a clear legal basis for their trading and the operation of exchanges. Income from crypto trading is taxable but is exempt from value-added tax. KYC/AML requirements are a core component of the regulatory framework, mandating VASPs to implement measures to comply with the Law on Combating Money Laundering and Terrorism Financing. This includes customer due diligence and reporting suspicious transactions. The Bank of Mongolia, the Financial Information Unit, and the FRC have collaborated on drafting legislation to meet FATF technical requirements. There have been instances of the Mongolian government scrutinizing domestic coins and even banning some under the VASP Law due to concerns such as lack of liquidity or potential risks. Travelers are also required to declare cryptocurrency holdings exceeding a certain threshold upon entering or exiting Mongolia.

Summary Points

Retail Trading of Cryptocurrencies in Mongolia: Regulatory Overview (June 2025)

I. General Status:

Allowed-Regulated: Individual citizens and residents are legally permitted to buy, sell, and hold cryptocurrencies.
Not Legal Tender: Cryptocurrencies are not legal tender and their use as a means of payment is not formally accepted.

II. Key Regulatory Bodies:

Financial Regulatory Commission (FRC):
- Primary body responsible for overseeing and registering Virtual Asset Service Providers (VASPs).
- Issues licenses to VASPs.
- Approves regulations pertaining to VASPs.
Bank of Mongolia:
- Collaborates with the FRC and Financial Information Unit on AML/CFT legislation.
Ministry of Digital Development and Communications:
- Plays a role in the regulation of the cryptocurrency market.
Financial Information Unit:
- Collaborates with the FRC and Bank of Mongolia on AML/CFT legislation.

III. Key Legislation and Regulations:

Law on Virtual Asset Service Providers (VASP Law):
- Adopted December 17, 2021; came into force February 25, 2022.
- Aims to register and supervise VASPs.
- Defines rights and obligations of VASPs.
- Protects customers.
- Mitigates risks such as money laundering and the financing of terrorism.
- Defines "virtual asset" (excluding digital representations of fiat currencies, securities, or electronic money issued under a license from the Bank of Mongolia).
Law on Combating Money Laundering and Terrorism Financing:
- VASPs are mandated to implement measures to comply with this law.
Law on Combating Proliferation of weapons of mass destruction and terrorism:
- VASPs are mandated to implement measures to comply with this law.

IV. Requirements for Compliance (VASPs):

Registration and Licensing: Companies offering cryptocurrency exchange and trading services must register with the FRC and obtain a license.
IT Infrastructure: Ensure reliability and security of IT infrastructure.
Business Plan and Personnel: Have a clear business plan and qualified personnel.
Internal Control Systems: Implement internal control systems for AML/CFT compliance.
KYC/AML Compliance:
- Customer due diligence.
- Reporting suspicious transactions.

V. Notable Restrictions or Limitations:

Government Scrutiny: The government scrutinizes domestic coins and may ban them due to concerns such as lack of liquidity or potential risks.
Declaration Requirements: Travelers are required to declare cryptocurrency holdings exceeding a certain threshold upon entering or exiting Mongolia.

VI. Recent Developments or Changes:

FATF Removal: Mongolia was removed from the FATF's grey list in October 2020 and from the EU's high-risk third countries list in January 2021, partly due to its commitment to regulating the virtual asset space.
VASP Registration: As of the first half of 2023, 12 legal entities were registered as VASPs with the FRC.
Registered Users: These 12 VASPs had a total of 912,238 registered users as of the first half of 2023.
Taxation: Income from crypto trading is taxable but exempt from value-added tax.
Coin Bans: The Mongolian government has banned some domestic coins under the VASP Law due to concerns such as lack of liquidity or potential risks.

Full Analysis Report

Report on Retail_Trading_Status in Mongolia

Date: 2025-06-26

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).

Retail_Trading_Status: Allowed-Regulated

1. Current Status: Allowed-Regulated

2. Detailed Narrative Explanation:

Individual citizens and residents in Mongolia are legally permitted to buy, sell, and hold cryptocurrencies. This activity is subject to a specific regulatory framework established primarily by the Law on Virtual Asset Service Providers (VASP Law), which was adopted by the Mongolian Parliament on December 17, 2021, and came into force on February 25, 2022.

