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The British Virgin Islands (“BVI”) has recently introduced a new regulatory framework for Virtual Assets Service Providers operating within the Virgin Island. The new legislation, known as the Virtual Asset Service Providers Act, 2022 (the “VASP Act”), came into effect on 1 February 2023.
Under this new regulatory framework, all VASPs operating in the BVI are required to be licensed and registered with the BVI Financial Service Commission (“FSC”).
New entities wishing to provide virtual assets services in or from within the BVI must register with FSC before commencing business.
For existing operational entities to continue providing a virtual asset service, a completed application must be submitted to FSC for registration as a VASP by 31st July 2023. Where an application is not submitted by the said date, the entity will be considered to be conducting unauthorised business and subjected to enforcement action accordingly.
A “VASP” is defined as a virtual asset service provider who provides, as a business, one or more of the following activities or operations for or on behalf of another person
exchange between virtual assets and fiat currencies;
exchange between one or more forms of virtual assets;
transfer of virtual assets, where the transfer relates to conducting a transaction on behalf of another person that moves a virtual asset from one virtual asset address or account to another;
safekeeping or administration of virtual assets or instruments enabling control over virtual assets;
participation in, and provision of, financial services related to an issuer’s offer or sale of a virtual asset; or
perform such other activities or operations as may be specified in the VASP Act or further regulations.
A virtual assets service is defined as engaging the following activities or operations for or on behalf of another person:
hosting wallets or maintaining custody or control over another person’s virtual asset, wallet or private key;
providing financial services relating to the issuance, offer or sale of a virtual asset;
providing kiosks (such as automatic teller machines, bitcoin teller machines or vending machines) for the purpose of facilitating virtual assets activities through electronic terminals to enable the owner or operator of the kiosk to actively facilitate the exchange of virtual assets for fiat currency or other virtual assets; or
engaging in any other activity that, under the Guidelines, constitutes the carrying on of the business of providing virtual asset service or issuing virtual assets or being involved in virtual asset activity.
Out-of-scope VASP activities:
Entities or persons engaging in or performing the following activities shall not be subjected to the VASP Act:
providing ancillary infrastructure to allow another person to offer a service, such as cloud data storage provider or integrity service provider responsible for verifying the accuracy of signatures;
providing service as a software developer or provider of unhosted wallets whose function is only to develop or sell software or hardware;
solely creating or selling a software application or virtual asset platform;
providing ancillary services or products to a virtual asset network, including the provision of services like hardware wallet manufacturer or provider of unhosted wallets, to the extent that such services do not extend to engaging in or actively facilitating as a business any of those services for or on behalf of another person;
solely engaging in the operation of a virtual asset network without engaging or facilitating any of the activities or operations of a VASP on behalf of customers;
providing closed-loop items that are non-transferable, nonexchangeable, and which cannot be used for payment or investment purposes; or
accepting virtual assets as payment for goods and services (such as the acceptance of virtual assets by a merchant when effecting the purchase of goods).
In addition, any BVI entity issuing tokens on a proprietary basis for its own account and behalf is not an activity regulated by the VASP Act
Application
A VASP application for registration must be accompanied with the following information and documentation:
(a) the names and addresses of the persons proposed as directors and senior officers of the VASP;
(b) the names and addresses of the persons who hold shares, including their level of shareholding in the VASP;
(c) the names and addresses of the persons who have a controlling interest in the VASP;
(d) the physical address in the Virgin Islands of the VASP;
(e) the name and address of the auditor of the VASP, including the auditor’s consent to act as such;
(f) the name and address of the proposed authorised representative of the VASP;
(g) a business plan in relation to the VASP
(h) a written risk assessment of the VASP, outlining the risks the VASP will or may be exposed to and specifying how those risks are to be identified, measured, assessed, monitored, controlled and reported;
(i) a written manual showing how the applicant, if granted registration, intends to comply with the requirements of this Act and any regulations made thereunder, including how the applicant intends to safeguard against the activities of money laundering, terrorist financing and proliferation financing;
(j) the internal safeguards and data protection (including cyber security) systems intended to be utilized; and
(k) the system to be put in place on how the VASP
The regulation also mandates VASPs to appoint two Directors, an authorized representatives, an auditor and a Compliance Officer to oversee respective functions. Furthermore, the legislation requires VASPs to conduct ongoing customer due diligence, report suspicious transactions, and maintain comprehensive records of their operations. Failure to comply with these regulations can result in penalties and other enforcement actions.
Fees
VASP
US$
Application
$5,000
Initial registration
$7,500
Annual renewal of registration
$7,500
VASP providing virtual assets custody services
Application
$10,000
Initial registration
$15,000
Annual renewal of registration
$15,000
VASP operating a virtual assets exchange
Application
$10,000
Initial registration
$25,000
Annual renewal of registration
$25,000
Penalties
Any director, partner or senior officer of a BVI entity carrying on virtual asset services without being registered under the VASP Act may be liable on conviction to a fine of up to US$100,000 and/or 5 years imprisonment, if they have knowingly acquiesced in the commission of the offence.
Further details can be found in the below references:
Should you require further information, please contact your usual Aegis representative or email us at corporate@aegisintlgroup.com