Summary
- The Financial Services Act 2025 (Law No. 5 of 2025) is GMC's licensing statute, deemed in operation from 26 December 2024 (s. 1(1)). The regulator is the Gelephu Financial Services Office (GFSO), defined in s. 258 as "the Regulator".
- Section 16 contains the General Prohibition: no person may carry on a Regulated Activity "by way of business in GMC" unless it is a Licensed Firm or an Exempt Firm.
- Schedule 1, Part 2 specifies 23 regulated activities, from Dealing in Investments as Principal (para. 4) to Agreeing to Carry On Specified Kinds of Activity (para. 70). Most extend expressly to Virtual Assets and Spot Commodities.
- Schedule 1, Part 3 lists 15 categories of Specified Investment (paras. 85–99B); Part 4 defines 16 classes of insurance (paras. 102–117).
- A Financial Services Licence under Part 4 specifies the permitted activities and may carry conditions (s. 30). Agreements made in breach of the General Prohibition are unenforceable against the other party (s. 21).
What the Act does
The Financial Services Act 2025 repeals and re-enacts, with amendments, the Financial Services and Markets Regulations 2015 that had applied in GMC through Schedule B of the Application of Laws Act 2024 (s. 1(2)).
GFSO's objectives (s. 1A(3)) include fairness, transparency and efficiency, confidence in GMC, financial stability and the safety and soundness of Licensed Firms. The Act is supported by GFSO rulebooks, principally the General Rulebook (GEN, Version 1.0, 7 May 2026), COBS, the Fund Rulebook, AML and Sanctions and the Prudential rulebooks (PRU and PIN), plus Virtual Asset Guidance.
The General Prohibition
Section 16(1) provides: "No person may carry on a Regulated Activity by way of business in GMC, or purport to do so, unless he is— (a) a Licensed Firm; or (b) an Exempt Firm."
Three elements matter. The activity must be a Regulated Activity, defined in s. 19 as one "specified as a Regulated Activity in Schedule 1". It must be carried on "by way of business". And it must be carried on "in GMC". Under s. 259 a person is treated as carrying on an activity in GMC if its registered or head office in GMC manages the activity day to day (s. 259(2)), or if the activity is carried on from an establishment it maintains in GMC (s. 259(3)).
A Licensed Firm must also stay inside its licence: it must not carry on a Regulated Activity "otherwise than in accordance with a Financial Services Licence" (s. 17(1)).
Key terms
| Term | Meaning (s. 258 unless stated) |
|---|---|
| Licensed Firm | A person "who has a Financial Services Licence to carry on one or more Regulated Activities". |
| Financial Services Licence | "a licence given, or having effect as if so given, by the Regulator in accordance with Part 4". |
| Financial Services Permission | The term GEN uses for the scope of a firm's licence — GEN 8.3 concerns an "Application to change the scope of a Financial Services Permission". Licence and Permission describe the same authorisation. |
| Exempt Firm | "a person set out in Schedule 3": the Regulator, the Registrar, Licensed Bodies, External Bodies, External Members and public bodies listed on GFSO's website; exempt from the General Prohibition (s. 16(3)). |
| Specified Investment | "an investment falling within paragraphs 85 to 99B of Schedule 1, without regard to any applicable exclusions". |
| Approved Person | "an individual in relation to whom an Approval is given under section 43" to perform a Controlled Function (see our guide to Approved Persons and Controlled Functions). |
| Controlled Function | "a function of a description specified in the Rules made by the Regulator"; the functions are listed in GEN 5.3. |
The "by way of business" test
Schedule 1, Part 1, para. 3(1) provides that a person carries on an activity by way of business if the person:
- "engages in the activity in a manner which in itself constitutes the carrying on of a business";
- "holds himself out as willing and able to engage in that activity"; or
- "regularly solicits other persons to engage with him in transactions constituting that activity".
The limbs are alternatives. A firm that has closed no transactions but advertises itself as willing to do so is already within limb (b). Section 6 allows GFSO to make Rules deeming persons to be, or not to be, acting by way of business. For deposits, para. 42(1) adds that a person is not accepting deposits by way of business if it does not hold itself out as doing so "on a day-to-day basis" and accepts deposits "only on particular occasions".
How Schedule 1 works
Para. 2(1) links activity to investment: an activity in Part 2 which "relates to an investment of a kind specified by any provision of Part 3" is a Regulated Activity. Para. 2(2) makes paras. 36, 43, 46, 52, 59–61, 65 and 68 regulated "irrespective of the kind of property to which it relates". Para. 2(3) confirms every activity is read subject to its exclusions, including Chapter 18 (see our guide to the Schedule 1 exclusions).
