Whether holding a client's private keys is a licensable activity is the question that decides how a digital asset business is built, and in the Gelephu Mindfulness City the answer is usually yes. Safeguarding virtual assets for others is a Regulated Activity in the Gelephu Mindfulness City Special Administrative Region (GMC), known as Providing Custody. Basnet Law advises custodians, exchanges and wallet providers on the licence, the exclusions that sit alongside it, and the systems and controls GFSO will inspect. This page explains where the custody line falls and how we get a custodian licensed.
How we help
- Determine whether your model is Providing Custody, Arranging Custody, or outside both under the custody exclusions.
- Prepare the Financial Services Licence application to the Gelephu Financial Services Office (GFSO), including the Approved Person filings.
- Draft key management, hot and cold wallet, segregation and reconciliation policies that meet the GEN Rulebook systems and controls.
- Structure client asset arrangements against the Client Money and client asset rules GFSO may make and the COBS rulebook.
- Design outsourcing and sub-custody arrangements that satisfy the GEN Rulebook on outsourcing and material outsourcing notifications.
- Advise exchanges on whether in-house custody requires a separate permission alongside the exchange permission.
- Support the Accepted Virtual Asset analysis for each asset held.
How GMC crypto custody law works, in plain terms
Providing Custody is the safeguarding of Financial Instruments, Virtual Assets or Spot Commodities "belonging to another"; safeguarding Fund Property for a Fund; acting as a Central Securities Depository; and administering those assets for the purpose of safeguarding. It is immaterial that title is held in uncertificated form, or that the assets may be transferred subject to a commitment to replace them with equivalent assets. That second point matters for omnibus wallets and lending-style arrangements.
Three things are not administration: providing information on the number of units or value of assets in custody, converting currency, and receiving documents solely for onward transmission. The general exclusions also apply, for trustees, nominees and personal representatives; professions and non-investment businesses; sale of goods and services; groups and joint enterprises; incidental information; and insolvency practitioners.
Arranging for another person to Provide Custody is itself regulated. An introducer who refers clients to a custodian licensed by GFSO or a non-GMC regulator is excluded, provided the introducer is not connected with the custodian, meaning not in the same group and not remunerated by it for the introduction.
The Financial Services Act 2025 prohibits custody of privacy tokens, algorithmic stablecoins and similar assets, and it allows GFSO to direct that a particular Virtual Asset not be held. GFSO may make Client Money Rules that result in money being held on trust. Capital under the PRU rulebook and application fees are set by GFSO; we confirm current figures at engagement.
Who this is for
- Specialist digital asset custodians and wallet-as-a-service providers.
- Exchanges and brokers holding client assets in-house.
- Fund administrators and trustees safeguarding Fund Property.
- Technology providers unsure whether key-management software crosses into custody.
How an engagement runs
- Perimeter memorandum applying the custody activities and the rulebook exclusions to your architecture, so you know what needs a licence.
- Custody policy set: key ceremony, wallet tiering, segregation, reconciliation and incident response.
- GFSO initial meeting and business model presentation, which we attend with you.
- Application, interviews and In-Principle Approval.
- Incorporation, capital, insurance if required, bank account and staff, then licence issue.
Frequently asked questions
Is holding client private keys "custody"?
Safeguarding Virtual Assets belonging to another is Providing Custody. Control of the keys that move a client's assets is the practical test GFSO applies, and we assess it against your setup.
Does a self-custody wallet app need a licence?
If the provider never holds or controls client assets and merely supplies software, it is generally not safeguarding assets belonging to another. The "by way of business" and incidental-information exclusions are relevant, and we confirm on the facts.
We refer clients to a third-party custodian. Are we regulated?
Arranging Custody is regulated, but an unconnected introducer referring to a GFSO-licensed or foreign-regulated custodian without remuneration from it is excluded. We check whether you sit inside that exclusion.
Can we lend or rehypothecate client assets?
Assets transferred subject to a replacement commitment are still in custody, so the permission and client asset rules continue to apply. We structure any lending accordingly.
Which assets can we custody?
Only Accepted Virtual Assets. Privacy tokens and algorithmic stablecoins are prohibited, and we screen each asset before you take it on.
Must the custody operation be in GMC?
A GMC-incorporated Licensed Firm needs its head office and registered office in GMC. Offshore sub-custody is an outsourcing that must meet the GEN Rulebook outsourcing rules, and we document it.
Talk to GMC counsel on the ground
Basnet Law Pte. Ltd. is the first law firm incorporated in the Gelephu Mindfulness City. A short conversation early in a matter usually saves time and cost later. Write to basnet@basnetgmc.com or office@basnetgmc.com with a few lines about your plans, and we will tell you plainly what is needed, how long it takes, and whether we are the right fit.
You may contact Basnet Law at basnet@basnetgmc.com or office@basnetgmc.com for any legal queries related to GMC.
