Summary
- A "Deposit" is money paid on terms that it will be repaid, on demand or at an agreed time, and not referable to property, services or security (Financial Services Act 2025, Schedule 1, para. 85).
- Accepting Deposits is a Regulated Activity only if the money is lent to others or finances the recipient's other activities (para. 38). That is the statutory definition of banking.
- Exclusions cover group, lender and close-relative payments (para. 39), lawyers (para. 40), debt instruments with a USD 150,000 commercial paper floor (para. 41), one-off fundraisings and money received by other Licensed Firms in their own activities (para. 42).
- Depositors of an unlicensed deposit-taker can ask the Court to order repayment (s. 24).
- Providing Money Services, currency exchange, Money Remittance or Payment Services, including Stored Value and Payment Accounts, is a separate activity (para. 52) with its own exclusions (paras. 53–53A); Issuing a Fiat-Referenced Token is another (para. 53B).
- Capital sits in the Prudential Rulebook (PRU); GFSO uses supplementary application forms for banking. The Royal Charter provides for a GMC central bank (Art. 4).
The question every fintech asks
At what point does holding customer money in GMC become banking? The Financial Services Act 2025 (the Act) answers in two steps: is the money a "Deposit", and is the recipient "Accepting Deposits" as a Regulated Activity? For payment businesses a third question follows: is it Stored Value or a Payment Account, which brings the business under Providing Money Services instead. "$" and "USD" in GMC law mean United States dollars.
Step 1: is it a Deposit?
Paragraph 85 of Schedule 1 defines a Deposit as "a sum of money paid on terms":
- "under which it will be repaid, with or without interest or a premium, and either on demand or at a time or in circumstances agreed" between payer and recipient; and
- "which is not referable to the provision of property (other than currency) or services or the giving of security" (para. 85(1)).
Money is referable to property, services or security, and so not a Deposit, if it is an advance or part payment under a sale, hire or services contract repayable only if the property or services are not provided; security for performance of a contract or for loss from non-performance; or security for the delivery of property (para. 85(2)).
The definition is wide in its terms. A platform balance withdrawable on demand is, on its face, a Deposit unless it is referable to goods or services or falls within an exclusion. Prepayments for a specific purchase and rental bonds generally fall outside; "wallet" balances held for unspecified future use generally do not.
Step 2: is the recipient Accepting Deposits?
Receiving a Deposit is not itself regulated. Paragraph 38 makes Accepting Deposits a specified kind of activity only if:
- "money received by way of Deposit is lent to others"; or
- "any other activity of the person accepting the Deposit is financed wholly, or to a material extent, out of the capital of or interest on money received by way of Deposit" (para. 38(1)).
This is the classic banking model: taking deposits and putting them to work. A business that holds customer money unused is not within para. 38, though it may be within Providing Money Services or Providing Custody. A business that funds its lending book, treasury or operating costs from customer balances is within para. 38. Like every Schedule 1 activity, it must be carried on "by way of business" (para. 3), and the General Prohibition in s. 16 then applies.
The exclusions
The Act carves out several categories.
| Exclusion | Paragraph | Effect |
|---|---|---|
| Sums paid by certain persons | 39(1)(a) | Money from a Licensed Firm permitted to Accept Deposits or to effect or carry out insurance, or from the IBRD, IFC or IMF, is not a Deposit |
| Lenders | 39(1)(b) | Money paid in the course of a business "consisting wholly or to a significant extent of lending money" |
| Group and joint enterprise | 39(1)(c) | Money paid between bodies corporate in the same Group, with a common majority shareholder, or between participants in a Joint Enterprise for its purposes |
| Close relatives, directors, controllers | 39(1)(d) | Money paid by a Close Relative of the recipient, or by (or a Close Relative of) a director, manager or Controller of the recipient |
| Lawyers | 40 | Sums received by "a practising lawyer acting in the course of his profession", meaning a lawyer qualified under the laws of any jurisdiction |
| Debt instruments | 41 | Consideration for the issue of instruments within paras. 88, 89 or 90, but commercial paper (maturity under one year) only if issued to professional investors and with a redemption value of at least 150,000 US Dollars per instrument and per transferable part |
| Not by way of business | 42(1)–(2) | A person who does not hold itself out as Accepting Deposits day-to-day and accepts them "only on particular occasions", judged by frequency and distinguishing characteristics |
| Other Licensed Firms | 42(3) | A sum received by a Licensed Firm licensed for dealing, arranging, advising, credit, money services, MTF/OTF, asset management or fund activities (paras. 4, 12, 16, 28, 48, 50, 52, 54, 56, 59, 60 or 61), "in the course of, or for the purposes of, carrying on any such activity" with or for the payer |
Two carry most of the practical weight. Paragraph 41 lets a corporate treasury raise wholesale funding through bonds or notes without becoming a bank. Paragraph 42(3) means a licensed payment, brokerage or fund firm receiving client money in the course of its licensed activity is not, by that fact alone, Accepting Deposits; the money is instead handled under the Client Money Rules made under s. 4 and the Conduct of Business Rulebook (COBS).
