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Crypto-Based Derivative Products Require Careful Consideration in BVI

In the rapidly evolving world of cryptocurrency and blockchain technology, companies operating in the British Virgin Islands (BVI) must navigate a complex web of regulations to ensure compliance. The VASP Act and the BVI Securities and Investment Business Act, 2010 (SIBA), among other laws, apply to virtual asset service providers (VASPs) and investment businesses, respectively.

Regulatory Framework

While not specifically designed for cryptocurrency regulation, BVI entities involved in the cryptocurrency space may fall under existing regulatory frameworks. These include:

  • The BVI Business Companies Act, 2004 (as amended)
  • SIBA
  • The Financing and Money Services Act, 2009 (FMSA)
  • The Anti-Money Laundering Regulations, 2008 (as amended) (AML Regs)
  • The Economic Substance (Companies and Limited Partnerships) Act, 2018 (as amended)

VASP Act Exemptions

The VASP Act explicitly states that a person registered under the act solely engaged in providing virtual asset services does not need licensing under SIBA or FMSA. However, if a BVI entity provides financial services related to virtual asset issuance or transfer, it must register with the Commission.

SIBA and Investment Business

SIBA oversees investment services within the BVI, requiring entities engaging in investment business to be regulated and licensed by the Commission. The definition of investment business is comprehensive, encompassing activities such as:

  • Dealing in investments
  • Arranging deals in investments
  • Investment management
  • More…

Money Transmission Laws and Anti-Money Laundering Requirements

The FMSA governs money services businesses, including automated teller machine services, money transmission services, and currency exchange services. While cryptocurrencies are not typically considered “money” or “currency,” the VASP Act’s exemption for registered virtual asset service providers provides clarity.

Anti-Money Laundering Requirements

VASPs must comply with the Anti-Money Laundering (Amendment) Regulations, 2022, and the Anti-Money Laundering and Terrorist Financing (Amendment) Code of Practice, 2022. These regulations bring VASPs under the scope of the BVI’s AML/CTF regime for transactions involving virtual assets valued at $1,000 or more.

Conclusion

In the rapidly evolving world of cryptocurrency and blockchain technology, careful consideration is required to ensure compliance with relevant laws and regulations in the BVI. Companies must navigate a complex regulatory landscape to avoid non-compliance and potential penalties. It is essential to seek professional advice from qualified lawyers to ensure that your company remains compliant with all applicable regulations.