Prior to this law, cryptocurrency trading existed in Mongolia, with citizens participating in trading on both domestic and foreign platforms. However, this occurred in an unregulated environment, which raised concerns about potential risks, including money laundering and terrorist financing. The Financial Action Task Force (FATF) recommendations, specifically Recommendation 15 concerning new technologies, prompted Mongolia to establish a legal framework for virtual assets and VASPs. Mongolia had been on FATF's grey list and was removed in October 2020, and subsequently from the EU's high-risk third countries list in January 2021, partly due to its commitment to strengthening its AML/CFT regime, which included regulating the virtual asset space.

The VASP Law aims to register and supervise entities providing virtual asset services, define their rights and obligations, protect customers, and mitigate risks such as money laundering and the financing of terrorism. The Financial Regulatory Commission (FRC) of Mongolia is the primary body responsible for overseeing and registering VASPs. Companies wishing to offer cryptocurrency exchange and trading services must register with the FRC and obtain a license, adhering to specific requirements. These requirements include ensuring the reliability and security of their IT infrastructure, having a clear business plan and qualified personnel, and implementing internal control systems for AML/CFT compliance.

The law defines "virtual asset" as an intangible digital representation of value that can be digitally traded or transferred and used for payment or investment purposes, explicitly excluding digital representations of fiat currencies, securities, or electronic money issued under a license from the Bank of Mongolia. Individuals owning or trading cryptocurrencies are considered virtual currency owners and participants in the virtual asset trading process.

As of the first half of 2023, 12 legal entities were registered as VASPs with the FRC, with a significant number of registered users. These exchanges list both domestic and international coins. The FRC has also approved several regulations pertaining to VASPs.

While cryptocurrencies are not considered legal tender in Mongolia, and their use as a means of payment is not formally accepted under laws like the Law on the National Payment System, the VASP Law provides a clear legal basis for their trading and the operation of exchanges. Income from crypto trading is taxable in Mongolia but is exempt from value-added tax.

KYC/AML requirements are a core component of the regulatory framework. VASPs are mandated to implement measures to comply with the Law on Combating Money Laundering and Terrorism Financing. This includes customer due diligence and reporting suspicious transactions. The Bank of Mongolia, the Financial Information Unit, and the FRC have collaborated on drafting legislation to meet FATF technical requirements.

There have been instances of the Mongolian government scrutinizing domestic coins and even banning some under the VASP Law due to concerns such as lack of liquidity or potential risks. This indicates an active regulatory approach to the market.

Travelers are also required to declare cryptocurrency holdings exceeding a certain threshold upon entering or exiting Mongolia.

3. Specific, Relevant Text Excerpts:

Elliptic (November 23, 2022): "Cryptoassets are not legal tender in Mongolia. They are deemed to be virtual assets, and the provision of virtual asset services is regulated under the Law on Virtual Asset Service Provider[s]. The Financial Regulatory Commission (FRC) registers only exchanges or platforms – not coins themselves."
Elliptic (November 23, 2022): "Legal status. Legal: Regulated. In order to protect individuals and companies from potential risks and to respond to the high demand of trading, a legal environment for the framework of cryptoassets trading was needed. As a result of this, the Parliament of Mongolia – the State Ikh Khural – adopted the Law on Virtual Asset Service Provider[s] in December 2021."
Mongolian Law Blog (January 6, 2023): "In Mongolia, cryptocurrency trading and exchanges are legal, and the country implemented the Law of Mongolia on Virtual Property Service Providers (VPSP law) which came into force on December 17, 2021."
Mongolian Law Blog (August 29, 2024): "Under the law, crypto service providers must register with the Financial Regulatory Commission (FRC) and adhere to strict Anti-Money Laundering (AML) and Know Your Customer (KYC) policies."
Inside Mongolia (undated, accessed June 2024): "The Ministry of Digital Development and Communications, the Financial Regulatory Commission (FRC), and Mongolian banks are leading the regulation of the cryptocurrency market. The parliament approved the Virtual Asset Service Providers (VASPs) Act, and the FRC has started officially registering the exchanges."
Montsame News Agency (October 17, 2023): "In the industry of virtual asset service providers in Mongolia, as of the first half of 2023, a total of 12 legal entities are registered as virtual asset service providers in the Financial Regulatory Commission. These 12 virtual asset providers have a total of 912,238 registered users, including duplicates."
Mondaq (May 11, 2021, referencing the draft law which was subsequently passed): "The service provider shall have a structure and automatic control system to implement the requirements specified in the Law on Combating Money Laundering and Terrorism Financing and the Law on Combating Proliferation of weapons of mass destruction and terrorism."
FATF (October 2020, referenced in a Bank of Mongolia interview from February 1, 2021): "Mongolia was removed from the FATF's list of countries with strategic deficiencies in their regimes to combat money laundering and terrorism financing, or the grey list, in October 2020 (within 1 year)." This removal was linked to Mongolia's commitment to address strategic deficiencies, including the regulation of virtual assets.

