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BVI Introduces New Regulations to Combat Money Laundering, Terrorist Financing and Proliferation Financing

The British Virgin Islands (BVI) has introduced new regulatory requirements for intermediaries involved in transfers of virtual assets to combat money laundering, terrorist financing, and proliferation financing.

Sandbox Regulations

The BVI has also introduced the Financial Services (Regulatory Sandbox) Regulations, 2020, which aims to encourage technological innovation in the financial technology sector under a lighter touch regulatory regime. This allows start-ups to test innovative technologies for delivering licensable financial services, including those related to virtual assets.

Ownership and Licensing Requirements

  • There are no restrictions on an investment manager owning cryptocurrencies for investment purposes.
  • An investment fund incorporated in the BVI can deal with virtual assets without being registered by the Commission under the VASP Act, as long as it is dealing with those assets on a proprietary basis.
  • However, if an investment manager holds virtual assets on behalf of a third party, they may need to apply for registration under the VASP Act.

Mining

Mining cryptocurrencies is not regulated in the BVI and remains an unregulated activity from a BVI perspective, whether conducted within or outside of the territory. However, mining may not be efficient due to high electricity costs.

Border Restrictions and Declaration

  • The BVI does not impose any general border restrictions on the ownership or importation of virtual assets.
  • Customs regulations require individuals entering or departing the BVI to declare amounts of cash exceeding $10,000.

Reporting Requirements

  • A BVI company involved in transactions with virtual assets must report those transactions under the Common Reporting Standard (CRS) and the OECD’s Crypto-Asset Reporting Framework (CARF).

Estate Planning and Testamentary Succession

  • Cryptocurrencies and other virtual assets have not been widely used for estate planning and testamentary succession under BVI law.
  • The VASP Act does not deal specifically with the treatment of virtual assets upon death, and there may be uncertainty as to where the situs of a virtual asset is located.

Conclusion

The new regulations introduced by the BVI aim to combat money laundering, terrorist financing, and proliferation financing in the virtual asset sector. Intermediaries involved in transfers of virtual assets must comply with these regulations and obtain sufficient information about the origin and destination of transactions.