BVI
Virtual Assets Service Provider

Wishing to get VASP licensed in BVI?

Introduction

In accordance with existing financial services regulations, any activity outlined within these regulations necessitates the acquisition of licensing, authorization, or approval, unless explicitly exempted.

In accordance with the definition endorsed by the FATF (Financial Action Task Force), a virtual asset is a digital representation of value that can be digitally traded or transferred and is intended for payment or investment purposes. It is crucial to note that digital representations of fiat currencies are not considered virtual assets. The Commission’s stance is that virtual assets and their associated products possess intrinsic value, exhibit characteristics of property, and meet the criteria for intangible property.

When determining the necessity of licensing for activities related to virtual assets, it is essential to evaluate the following factors:

1. The way in which the virtual asset (commonly referred to as a crypto asset) is being utilized.
2. The nature of the business activities being proposed or conducted.
3. Whether the business activities are analogous to those conducted by traditional enterprises.
4. The attributes and economic substance of the offering or issuance, including the characteristics and business activities involved.

If an intermediary or activity falls under the definition of “relevant business” as defined in regulation 2 of the Anti-money Laundering Regulations, 2008, the regulated entity must ensure continual compliance with these regulations, including the Anti-Money Laundering and Terrorist Financing Code of Practice, 2008, the Regulatory Code, and the Financial Services Commission Act, 2001.

From a regulatory perspective, virtual asset products can be subject to oversight in two primary ways: initially upon issuance and subsequently when they are held by an owner or become the focus of an investment activity.

Virtual assets and virtual asset-related products used exclusively for the purpose of purchasing goods and services, such as utility tokens that enable the acquisition of goods and services, would not fall under the purview of financial services legislation.

However, if a virtual asset product or service confers a benefit or right beyond serving as a medium of exchange, it may come under the scope of the Securities and Investment Business Act, 2010 (“SIBA”).

The following information offers guidance on the relevant laws, the types of products involved, and whether they should be subject to regulation by the Commission. These guidelines may not cover all possible scenarios, so if a virtual asset product exhibits characteristics resembling a regulated activity under SIBA but is not explicitly mentioned, it is advisable to seek the Commission’s views and guidance before proceeding with the activity within the Territory.

BVI
VASP License Application
Guidance on the Relevant BVI Laws

In December of 2022, the British Virgin Islands (BVI) implemented the Virtual Assets Service Providers Act, 2022 (the Act), which officially came into effect on February 1, 2023. This legislation establishes a structured regulatory framework for entities offering virtual assets services.

The Act provides clear definitions of crucial terms within the fintech sector, outlines the requirements for registration under the Act, and enumerates the ongoing responsibilities for relevant parties.

Who Qualifies as a Virtual Asset Service Provider (VASP)?

According to the Act, a VASP is an entity that operates as a business and provides virtual assets services, registered under the Act to perform one or more of the following activities for another individual or entity:

• Exchanging between virtual assets and fiat currencies.
• Exchanging between various forms of virtual assets.
• Transferring virtual assets related to a transaction on behalf of another party, involving moving virtual assets between virtual asset addresses or accounts.
• Safeguarding or managing virtual assets or instruments that grant control over virtual assets.
• Participating in and offering financial services connected to the issuance or sale of a virtual asset.
• Conducting other activities or operations specified in the Act or through regulations established under the Act.

It’s important to note that individuals or entities involved in certain activities do not meet the criteria or designation of a VASP:

• Providing supporting infrastructure for others to offer services, such as cloud data storage or integrity verification services.
• Acting as a software developer or offering unhosted wallets for software or hardware development.
• Solely creating or selling software applications or virtual asset platforms.
• Providing ancillary services or products to a virtual asset network, like hardware wallet manufacturing or offering unhosted wallets, as long as such services do not involve actively facilitating VASP activities for others.
• Solely operating a virtual asset network without facilitating VASP activities on behalf of customers.
• Offering closed-loop items that are non-transferable and non-exchangeable, with no payment or investment functionality.
• Accepting virtual assets as payment for goods and services, such as merchants accepting virtual assets for purchases.

Registration as a VASP

Those seeking to engage in the business of providing virtual asset services in the BVI can apply to the BVI Financial Services Commission (the Commission) for registration as a VASP. This registration can pertain to one or more of the following categories:

• Providing virtual asset services.
• Engaging in the business of offering virtual asset custody services.
• Operating a virtual asset exchange.

These categories are further defined as follows:

• “Virtual Assets Service” involves engaging in VASP activities or operations on behalf of another party and encompasses hosting wallets, providing financial services related to virtual assets, offering kiosks for virtual asset activities, or other activities as defined in issued guidelines.
• “Virtual Assets Custody Service” involves accepting and safeguarding virtual assets or instruments that allow a VASP to control these assets.
• “Virtual Assets Exchange” is a trading platform facilitating buying or selling virtual assets for money or other virtual assets, with custody or control over money or virtual assets during its operation.

