Summary
- A centralised crypto exchange in GMC is licensed for "Operating a Multilateral Trading Facility" under Schedule 1, para. 54(1)(a) of the Financial Services Act 2025, which expressly covers an MTF "on which Financial Instruments, Virtual Assets or Spot Commodities are traded".
- An Organised Trading Facility (OTF) under para. 54(1)(b) is limited to Financial Instruments.
- Para. 55 excludes a facility that is "merely an order routing system" where orders "are merely transmitted but do not interact". Matching is the trigger.
- A real exchange usually also needs Providing Custody (para. 43), Dealing as Principal or Agent (paras 4 and 12) and possibly Providing Money Services (para. 52), subject to the connected-services exclusion in para. 53.
- GFSO may require an MTF admitting Accepted Virtual Assets to become a Licensed Exchange under s. 121 (s. 5A(2)(d)). Licensed Exchanges are exempt from the General Prohibition for their exchange business (s. 119).
- MTFs must report orders and transactions in Accepted Virtual Assets (s. 149(2)), and market abuse rules apply to tokens admitted to trading on an MTF (s. 92(1)(a)(iv)). Detailed venue rules are in the Market Infrastructure Rulebook (MIR).
What a crypto exchange is, in the language of the Act
The Financial Services Act 2025 does not use the phrase "crypto exchange". A "Multilateral Trading Facility" or "MTF" is "a multilateral system, operated by a Licensed Firm or Licensed Exchange, which brings together multiple third-party Buying and Selling interests ... in accordance with non-discretionary rules, in a way that results in a contract in accordance with its rules" (s. 258). An "Organised Trading Facility" or "OTF" is a multilateral system that is neither a Licensed Exchange nor an MTF, in which multiple third-party interests "are able to interact in the system in a way that results in a contract" (s. 258). A central-limit-order-book exchange that matches token buyers and sellers under published, non-discretionary rules is an MTF. That is the activity under Schedule 1, para. 54.
Paragraph 54: the activity
Paragraph 54(1) specifies three things as a regulated activity:
- (a) "the operation of a Multilateral Trading Facility on which Financial Instruments, Virtual Assets or Spot Commodities are traded";
- (b) "the operation of an Organised Trading Facility on which Financial Instruments are traded"; and
- (c) "any other ancillary activities deemed suitable by the Regulator for the MTF or OTF to conduct".
Three points follow. First, virtual assets are named in the MTF limb, so a token venue does not need to argue that its tokens are securities. "Virtual Asset" is defined in s. 258 as a digital representation of value that can be digitally traded and functions as a medium of exchange, unit of account or store of value, without legal tender status (see our guide to the GMC digital asset framework).
Second, the OTF limb refers only to Financial Instruments, defined by reference to paras 87–96, 99A and 99B of Schedule 1 (shares, debt, warrants, certificates, fund units, derivatives, structured products and environmental instruments). A discretionary venue for spot tokens is therefore not an OTF under the Act and needs early discussion with GFSO.
Third, para. 54(1)(c) lets GFSO deem "ancillary activities" suitable for the venue, such as listing, market data or post-trade services. What counts as ancillary is for GFSO.
Running a venue is its own activity. Paragraph 19 excludes from arranging (para. 16) "arrangements which amount to Operating a Multilateral Trading Facility or Organised Trading Facility", and para. 54 is carved out of the "agreeing" activity in para. 70.
Paragraph 55: the order-routing exclusion
Paragraph 55 defines the edge of the perimeter. A person does not operate an MTF "if it operates a facility which is merely an order routing system where Buying and Selling interests in, or orders for, Financial Instruments, Virtual Assets or Spot Commodities are merely transmitted but do not interact" (para. 55(1)(a)). The same rule applies to OTFs for Financial Instruments (para. 55(1)(b)).
The test is interaction. A system that passes a client order to an exchange, a market maker or another broker is routing. A system in which orders meet other orders and a contract results is a venue. Smart order routers and aggregators that forward orders to external liquidity fall on the routing side, provided nothing in the system matches one client's order against another's. The moment a platform crosses client orders internally, para. 55 no longer helps and para. 54 applies.
Two related exclusions sit alongside para. 55: para. 17 (arrangements that "do not or would not bring about the transaction") and para. 18 ("merely providing means by which one party to a transaction ... is able to communicate with other such parties"). A pure bulletin board may fit para. 18. An order book does not.