The consequence of getting it wrong
Section 24 gives a statutory remedy. Where a deposit is taken in contravention of the General Prohibition and the depositor cannot recover it without delay, the depositor "may apply to the Court for an order directing the deposit-taker to return the money" (s. 24(2)). The Court may decline only if it would not be just and equitable, having regard to whether the deposit-taker reasonably believed it was not contravening the prohibition (s. 24(3)). Enforcement powers in Parts 19 and 20 of the Act sit on top.
Licensing a bank in GMC
The route is the standard GFSO process ending in In-Principle Approval and then the Financial Services Licence (see our guide to the GFSO application process). GFSO states that banking activities require supplementary application forms. Provisions specific to deposit-takers include:
- Legal form. An applicant for Accepting Deposits must be a Body Corporate or a Partnership (GEN 5.2.2(3)). A GMC-incorporated Licensed Firm must have its head office and registered office in GMC (GEN 4.5.1(1)).
- Mandatory appointments. Banks must appoint a Finance Officer as an Approved Person in addition to the Senior Executive Officer, Compliance Officer and Money Laundering Reporting Officer required of every Licensed Firm (GEN 5.5.1(1)(b)).
- Board composition. For Banks, a majority of the Governing Body must be Non-Executive Directors, at least one of whom must be independent, and the chair must be a non-executive (GEN 3.3.41A). GFSO may require audit, risk and other committees (GEN 3.3.41A(5)). GEN also expects a Bank to appoint a Senior Manager other than the Senior Executive Officer to advise on risk (GEN 5.3, guidance).
- Prudential. Capital, liquidity and the ICAAP and IRAP processes referred to in GEN 3.3.16(2) are governed by PRU, published by the Gelephu Financial Services Office as the Prudential Rules for "Investment, Insurance Intermediation and Banking". Minimum capital figures are set there and by GFSO.
- Foreign banks. GFSO may take account of a home regulator's opinion when assessing a Non-GMC Firm against the Threshold Conditions (s. 29). A Branch is subject to notification rather than prior approval on changes of control (GEN 8.8.10).
Money Services: the other perimeter
Most payment, wallet and remittance businesses are not banks but do fall under Chapter 8 of Schedule 1. Providing Money Services means "providing currency exchange, Money Remittance or Payment Services" (para. 52). The definitions in s. 258 do the work:
- Payment Services include placing cash in or withdrawing it from a Payment Account and operating the account; executing Payment Transactions by direct debit, payment instrument or credit transfer; issuing Payment Instruments; "Selling or issuing Stored Value"; receiving money for transmission within or outside GMC; and transferring, settling or safeguarding Fiat-Referenced Tokens for payment purposes.
- Stored Value is "electronically, including magnetically, stored monetary value as represented by a claim on a Stored Value Provider", issued on receipt of money for making Payment Transactions and accepted by persons other than the issuer. This is the e-money concept.
- Money Remittance is receiving money for remittance, within or outside GMC, "without the use of a Payment Account, Payment Instrument, Fiat-Referenced Token or Stored Value".
- A Payment Account is an account in the name of a payer or payee used for executing Payment Transactions.
Money Services exclusions
A Licensed Firm does not Provide Money Services where doing so is "in connection with and a necessary part of" another Regulated Activity it carries on (para. 53). Paragraph 53A lists what is not a Payment Service, including cash-only transactions; commercial agents acting for one side; physical cash transport; cheques and paper vouchers; settlement-system transactions between payment providers, banks and central banks; "technical service providers" that never possess the funds; limited-network and limited-range instruments; own-account and intra-Group payments; ATM withdrawals; and the issuance of a Fiat-Referenced Token.
The limited-network exclusion (para. 53A(j)) is the safe harbour for closed-loop gift cards and store credit. The technical-service exclusion (para. 53A(i)) is the safe harbour for software vendors, provided they never come into possession of the money.