Every regulated activity in Schedule 1, Part 2
| Para. | Regulated Activity | Scope (summarised; "Financial Instruments" means the traditional instruments in Part 3) |
|---|---|---|
| 4 | Dealing in Investments as Principal | Buying or selling Financial Instruments, Virtual Assets or Spot Commodities, or subscribing for or underwriting Financial Instruments, as principal. |
| 12 | Dealing in Investments as Agent | The same activities as agent. |
| 16 | Arranging Deals in Investments | Arrangements with a view to another person buying, selling, subscribing for or underwriting a Specified Investment, Virtual Asset or Spot Commodity (16(1)), or with a view to a participant in the arrangements doing so (16(2)). |
| 28 | Advising on Investments or Credit | Advice on the merits of buying or selling a Specified Investment, Virtual Asset or Spot Commodity, or entering into a Credit Facility, given to an investor or borrower. Includes any "statement, opinion or report" intended to influence a product choice. |
| 31 | Effecting Contracts of Insurance | Effecting a Contract of Insurance as principal. |
| 32 | Carrying Out Contracts of Insurance as Principal | Carrying out a Contract of Insurance as principal. |
| 33 | Insurance Intermediation | Advising on, acting as agent in buying or selling, or arranging Contracts of Insurance, including arrangements that "do not bring about the transaction" (33(5)). |
| 36 | Insurance Management | Management services or managerial functions for an insurer, including administration and underwriting. |
| 38 | Accepting Deposits | Accepting deposits where the money is lent to others or finances other activities to a material extent. |
| 43 | Providing Custody | Safeguarding Financial Instruments, Virtual Assets or Spot Commodities belonging to another; safeguarding Fund Property; acting as a Central Securities Depository; or administering those assets. |
| 46 | Arranging Custody | Arranging for others to Provide Custody. |
| 48 | Providing Credit | Entering into a Credit Facility with a borrower, or exercising the lender's rights and duties under one. |
| 50 | Arranging Credit | Arranging for another person to borrow by way of a Credit Facility. |
| 52 | Providing Money Services | Currency exchange, Money Remittance or Payment Services. |
| 53B | Issuing a Fiat-Referenced Token | Issuing a fiat-backed token as defined in s. 258. |
| 54 | Operating a Multilateral Trading Facility or Organised Trading Facility | An MTF on which Financial Instruments, Virtual Assets or Spot Commodities are traded; an OTF for Financial Instruments; and ancillary activities GFSO deems suitable. |
| 56 | Managing Assets | Discretionary management of another's assets that include any Financial Instrument, Virtual Asset, Spot Commodity or rights under long-term insurance. |
| 59 | Managing a Collective Investment Fund | Being legally accountable to Unitholders for fund property, or establishing, managing, operating or winding up a fund. |
| 60 | Acting as the Administrator of a Collective Investment Fund | Fund administration services: dealing instructions, NAV calculation, register maintenance, AML functions, reconciliation, financial statements. |
| 61 | Acting as the Trustee of an Investment Trust | Holding fund assets on trust for Unitholders of an Investment Trust. |
| 65 | Operating a Credit Rating Agency | Credit Rating Activities producing a Credit Rating for public dissemination or subscription. |
| 68 | Specified Benchmarks | Providing Information in relation to, and Administering, a benchmark specified in GFSO Rules. |
| 70 | Agreeing to Carry On Specified Kinds of Activity | Agreeing to carry on any other Part 2 activity, other than paras. 31, 32, 38, 54, 59, 60 and 61. |
Virtual assets under the same framework
The Act has no separate crypto licence. A Virtual Asset is "a digital representation of value that can be digitally traded" (s. 258), and paras. 4, 12, 16, 28, 43, 54 and 56 refer to it expressly. A Fiat-Referenced Token is a distributed-ledger token referencing a fixed amount of a single fiat currency and redeemable from its issuer on demand (s. 258); issuing one is its own activity (para. 53B). Section 5A gives GFSO rule-making power for firms dealing in Virtual Assets, Spot Commodities or Fiat-Referenced Tokens, and s. 5B a direction power. GFSO's page confirms Regulated Activities apply to "both traditional assets (e.g. securities) or virtual assets (e.g. spot cryptocurrencies)", subject to Virtual Asset Guidance (see our guide to the GMC digital asset framework).
Schedule 1, Part 3: the Specified Investments
The 15 categories are: deposits (para. 85); rights under a Contract of Insurance (86); shares or stock in any Body Corporate other than an open-ended investment company (87); instruments creating or acknowledging indebtedness such as debentures, bonds and certificates of deposit, excluding trade credit instruments, cheques, letters of credit and banknotes (88); government and public Financial Instruments (90); warrants and other entitlements (91); certificates representing Financial Instruments (92); units in a Collective Investment Fund (93); options (94); futures, excluding contracts "made for commercial and not investment purposes" (95); contracts for differences (96); rights under a Credit Facility (97); rights to or interests in any other Specified Investment (98); Structured Products (99A); and Environmental Instruments such as emissions allowances and carbon credits recognised by GFSO (99B).
