Central Bank of Oman's Stance on Cryptocurrencies
The Central Bank of Oman (CBO) has been quite clear about its position on cryptocurrencies. In a cautionary notice issued in 2020, the CBO explicitly stated that it does not recognize cryptocurrencies as legal tender. Furthermore, the bank highlighted that it had not issued any licenses or authorizations to digital asset service providers. This implies that the creation, trading, or usage of cryptocurrencies is neither guaranteed by the Central Bank of Oman nor protected by the Banking Law 114/2000 as legal tender money. The CBO emphasized the risks associated with cryptocurrencies, including financial, operational, legal, customer protection, and security-related risks. It warned citizens and residents about the potential for permanent loss of investment due to high volatility or becoming a victim of fraud, stating that anyone dealing in such cryptocurrencies would be doing so at their own risk and responsibility.
That being said, there has been significant demand in Oman for cryptocurrency-related business, and as a result we have seen a number of Omani cryptocurrency businesses popping up and not being penalised by the authorities. As this number grows, it was necessitating the presence of regulation.
Legal Framework for Digital Assets
Despite the cautious stance of the CBO regarding cryptocurrencies, there has been a significant development in the regulatory landscape for digital assets in Oman. The Financial Services Authority (FSA) issued Decision No. (E/35/2023), which provides instructions on the registration of Virtual Asset Service Providers (VASPs) and the implementation of requirements for combating money laundering and terrorism financing. This decision requires VASPs to register with the FSA and comply with enhanced Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) requirements.
The FSA's decision outlines that both legal persons in Oman and natural persons with a place of business in Oman offering or conducting services in the country need to register as VASPs. The allowed activities for registered VASPs include the exchange between virtual assets and fiat currencies, exchange between different forms of virtual assets, transferring virtual assets, safekeeping/administration of virtual assets, and participation in financial services related to virtual assets.
VASPs looking to register must follow the procedure outlined in Article 6 of the FSA's decision. The FSA is required to issue a decision on the application within one month of submission of a complete application. Once approved, VASPs are entered into a register and granted an approved certificate. However, there are restrictions, such as the prohibition of virtual assets that conceal the identity of the originator or the nature of the transaction, and the CBO retains jurisdiction over payments, including stored value facilities.
Future Plans for Crypto Regulation
Looking ahead, the FSA has announced its intention to set out a Virtual Assets Regulatory Framework. This proposed framework aims to provide a comprehensive and friendly regulatory environment for virtual assets, including a new regulation for all virtual asset activities, a licensing framework, and a supervisory framework to evaluate and mitigate ongoing risks. This initiative indicates Oman's commitment to embracing the potential of digital assets while ensuring the protection and stability of its financial system.
In conclusion, while Oman adopts a cautious approach towards cryptocurrencies, recognizing the inherent risks, it is also taking progressive steps to establish a regulatory framework for digital assets. This balanced approach reflects Oman's recognition of the importance of adapting to technological advancements while ensuring the safety and security of its financial system.