Fiat-Referenced Tokens
Issuing a Fiat-Referenced Token is its own Regulated Activity (para. 53B), and is expressly excluded from Payment Services (para. 53A(n)). A Fiat-Referenced Token is a distributed-ledger digital asset used "as a medium of exchange with a stable store of value" by referencing a fixed amount of a single fiat currency (s. 258). Transferring, settling or safeguarding such tokens for payment purposes is, however, a Payment Service. See our guide to stablecoin issuance in GMC.
Deposit, Stored Value or Payment Account: a working test
| Feature | Likely characterisation |
|---|---|
| Customer money repayable on demand; used to fund lending or the firm's own activities | Deposit; Accepting Deposits (paras. 38, 85) |
| Customer money held only to execute payments the customer instructs | Payment Account; Payment Services (para. 52) |
| Prepaid balance redeemable at third-party merchants | Stored Value; Payment Services (para. 52) |
| Prepaid balance usable only with the issuer or a closed network | Excluded (para. 53A(j)) |
| Advance payment against a specific purchase, refundable only if not delivered | Not a Deposit (para. 85(2)(a)) |
| Bonds or notes issued to fund the business; commercial paper of at least USD 150,000 to professionals | Not a Deposit (para. 41) |
| Client money received by a licensed broker or fund manager for its licensed activity | Not a Deposit (para. 42(3)); Client Money Rules apply |
The characterisation determines the licence, the prudential rulebook and the client-money regime. It should be settled before the product is built, not after.
The central bank question
Article 4 of Royal Charter No. 1 of 2024 directs the GMC Authority to establish regulatory bodies including a central bank. GFSO is the independent regulator of all financial services and virtual assets activities in GMC, and the Charter provides for the central bank alongside it. Basnet Law advises on the current position.
Practical checklist
- Map every customer money flow and test each against para. 85: repayable? referable to goods, services or security?
- Ask whether balances fund lending or your own operations (para. 38). If yes, plan for a banking licence.
- Check the exclusions, especially para. 41 for wholesale funding and para. 42(3) for money received in the course of another licensed activity.
- If balances are held to make payments or as e-money, scope a Money Services licence (para. 52) and test the para. 53A exclusions.
- Choose the legal form (GEN 5.2.2(3)) and locate the head office in GMC (GEN 4.5.1).
- Identify Approved Persons for the Senior Executive Officer, Finance Officer, Compliance Officer and MLRO roles (GEN 5.5.1) and design a board that meets GEN 3.3.41A.
- Obtain PRU and the banking supplementary forms from GFSO and model capital and liquidity against them.
- Build client-money and AML frameworks (Client Money Rules under s. 4; see our guide to AML compliance in GMC).
Frequently asked questions
Is holding customer wallet balances in GMC deposit-taking?
It depends on what you do with the money. A balance repayable on demand is a Deposit under para. 85, but Accepting Deposits is regulated only if the money is lent out or finances your other activities (para. 38). A balance held solely to execute the customer's payments is more likely a Payment Account or Stored Value under Providing Money Services (para. 52).
Can a GMC company raise debt from investors without a banking licence?
The general answer is yes. Consideration for debt instruments within paras. 88–90 is not a Deposit (para. 41), but commercial paper must be issued to professional investors and carry a redemption value of at least USD 150,000. Offers of securities remain subject to Part 6 of the Act.
What capital does a GMC bank need?
Capital requirements are set in the Prudential Rulebook (PRU) and by GFSO as a condition of In-Principle Approval. Basnet Law can confirm the current requirements.
Key takeaways
- "Deposit" (para. 85) and "Accepting Deposits" (para. 38) are separate tests; both must be met before a banking licence is required.
- The exclusions in paras. 39–42 protect group treasury, wholesale debt issuance, lawyers' client accounts and money received by other Licensed Firms.
- Payment, wallet and e-money models fall under Providing Money Services (para. 52) with closed-loop and technical-provider exclusions (para. 53A).
- Stablecoin issuance is a distinct activity (para. 53B).
- Banks must be bodies corporate or partnerships with a GMC head office, a Finance Officer and a majority non-executive board; capital is set by PRU and GFSO.
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. 4, 16, 24, 29, 258 (definitions of "Deposit", "Fiat-Referenced Token", "Money Remittance", "Payment Account", "Payment Services", "Stored Value", "Stored Value Provider"); Schedule 1, paras. 3, 38–42, 52, 53, 53A, 53B, 85, 88–90
- GEN Rulebook 2026, Rules 3.3.16, 3.3.41A, 4.5.1, 5.2.2, 5.3 (guidance), 5.5.1, 8.8.10
- Royal Charter No. 1 of 2024, Art. 4
- Application of Laws Act 2024, s. 5 and Schedule B (COBS, PRU)
