Mongolia

Retail_Trading_Status

Allowed-Regulated High Confidence

Analysis ID: #732
Version: Latest
Created: 2025-12-12 04:53
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Executive Summary

Retail cryptocurrency trading is legal and formally regulated in Mongolia under the Law on Virtual Asset Service Providers (VASP Law), enacted in December 2021. The Financial Regulatory Commission (FRC) serves as the primary regulator, overseeing the registration and supervision of crypto exchanges and wallet providers. While cryptocurrencies are not recognized as legal tender by the Bank of Mongolia, the regulatory framework mandates strict AML/KYC compliance for service providers and explicitly permits the operation of registered domestic exchanges.

Detailed Explanation

Retail cryptocurrency trading is legal and formally regulated in Mongolia. The foundational legal framework is the Law on Virtual Asset Service Providers (VASP Law), enacted on December 17, 2021, which explicitly legalizes and regulates the industry. This law defines virtual assets and the scope of regulated services, establishing the Financial Regulatory Commission (FRC) as the primary regulator responsible for registering and supervising all Virtual Asset Service Providers (VASPs), including exchanges and wallet providers. The regulatory environment is further shaped by amendments to the Law on Anti-Money Laundering and Combatting the Financing of Terrorism (AML/CFT Law) from May 31, 2013, which designates VASPs as reporting entities, mandating strict customer due diligence and suspicious transaction reporting to the Financial Information Unit. The Bank of Mongolia, the central bank, clarifies that cryptocurrencies are not recognized as legal tender and cannot be used for payments, though it oversees broader payment system implications. For a VASP to operate legally, it must complete registration with the FRC and meet minimum share capital requirements set by the regulator. The tax framework, established through amendments to tax legislation, stipulates that income from virtual asset trading is subject to Personal Income Tax, while services related to virtual asset transfers are exempt from Value Added Tax. This comprehensive regulatory approach is driven by Mongolia's commitment to comply with international standards set by the Financial Action Task Force (FATF). While the framework provides a clear, regulated path for domestic exchanges like Trade.mn and DAX, Mongolian residents also access international platforms, which operate outside the local consumer protection and regulatory umbrella. The issuance of independent coins without FRC approval is restricted, and certain speculative coins have faced bans, though cryptocurrency mining is a legal and recognized activity subject to its own energy usage regulations.

Summary Points

I. Regulatory Status
* Retail cryptocurrency trading is Allowed-Regulated in Mongolia.
* The activity is legal under a formal regulatory framework established by the Law on Virtual Asset Service Providers (VASP Law).
* Cryptocurrencies are not recognized as legal tender by the Bank of Mongolia.

II. Key Regulatory Bodies
* Financial Regulatory Commission (FRC): The primary regulator for the crypto industry, responsible for registering and supervising Virtual Asset Service Providers (VASPs).
* Bank of Mongolia: The central bank issues warnings on volatility, clarifies the non-legal tender status of crypto, and oversees payment system implications.
* Financial Information Unit (FIU): Receives suspicious transaction reports from VASPs under AML/CFT obligations.

III. Important Legislation
* Law on Virtual Asset Service Providers (VASP Law): Enacted on December 17, 2021. This is the foundational law that legalizes and regulates the industry, defines virtual assets, and grants the FRC its supervisory authority.
* Law on Anti-Money Laundering and Combatting the Financing of Terrorism (AML/CFT Law): Enacted on May 31, 2013, and amended to include VASPs as reporting entities, mandating Customer Due Diligence (CDD) and suspicious transaction reporting.
* Tax Legislation (Amendments): Clarifies that income from virtual asset trading is subject to Personal Income Tax (PIT), while services related to virtual asset transfers are exempt from Value Added Tax (VAT).

IV. Compliance Requirements
* Registration Requirement: All Virtual Asset Service Providers (VASPs) must register with the FRC to operate legally.
* AML/CFT Compliance: VASPs are obligated reporting entities and must implement full Anti-Money Laundering and Counter-Financing of Terrorism protocols, including KYC checks.
* Capital Requirements: Registered VASPs must meet minimum share capital requirements as set by the FRC.

V. Notable Restrictions or Limitations
* Payment Ban: Cryptocurrencies cannot be used as a payment method for goods and services, as clarified by the Bank of Mongolia.
* Coin Issuance Restrictions: The issuance of independent coins without an underlying registered exchange or FRC approval is restricted; specific 'speculative' coins have faced bans.
* Domestic vs. International Platforms: While domestic exchanges are regulated, access to international platforms by residents lacks local consumer protections.

VI. Recent Developments or Notes
* Mongolia's regulatory framework is considered relatively advanced for the region, largely driven by the need to comply with FATF standards.
* Cryptocurrency mining is legal and recognized, with specific regulations regarding energy usage.
* The existence of licensed domestic exchanges provides a clear, regulated on-ramp for retail investors, distinguishing Mongolia from neighboring 'Gray-Zone' jurisdictions.

