Micronesia (Federated States of)

## Report on Retail Cryptocurrency Trading Status in Micronesia (Federated States of)

**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.

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### Retail_Trading_Status

**Status:** Allowed-Unregulated

**Narrative Explanation:**

Cryptocurrency trading by individuals in the Federated States of Micronesia (FSM) is currently legal, primarily because there are no specific laws or regulations prohibiting it. The FSM has not established a dedicated regulatory framework for cryptocurrencies. This means that while individuals are generally free to buy, sell, and hold digital assets, they do so in an environment lacking specific consumer protections, licensing requirements for exchanges, or crypto-focused AML/KYC rules directly imposed by the FSM government.

The primary financial regulator, the FSM Banking Board, has explicitly stated in its Annual Reports (2022, 2023) that the country is 'not ready to entertain digital currencies and virtual assets' due to the absence of a legal framework. This position, derived from its powers under the FSM Banking Act (Title 29), effectively restricts local banks (Bank of Guam and Bank of the FSM) from offering crypto services or facilitating payments to crypto exchanges. A 2021 clarification from the Finance Ministry, referenced by secondary sources, also indicated that financial institutions are not permitted to use or transact in crypto-assets.

Consequently, retail investors face significant practical hurdles in moving fiat currency to and from crypto exchanges, as the domestic banking system is effectively closed to crypto-related transactions. There are no licensed domestic cryptocurrency exchanges. However, this banking blockade is a restriction on financial institutions, not a ban on individual possession or trading. Individuals may still use international exchanges, which often require ID verification for KYC compliance based on their home jurisdiction rules.

The FSM relies on the U.S. dollar, and its financial laws are influenced by the U.S. The lack of a clear regulatory framework creates uncertainty. The government's stance is one of caution and observation, with discussions around cybersecurity highlighting the need for user awareness regarding risks in the digital space, including cryptocurrency. The Financial Management Regulations of the FSM (May 2021) contain no crypto provisions, further underscoring the regulatory void.

In essence, retail cryptocurrency trading is allowed because it is not illegal, but it is unregulated and operates in a challenging practical environment due to banking restrictions.

**Supporting Excerpts and Sources:**

*   **FSM Banking Board, 2023 Annual Report:** "The Board believes FSM is not ready to entertain digital currencies and virtual assets as there is no legal framework in place for governing these alternative forms of payments."
*   **FSM Banking Board, 2022 Annual Report:** "The Board; however, still has much to learn about cryptocurrency... especially in view of important public interest issues such as safety, confidentiality, stability, among many others."
*   **FSM Banking Act (Title 29):** Provides the Banking Board with broad powers to regulate banking business.
*   **Financial Management Regulations of the FSM (May 2021):** Contains no specific provisions for cryptocurrencies or digital assets.
*   **Proelium Law LLP (Cryptocurrency Regulation Tracker):** References a 2021 Finance Ministry clarification that financial institutions are not permitted to use or transact in crypto-assets.
*   **UEEx Technology (Best Crypto Exchanges in Micronesia 2025):** "Yes, crypto exchanges are legal in Micronesia, but the country does not have clear regulations specifically for cryptocurrencies... there are no local government-backed crypto regulations or licensing requirements."
*   **UPay Blog (Crypto Adoption Around the World: Micronesia):** "Cryptocurrencies are legal in Micronesia, though no specific regulations currently govern their use, indicating an open but cautious approach to digital assets."
*   **Invezz (7 Best Exchanges to Buy Bitcoin in Micronesia 2025):** "Yes, buying Bitcoin is legal in Micronesia... However, many cryptocurrency exchanges aren't regulated in Micronesia, as the legislation has yet to catch up with the reality of the crypto market."
*   **UNDP Pacific Office in Fiji (Empowering Digital Resilience in the FSM):** Highlights the "increasing prevalence of... cryptocurrency" and the need for user awareness of digital risks.
*   **U.S. Department of State, 2021 Investment Climate Statements:** Notes the two commercial banks (Bank of Guam and Bank of the FSM) are FDIC-insured.