What is a VASP?
A VASP, or Virtual Asset Service Provider, is an entity that provides services for the transfer of virtual assets. It can be thought of as a financial institution that acts as an intermediary between two parties in the exchange and transfer of virtual currencies such as Bitcoin.
VASPs are required to comply with Anti-Money Laundering (AML) regulations set forth by various governments throughout the world. They must identify their customers and verify their identities before allowing them to make transactions involving virtual currencies. Additionally, they must report any suspicious activity to relevant authorities in order to prevent criminal activities from occurring through its platform.
Why do we need VASPs?
The use of digital currency has grown significantly over recent years due to its convenience and anonymity when compared with traditional banking systems. As such, it is important that measures are taken to ensure legitimate uses rather than illicit ones. This is where VASPs come into play; they provide a vital service in helping combat money laundering and terrorist financing while also providing users with greater security when transacting online using cryptocurrencies like Bitcoin or Ethereum.
Moreover, these entities help promote regulatory compliance within cryptocurrency markets by ensuring users adhere to all applicable AML laws and regulations which seek to protect investors against fraudulent activities associated with digital currency transactions globally.