Virtual Assets Derivatives: A Guide to Legal Compliance
The rapid growth of the virtual asset market has raised important questions about regulatory compliance for investors, businesses, and individuals involved in this space. In this article, we will explore the legal framework governing virtual assets derivatives and provide guidance on the requirements for licensing and registration.
What are Contracts for Differences?
Under the Securities and Investment Business Act (SIBA), a “contract for differences” is defined as rights under any contract where the purpose or intended purpose is to secure a profit or avoid a loss by reference to fluctuations in the value or price of property of any description. This includes contracts for virtual assets, such as cryptocurrencies like Bitcoin or Ethereum.
Long-term Insurance Contracts
Paragraph 8, Schedule 1 of SIBA defines “long-term insurance contracts” as rights under a contract that constitutes Class 1 or Class 2 long-term business within the meaning of the Insurance Act, 2008. However, virtual assets are not currently covered by this definition.
Rights and Interests in Investments
Paragraph 9, Schedule 1 of SIBA defines “rights and interests in investments” as rights to and interests in any investment falling within any of the preceding paragraphs of this Schedule. This includes virtual assets deemed an investment under any other paragraph within Schedule 1 of SIBA.
Investment Activities
Schedule 2 of SIBA sets out specific investment activities that require a licence, including:
- Dealing in investments
- Arranging deals in investments
- Managing investments
- Providing investment advice
- Operating an investment exchange
To determine whether a licence is required, two conditions must be satisfied:
- The product must satisfy the definition of an investment
- The activity must not be excluded under Part B of Schedule 2 or Paragraph (b) of Section 6 of SIBA
Money Transmission Services
Section 6 of the Financing and Money Services Act (FMSA) defines “money services business” as providing certain financial services, including transmission of money in any form. However, virtual assets are not considered “money” under this definition, and therefore do not require a licence for transmission.
Regulatory Compliance
In conclusion, virtual assets derivatives are subject to specific regulatory requirements under SIBA and FMSA. Investors, businesses, and individuals involved in this space must comply with these regulations to avoid legal and financial consequences. We recommend seeking professional advice from experienced lawyers and compliance experts to ensure compliance with the relevant laws and regulations.
P.S. Insights on Cryptocurrency Legal Issues
Cryptocurrencies like Bitcoin and Ethereum have raised important questions about regulatory compliance, tax planning, and tax compliance. Our Freeman Law Cryptocurrency Law Resource page provides a summary of the legal status of cryptocurrency for each country across the globe. Contact us now to schedule a consultation or call (214) 984-3410 to discuss your cryptocurrency and blockchain technology concerns.