Full Analysis Report

Mongolia has transitioned from an unregulated gray market to a fully regulated environment for cryptocurrency trading following the enactment of the Law on Virtual Asset Service Providers (VASP Law) in December 2021. This legislation was a direct response to FATF recommendations, aiming to remove Mongolia from the 'grey list' by establishing a robust AML/CFT framework. The law formally defines 'virtual assets' and places the sector under the supervision of the Financial Regulatory Commission (FRC). As of late 2022, the FRC had registered approximately 12 domestic crypto exchanges, including platforms like Trade.mn, DAX, and Coinhub, legitimizing their operations.

Under this regime, retail investors are legally permitted to buy, sell, and hold cryptocurrencies. However, the Bank of Mongolia has maintained a cautious stance, repeatedly issuing public warnings that virtual assets are not legal tender and carry high investment risks. The central bank emphasizes that the national currency, the Tugrik (MNT), is the only legal means of payment for debts and commerce. Consequently, while trading as an investment is allowed, using crypto for direct merchant payments is restricted.

Compliance requirements for service providers are stringent. VASPs must demonstrate fit-and-proper management, adequate IT infrastructure, and robust internal control systems. They are obligated to perform Know Your Customer (KYC) checks on all users and report suspicious activities to the Financial Information Unit. The regulatory framework has also led to a consolidation of the market; following the law's implementation, the number of operating exchanges decreased as smaller, non-compliant entities were forced to close or merge.

Taxation remains a critical consideration for retail traders. The legal framework establishes that income derived from virtual asset trading is subject to tax, treating it similarly to other capital gains or income sources. Notably, the government has provided a VAT exemption for the services provided by VASPs to encourage industry growth. Despite the clear regulations, challenges remain regarding the enforcement of tax collection from individual traders and the oversight of cross-border trading on unregistered international platforms.

Mongolia has transitioned from an unregulated gray market to a fully regulated environment for cryptocurrency trading following the enactment of the Law on Virtual Asset Service Providers (VASP Law) in December 2021. This legislation was a direct response to FATF recommendations, aiming to remove Mongolia from the 'grey list' by establishing a robust AML/CFT framework. The law formally defines 'virtual assets' and places the sector under the supervision of the Financial Regulatory Commission (FRC). As of late 2022, the FRC had registered approximately 12 domestic crypto exchanges, including platforms like Trade.mn, DAX, and Coinhub, legitimizing their operations.

Under this regime, retail investors are legally permitted to buy, sell, and hold cryptocurrencies. However, the Bank of Mongolia has maintained a cautious stance, repeatedly issuing public warnings that virtual assets are not legal tender and carry high investment risks. The central bank emphasizes that the national currency, the Tugrik (MNT), is the only legal means of payment for debts and commerce. Consequently, while trading as an investment is allowed, using crypto for direct merchant payments is restricted.

Compliance requirements for service providers are stringent. VASPs must demonstrate fit-and-proper management, adequate IT infrastructure, and robust internal control systems. They are obligated to perform Know Your Customer (KYC) checks on all users and report suspicious activities to the Financial Information Unit. The regulatory framework has also led to a consolidation of the market; following the law's implementation, the number of operating exchanges decreased as smaller, non-compliant entities were forced to close or merge.

Taxation remains a critical consideration for retail traders. The legal framework establishes that income derived from virtual asset trading is subject to tax, treating it similarly to other capital gains or income sources. Notably, the government has provided a VAT exemption for the services provided by VASPs to encourage industry growth. Despite the clear regulations, challenges remain regarding the enforcement of tax collection from individual traders and the oversight of cross-border trading on unregistered international platforms.

Source Evidence

Primary and secondary sources cited in this analysis

Law of Mongolia on Virtual Asset Service Provider primary (law_text)

2021-12-17

"The purpose of this law is to regulate the registration of legal entities that provide virtual asset services, monitor their activities, and determine their relevant rights and obligations."

Financial Regulatory Commission - List of Regulated Entities primary (regulator)

2023-01-01

"12 virtual assets service providers (VASPs) are currently supervised by the Financial Regulatory Commission (FRC)."

Bank of Mongolia Warning on Cryptocurrencies primary (official_government)

2018-01-09

"Mongolbank does not recognize any kind of cryptocurrency as a currency. Furthermore, cryptocurrency cannot be considered a legal means of payment."

Mongolia Country Guide - Elliptic secondary (analysis)

2022-11-23

"Legal: Regulated. The Parliament of Mongolia adopted the Law on Virtual Asset Service Provider[s] in December 2021."

LehmanLaw Mongolia - Cryptocurrency Regulation secondary (analysis)

2024-08-29

"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."