Costa Rica’s Legislative Assembly has advanced a landmark bill targeting the regulation of virtual asset service providers (VASPs), aiming to bolster the nation’s defenses against money laundering, terrorist financing, and the proliferation of weapons of mass destruction.
The bill, processed under file number 22.837 and first introduced by the administration of former President Carlos Alvarado Quesada, passed its first debate on Tuesday. It proposes significant amendments to Law No. 7786, notably through the addition of a new article—15 quater—which sets out a comprehensive regulatory framework for the country’s burgeoning crypto sector.
Key Provisions and Obligations
The proposed legislation mandates that all VASPs operating in Costa Rica must register with the Superintendencia General de Entidades Financieras (SUGEF), the country’s financial regulator. SUGEF will supervise these entities using a risk-based approach, focusing on compliance with anti-money laundering (AML) standards. However, officials stress that registration does not constitute government authorization to operate but rather ensures adherence to established AML protocols.
Under the bill, VASPs are required to:
- Identify clients and final beneficiaries
- Preserve detailed transaction records
- Enforce enhanced controls over politically exposed persons and high-risk jurisdictions as identified by international bodies
- Perform and regularly update risk assessments
- Maintain robust internal controls and information-sharing mechanisms with authorities
Suspicious transactions must be reported confidentially and promptly to the Financial Intelligence Unit of the Costa Rican Drug Institute (ICD).
Scope and Definitions
The legislation defines a virtual asset as any digital representation of value that can be traded or transferred online, regardless of its status as legal tender in Costa Rica. The definition of a VASP is broad, encompassing any individual or company involved in exchanging, transferring, safeguarding, issuing, or offering virtual assets.
International Standards and Enforcement
In line with recommendations from the Financial Action Task Force (FATF), the bill introduces special controls for international crypto asset transfers and prohibits business dealings with unregistered providers. SUGEF will maintain a public registry of all registered VASPs and is empowered to penalize those operating outside the regulatory framework.
Sanctions for non-compliance are substantial, with fines ranging from two to one hundred base salaries, proportional to the scale of unreported activity. The bill also aligns crypto-related obligations and penalties with those already in place for other regulated financial entities, including the freezing of suspicious funds and mandatory reporting.
Looking Ahead
With the bill’s passage in the first debate, Costa Rica signals its commitment to aligning its financial sector with international best practices while addressing the unique risks posed by digital assets. The legislation awaits further legislative review before becoming law, but its progress marks a significant step in the approach to crypto regulation, for better or for worse.