Entities running virtual assets exchanges may need to adhere to certain restrictions, including geographic scope, user access, client targeting, tradable virtual assets, and disclosure obligations related to theft, loss, and insurance. Additionally, they should manage conflicts, implement price discovery mechanisms to prevent manipulation, supervise trading activities, and take control measures to safeguard the exchange’s integrity and investor interests.

It’s important to note that a registered Virtual Assets Service Provider (VASP) operating a virtual assets exchange is prohibited from:

• Offering financing to its clients for the purchase of virtual assets without prior Commission approval and the provision of full disclosure regarding financing terms and associated risks.
• Engaging in trading or marketing activities related to any virtual assets for its own gain, which could harm its clients’ interests, unless such activities are necessary for the exchange’s operation and are disclosed to clients in advance.
• Allowing virtual asset trading on its exchange in a misleading or deceptive manner designed to defraud subscribers or buyers of the virtual asset.
• Permitting a client to trade or purchase a virtual asset on its exchange without ensuring the client’s awareness of the risks involved and providing appropriate disclosures.
• Providing fiat currency-to-fiat currency exchange services on its virtual assets exchange without written Commission approval.
• Engaging in any other activity that could compromise the exchange’s integrity or erode public confidence.

VASP License Application

Entities seeking to obtain a VASP license from the Commission must submit the following information:

• Names and addresses of proposed directors and senior officers, with at least two directors being individuals.
• Names and addresses of shareholders and their shareholding percentages.
• Names and addresses of persons with a ‘controlling interest’ in the VASP.
• Physical address of the VASP in the BVI.
• Name and address of the VASP’s auditor, along with the auditor’s consent.
• Name and address of the proposed authorized representative, who acts as an intermediary between the VASP and the Commission.
• A comprehensive business plan covering various aspects of the VASP, such as knowledge, scope, marketing, resources, outsourcing, capital, and financial projections.
• A risk assessment outlining the identified, measured, assessed, monitored, controlled, and reported risks the VASP may encounter.
• A manual demonstrating the VASP’s compliance with the Act and its regulations, particularly in safeguarding against money laundering, terrorist financing, and proliferation financing.
• Details of internal safeguards, data protection, and cybersecurity systems.
• A system for handling client assets, custodian relationships, and complaints.

The Commission reserves the right to request additional information beyond the listed requirements. Additionally, individuals serving as directors, senior officers, or persons with a significant interest must meet the “fit and proper” criteria as outlined in the BVI Regulatory Code. The Commission assesses their honesty, integrity, competence, capability, and financial soundness.

Functionaries and Ongoing Obligations of a VASP

A VASP must always have the following functionaries in place:

• An authorized representative.
• An auditor for financial statement auditing.
• An individual approved by the Commission as a compliance officer to
  ensure Act compliance.

Ongoing obligations for VASPs include:

• Reporting changes in the information submitted during the application process.
• Annual submission of the auditor’s report.
• Filing a report on various financial and client-related details.
• Proper handling and notification of any unlawful interference with client assets.
• Conducting customer due diligence, complying with anti-money laundering, terrorist financing, and proliferation financing laws, and maintaining relevant records.

In addition, unless a VASP is listed on a recognized exchange, the Commission’s consent is required before any person owning a significant or controlling interest can sell, transfer, charge, or otherwise dispose of their interest.

Our Services

Aside from assisting with company registration in the BVI, we can help draft, review, and revise necessary documents, compile the application, submit it, and liaise with the Commission until a decision is reached.

Transition Period

The Act stipulates that anyone providing virtual assets services on the Act’s implementation date must apply for VASP licensing within six months of that date. They may continue offering the service while awaiting Commission approval or refusal.

Conclusion

The BVI has taken a significant step in establishing regulations for virtual assets service providers, reflecting the ongoing growth of the fintech sector. The Act offers clarity on various aspects, and it is anticipated that further guidelines will enhance understanding of how it applies to various business types in this evolving environment.

How TBA Can Help You!

Established in 2009, TBA Associates boasts a dedicated business development team specializing in tailor-made wealth preservation and enhancement solutions. This expert team delivers tax-efficient structures to facilitate cross-border transactions.

The knowledgeable professionals at TBA Associates will guide you in making informed decisions while providing continuous support throughout the process. They can assist you in devising and executing strategies that enable you to manage your financial affairs with absolute confidentiality in an environment free from adverse tax implications.

Should you have any question or related matter you may need to discuss or clarify, do not hesitate to contact us.

Our Business Team will be more than happy and pleased to provide you free assistance, to assist you to properly reach your professional goals.