Part 4 defines a Contract of Insurance as "any contract of insurance or contract of reinsurance" (para. 100) and sets out seven life classes (paras. 102–108) and nine non-life classes (paras. 109–117).
What a Financial Services Licence looks like
Only a Body Corporate or a Partnership may apply (s. 27(1)); GEN 5.2.2 requires a Body Corporate for insurers and trustees of Investment Trusts. When GFSO grants a licence it "must specify the permitted Regulated Activity or Regulated Activities" (s. 30(3)), may attach "such conditions, restrictions or limitations as the Regulator considers appropriate" (s. 30(3A)), and may narrow, widen or add to the activities applied for (s. 30(4)). Adding or removing activities later is a variation under s. 32, which GEN 8.3 calls changing the scope of the Financial Services Permission (see our guide to the GFSO application process).
A GMC-incorporated Licensed Firm must have its head office and registered office in GMC (GEN 4.5.1(1)), and every key business document must state "Regulated by the GMC Gelephu Financial Services Office" (GEN 4.4.1(3)). Prudential categories, minimum capital and fees are set in PRU, PIN and by GFSO, not in the Act or GEN; Basnet Law can confirm current figures for a specific model.
Consequences of getting it wrong
- An agreement made in the course of carrying on a Regulated Activity in contravention of the General Prohibition "is unenforceable against the other party", who may recover money or property transferred and compensation for loss (s. 21(1)–(2)). Section 22 applies the same rule to agreements a Licensed Firm makes in consequence of a third party's unlicensed activity. The Court may allow enforcement if "just and equitable" (s. 23(4)).
- Unlicensed deposit-taking allows the depositor to seek a court order returning the money (s. 24). A contravention of the General Prohibition is a contravention of the Act (s. 218(1)(d)), exposing the person to public censure (s. 231), financial penalties (s. 232) and injunctions and restitution orders (Part 20).
- Section 20 prohibits holding out as licensed, and s. 19A prohibits misleading, deceptive, fraudulent or dishonest conduct in relation to any Specified Investment, Virtual Asset or Regulated Activity.
Practical checklist: mapping your business to Schedule 1
- List every product or service you will offer in or from GMC and the Specified Investment or asset type each relates to.
- Match each service to Part 2 activities, remembering para. 70 (agreeing) and para. 16(2).
- Test each against the "by way of business" limbs in para. 3(1) and the territorial link in s. 259.
- Apply the activity-specific and Chapter 18 exclusions (paras. 74–83), and test marketing against s. 18 (see our guide to financial promotions in GMC).
- Choose legal form under s. 27(1) and GEN 5.2.2, allowing for the resident director requirement in the Companies Act 2025, s. 145(1), and identify the individuals for the mandatory Controlled Functions.
Frequently asked questions
Is there one licence for all financial services in GMC?
Yes. The Financial Services Licence under Part 4 is the single authorisation. It lists the Regulated Activities the firm may carry on (s. 30(3)), so a bank, a broker and a fund manager each hold a licence with different permitted activities and conditions.
Does a crypto exchange need a different licence from a securities broker?
No. Virtual Assets are written into the same activities — dealing (paras. 4 and 12), arranging (16), advising (28), custody (43), operating an MTF (54) and managing assets (56). GFSO applies Virtual Asset Guidance and has specific powers under ss. 5A and 5B.
What happens to contracts signed by an unlicensed firm?
Under s. 21 they are unenforceable against the counterparty, who can recover what it paid plus compensation, unless the Court decides enforcement is just and equitable (s. 23). For deposits, s. 24 provides a route to a court order for return of the money.
Key takeaways
- The General Prohibition in s. 16 is the gateway: Regulated Activity, by way of business, in GMC.
- Schedule 1 specifies 23 activities, 15 categories of investment and 16 insurance classes; "by way of business" has three alternative limbs (para. 3(1)).
- A licence is bespoke: GFSO specifies the activities and may impose conditions (s. 30).
- Unlicensed activity makes contracts unenforceable (s. 21) and exposes the firm to penalties (ss. 231–232).
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 (Law No. 5 of 2025), ss. 1, 1A(3), 5A, 5B, 6, 16, 17, 18, 19, 19A, 20, 21, 22, 23, 24, 27(1), 30, 32, 218, 231, 232, 258, 259; Schedule 1, Part 1 paras. 2–3; Part 2 paras. 4, 12, 16, 28, 31–33, 36, 38, 42, 43, 46, 48, 50, 52, 53B, 54, 56, 59, 60, 61, 65, 68, 70; Part 3 paras. 85–99B; Part 4 paras. 100–117; Schedule 3
- Companies Act 2025 (Law No. 1 of 2025), s. 145(1)
- GEN Rulebook 2026 (Version 1.0), Rules 4.4.1, 4.5.1, 5.2.2, 8.3