The full stack a crypto exchange needs
An exchange that only matched orders and never touched client assets or cash could, in principle, hold a licence for para. 54 alone. Most centralised exchanges do far more. Each additional function maps to its own Schedule 1 activity and must be listed on the Financial Services Licence: s. 17(1) provides that a Licensed Firm must not carry on a Regulated Activity "otherwise than in accordance with a Financial Services Licence".
| Function of the exchange | Schedule 1 activity | Notes |
|---|---|---|
| Matching client orders | 54 Operating an MTF | Core venue licence |
| Holding client tokens in exchange wallets | 43 Providing Custody | Regulated regardless of property type (para. 2(2)) |
| Referring clients to a third-party custodian | 46 Arranging Custody | Introducer exclusion in para. 47 if not connected to or paid by the custodian |
| Market making or acting as counterparty | 4 Dealing in Investments as Principal | "Buying or Selling ... Virtual Assets ... as principal" |
| Executing client orders on another venue | 12 Dealing in Investments as Agent | "as agent" |
| Fiat deposits, withdrawals and conversions | 52 Providing Money Services | See para. 53 below |
| Token research or recommendations | 28 Advising on Investments or Credit | Advice on the merits of buying or selling "a Virtual Asset" |
| Issuing a house stablecoin | 53B Issuing a Fiat-Referenced Token | See our guide to stablecoin issuance |
Custody
Providing Custody is where most exchange risk sits. Paragraph 43(1)(a) covers "safeguarding of Financial Instruments, Virtual Assets or, Spot Commodities belonging to another", and para. 43(1)(d) covers administering them. Paragraph 43(2) makes it "immaterial that title to the assets is held in uncertificated form" and immaterial that assets may be transferred subject to a commitment to replace them with equivalent assets, so omnibus wallet structures are still custody. GEN 6.6.1(4) requires a firm permitted to provide custody to procure a Safe Custody Auditor's Report, tied by GEN 6.6.7 to the Safe Custody Rules in COBS Chapter 15. Our guide to crypto custody covers this in depth.
Money services and the connected-services exclusion
Providing Money Services (para. 52) means "Providing currency exchange, Money Remittance or Payment Services". Fiat on-ramps commonly involve Payment Services, defined in s. 258 to include operating Payment Accounts and executing Payment Transactions. Paragraph 53 provides that a Licensed Firm does not Provide Money Services "if it does so in relation to the carrying on of another Regulated Activity where Providing Money Services is in connection with and a necessary part of that other Regulated Activity". Whether an exchange's fiat rails are a "necessary part" of operating an MTF should be settled with GFSO at the business-model stage, not after launch.
Dealing
Paragraph 5 contains the "absence of holding out" exclusion, but it is limited to transactions relating to a Security, a Contract of Insurance or an investment under paras 98 or 99B. It does not on its face cover a principal trade in a Virtual Asset. An exchange that acts as counterparty in token trades should therefore expect to hold a Dealing as Principal permission.
MTF or Licensed Exchange?
The Act contains two tiers of venue. The first is an MTF operated by a Licensed Firm under a Financial Services Licence. The second is a "Licensed Exchange", defined as "an investment exchange operating within GMC in relation to which an Exchange / Clearing House Requirements Order is in force" (s. 258). Licensed Exchanges and Licensed Clearing Houses are together "Licensed Bodies" (s. 258). A Licensed Exchange is exempt from the General Prohibition for any Regulated Activity "carried on as a part of the Licensed Exchange's ... business as an investment exchange" (s. 119(1)).
Any Body Corporate may apply for an order declaring it to be a Licensed Exchange (s. 121(1)). GFSO sets the "Exchange / Clearing House Requirements" by Rules (s. 120) and may make the order if the applicant satisfies them (s. 124(1)(a)). The GEN Rulebook uses the term "Recognised Body" for this tier: GEN 5.1 guidance states that the Regulator's requirements for "Recognised Bodies are covered by MIR", and GEN 5.2.2(1) provides that GFSO will only consider a Financial Services Licence application from a Body Corporate or Partnership "who is not a Recognised Body". The two routes are alternatives, not a stack.
The bridge between them is s. 5A(2)(d). GFSO may by written notice require "a Licensed Firm Operating a Multilateral Trading Facility that admits Accepted Virtual Assets or Accepted Spot Commodities to trading to obtain an Exchange / Clearing House Requirements Order to become a Licensed Exchange under section 121", where satisfied that this is in the interests of GMC. A crypto MTF that grows to systemic scale should expect this conversation.
Only "Accepted Virtual Assets", tokens that in GFSO's opinion meet the requirements set under s. 5A, should be admitted to trading. Section 5A(4) prohibits any regulated activity involving algorithmic stablecoins, privacy tokens or similar technology. Section 5B allows GFSO to direct that a specific token must not be sold, bought or transferred, with a written-notice and representations procedure. Listing committees should build both into their rulebooks.
Ongoing obligations specific to venues
- Transaction reporting. Section 149(1) requires a Licensed Exchange, MTF or OTF to report orders and transactions in Financial Instruments traded on its platform. Section 149(2) applies the same duty to an MTF for "Accepted Virtual Assets". GFSO specifies the content by Rules (s. 149(5)).
- Market abuse. Section 92(1)(a)(iv) brings behaviour in relation to "an Accepted Virtual Asset admitted to trading on a Multilateral Trading Facility" within the market abuse regime. Section 92(4) covers orders that give a false or misleading impression of supply, demand or price, the statutory basis for surveillance against wash trading and spoofing. Section 103 separately prohibits misleading impressions as to the market in or price of Accepted Virtual Assets.
- Misconduct. Section 19A prohibits misleading, deceptive, fraudulent or dishonest conduct in relation to a Virtual Asset or a Regulated Activity.