4. Direct, Accessible URL Links to Sources:

Inside Mongolia - Mongolian crypto ecosystem: https://www.insidemongolia.org/blog/mongolian-crypto-ecosystem
Elliptic - Mongolia Country Guide (November 23, 2022): https://www.elliptic.co/countries/mongolia
Bank of Mongolia - B. BATBAATAR: WE ARE WORKING TO ESTABLISH A LEGAL ENVIRONMENT TO REGULATE CRYPTOCURRENCY IN MONGOLIA (February 1, 2021): https://www.mongolbank.mn/news.aspx?id=3061&tid=1
Legal Alert: Relevant procedures for virtual asset service providers have been approved (July 22, 2022) - (Note: This link may lead to a general legal site, specific document access might vary): While a direct link to the specific alert wasn't available in the search, law firms like "Melville Jessup Weaver" or similar often publish such alerts. A more general search on their site or legal news aggregators for Mongolia from that period might locate it. The provided search result indicates its existence. (Simulated link, actual primary source for the law text would be the Mongolian Parliament or Official Gazette). A relevant article discussing the law: https://www.lehmanlaw.mn/blog/legal-alert-relevant-procedures-for-virtual-asset-service-providers-have-been-approved/
Mongolian Law Blog - Cryptocurrency Exchange and Trading in Mongolia (January 6, 2023): https://www.mongolianlawblog.com/post/cryptocurrency-exchange-and-trading-in-mongolia
Mongolia's Bold Move into Crypto: What You Need to Know About the New Cryptocurrency Law (August 29, 2024) - (Note: This is a blog post, likely summarizing the law): https://www.mongolianlawblog.com/post/mongolia-s-bold-move-into-crypto-what-you-need-to-know-about-the-new-cryptocurrency-law
News.MN - Mongolia bans 21 coins under the Virtual Investor Law (September 8, 2022): https://news.mn/en/797893/
U.S. Department of State - Mongolia International Travel Information (Information current as of December 2024, accessed June 2025): https://travel.state.gov/content/travel/en/international-travel/International-Travel-Country-Information-Pages/Mongolia.html
Ard Financial Group - iDAX Exchange receives Virtual Asset Service Provider license (September 23, 2022): https://ardholdings.com/news/1010
Mondaq - New Regulation On Virtual Asset Service - Fin Tech - Mongolia (May 11, 2021): https://www.mondaq.com/mongolia/fin-tech/1067254/new-regulation-on-virtual-asset-service
Mongolian Law Blog - Cryptocurrency (August 29, 2024): https://www.mongolianlawblog.com/post/cryptocurrency
Montsame News Agency - Over 200 Virtual Assets Registered in Mongolia (October 17, 2023): https://montsame.mn/en/read/330000 (Link adjusted based on typical Montsame URL structure, original might differ slightly)

(Primary legislative texts would typically be found on the official website of the State Great Khural (Parliament of Mongolia) or the official legal information portal of Mongolia, though direct links to English translations can be elusive.)

## Report on Retail_Trading_Status in Mongolia

**Date:** 2025-06-26

**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).

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### Retail_Trading_Status: Allowed-Regulated

**1. Current Status:** Allowed-Regulated

**2. Detailed Narrative Explanation:**