- Systems and controls. GEN 3.3.33 requires business continuity arrangements that are "regularly tested"; GEN 3.3.31–3.3.32 govern outsourcing, including of matching engines or wallet infrastructure, and require notification of material outsourcing. GEN 5.5.1 requires a Senior Executive Officer, Compliance Officer and Money Laundering Reporting Officer, resident in GMC or Bhutan (GEN 5.5.2).
- Venue rules. The Market Infrastructure Rulebook (MIR), published by the Gelephu Financial Services Office, contains the detailed requirements for trading venues and Recognised Bodies; the Virtual Asset Guidance applies in addition. Both should be obtained from GFSO.
The application route
The seven-step process published by the Gelephu Financial Services Office applies (see our guide to the GFSO application process): initial meeting, business model presentation, application forms with a non-refundable fee, review and interviews, In-Principle Approval with pre-conditions, satisfaction of those pre-conditions, and issue of the licence. The official checklist includes transaction flow diagrams; for a venue, these and the market rulebook will be examined closely.
GFSO's public Financial Institutions Directory shows that, as at the date of this article, a Financial Services Licence for Operating a Multilateral Trading Facility together with Providing Custody has already been granted in GMC. The route is open and has been used.
Capital requirements are set by GFSO under the Threshold Conditions (s. 28) and the Prudential rulebook, and fees and timelines are set by GFSO. Basnet Law can confirm the current figures with GFSO.
Practical checklist / Next steps
- Decide whether the platform matches orders (para. 54) or only routes them (para. 55), and document the answer with system diagrams.
- Map every other function, custody, principal dealing, agency execution, fiat rails, research, stablecoin, to paras 43, 46, 4, 12, 52, 28 or 53B.
- Settle with GFSO whether fiat on-ramps fall within para. 53 or need a separate Providing Money Services permission.
- Draft a token admission policy limited to Accepted Virtual Assets, excluding anything caught by s. 5A(4), with a s. 5B delisting procedure.
- Build reporting (s. 149(2)) and market surveillance (ss. 92, 103) into the matching engine specification.
- Obtain MIR, COBS, GEN, AML and the Virtual Asset Guidance from GFSO and align the venue rulebook to them.
- Follow the GFSO process and appoint the GEN 5.5.1 officers before the In-Principle Approval conditions fall due.
Frequently asked questions
Can I run a token exchange in GMC without a licence if I never hold client assets?
No. Operating an MTF under para. 54 is a regulated activity in its own right, whether or not the operator holds assets. The General Prohibition in s. 16(1) applies to anyone carrying on the activity by way of business in GMC. Not holding assets simply means the custody permission is not needed.
Is an OTF licence available for crypto?
Paragraph 54(1)(b) defines the OTF activity by reference to Financial Instruments only, and the s. 258 definition of OTF is the same. A discretionary spot-token venue does not fit that wording. Security tokens that are Financial Instruments could in principle trade on an OTF.
Does a smart order router need a para. 54 licence?
Not if orders are "merely transmitted but do not interact" (para. 55). The router may still be Arranging Deals in Investments under para. 16 or Dealing as Agent under para. 12, depending on how it is remunerated and whether it brings about transactions.
Can a GMC exchange list any token?
No. The Act's market abuse, reporting and misconduct provisions are framed around "Accepted Virtual Assets", and s. 5A(4) prohibits algorithmic stablecoins and privacy tokens outright. GFSO sets the acceptance criteria by Rules under s. 5A(1)(b).
Key takeaways
- Para. 54(1)(a) is the crypto exchange licence: an MTF on which Virtual Assets are traded. The OTF limb is confined to Financial Instruments.
- Para. 55 draws the line at interaction of orders; routing is outside, matching is inside.
- Custody, dealing and money services are separate permissions most exchanges will also need.
- GFSO can require a virtual asset MTF to become a Licensed Exchange (ss. 5A(2)(d), 121).
- Reporting (s. 149(2)) and market abuse (s. 92) apply to Accepted Virtual Assets from day one; the venue detail is in MIR and the Virtual Asset Guidance.
This article is general information about the law of the Gelephu Mindfulness City Special Administrative Region as at the date above. It is not legal advice and does not create a lawyer–client relationship.
You may contact Basnet Law at basnet@basnetgmc.com or office@basnetgmc.com for any legal queries related to GMC.
References
- Financial Services Act 2025, ss. 5A(2)(d), 5A(4), 5B, 16, 17, 19A, 28, 92, 103, 119, 120, 121, 124, 149, 258 (definitions of Multilateral Trading Facility, Organised Trading Facility, Licensed Exchange, Licensed Body, Financial Instrument, Virtual Asset, Payment Services); Schedule 1, paras 2(2), 4, 5, 12, 16, 17, 18, 19, 28, 43, 46, 47, 52, 53, 53A, 53B, 54, 55, 70, 77
- GEN Rulebook 2026 (Version 1.0), Rules 3.3.1, 3.3.31, 3.3.32, 3.3.33, 5.1 (guidance), 5.2.2, 5.5.1, 5.5.2, 6.6.1, 6.6.7
