The BVI’s Cryptocurrency Regulation: A Comprehensive Guide

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Basic price of incorporation the company with VASP authorization in the BVI starts from €20,000

A brief overview of the BVI’s new VASP regulation

In December 2022, the BVI passed the Virtual Asset Service Providers Act 2022 (the VASP Act), which came into force on February 1, 2023. The VASP Act sets out the regulatory framework for VASPs operating in the BVI and is intended to strengthen the oversight and consumer protection of the virtual asset business in the BVI.

The BVI's standing as a leading offshore financial center, in combination with a favorable tax and regulatory environment, is encouraging the growth of virtual asset business in the country.

The BVI provides recently updated VASP regulation that along with a favorable tax and regulatory framework encourages the growth of the virtual asset industry

Step by step description

Step 1 – Initiating the process by obtaining relevant documents from the client:

    At this step we require the following documents:
  • completed Instruction Sheet;
  • notarized/certified copy of passport for each director, shareholder and beneficial owner;
  • a notarized/certified proof of address for each director, shareholder and beneficial owner.

Duration: from 1 to 3 business days.

Step 2 – Company incorporation:

    Registration procedure consists of:

  • Selection of 3 company names and reservation the preferred name with the Financial Services Commission (“Commission”), namely the BVI Registry;
  • Appointment a registered agent for the company;
  • Drafting and notarization of the memorandum;
  • Submission of the relevant documents - client must prepare the articles of association and details of the registered agent and founder of the company. Once completed and prepared, the client must submit them to the BVI Companies Registry for registration approval;
  • Finding a suitable office and hiring employees.

The cost of setting up a limited liability company - €3,000.

Step 3 – AML/KYC procedural rules:

    Creation of individual set of documents including AML/CTF procedures, Risk assessment policy, KYC configuration with necessary levels of verification of individuals, legal entities, merchants.

Duration: approximately 1-2 weeks

Step 4 – Obtaining a VASP license:

    The application must include the following information:

  • the names and addresses of the directors and senior officers of the VASP (and at least two of the directors must be individuals);
  • the names and addresses of shareholders of the VASP and details of their shareholding;
  • details of the auditor of the VASP;
  • details of the proposed authorized representative of the VASP;
  • a detailed business plan;
  • a written risk assessment;
  • a written compliance manual showing how the applicant, if granted registration, intends to comply with the requirements of the VASP Act and any other BVI regulations;
  • the internal safeguards and data protection (including cyber security) systems intended to be utilized; and
  • the system to be put in place on how the VASP will handle client assets, custodian relationships and complaints.

    • Applications fees as follows:

  • $10,000 - for entities that seek to provide virtual assets custody services;
  • $10,000 - for entities applying to operate a virtual assets exchange;
  • $5,000 - for any other type of virtual assets services.

Duration: the Commission will endeavor to process the application and provide initial comments within 6 weeks. The application process must be completed within 6 months of submission.

Understanding Requirements in the BVI

The Financial Services Commission (“Commission”) is established as the competent authority for the supervision of persons engaging in any virtual assets service.

Company must apply for registration with the Commission to obtain a VASP license, If it wishes to carry on in or from within the Virgin Islands the business of providing a virtual asset service in one or more of the following categories:

  • to carry on the business of providing a virtual assets service - the business of engaging on behalf of another person in any VASP activity or operation which outlined in Section 2 of VASPA;
  • to engage in the business of providing a virtual assets custody service - the acceptance for safekeeping of virtual assets or instruments that enable a VASP to exercise control over the virtual assets or instruments;
  • to operate a virtual assets exchange - operation of a trading platform that is managed for the purpose of allowing an offer or invitation to be made to buy or sell any virtual asset in exchange for money or any virtual asset and which comes into custody, control, power or possession of, or over, any money or any virtual asset at any point in time during its course of business.

    • To obtain a VASP license it is a must to register in the Financial Services Commission of British Virgin Islands

    A VASP license in BVI requires the contract with an auditor and AML officer. They are not obliged to be BVI residents, and the regulating authority may approve the professional from the list of recognized jurisdiction

    Requirements for VASP registration in the BVI

    Specific requirements for VASPs:

    • at least 2 individual directors, one of whom is physically residing in the BVI (if required by the Commission, depending on the nature and risk associated with the VASP; a director is deemed to be physically residing in the Virgin Islands if the director's cumulative period of absence (if any) from the Virgin Islands during the year does not exceed 120 days);
    • appointment of an authorized representative, an auditor, a compliance officer, a qualified individual as its Money Laundering Reporting Officer (“MLRO”);
    • maintenance customer identification procedures, keeping records of KYC processes and suspicious transactions, setting up internal procedures for reporting suspicious transactions etc.;
    • VASPs are under the BVI’s AML/CTF regime for transactions involving virtual assets valued at $1,000 or more;
    • ongoing obligations of VASPs include filing annual returns, filing annual financial statements and filing annual compliance officer reports;
    • and others.

      • Any entity carrying on virtual asset services without being registered under the VASP Act is liable on conviction to a fine of up to $100,000 and/or for any director, partner or senior officer to be imprisoned for 5 years.

    Taxes in the BVI

    The BVI is a tax neutral jurisdiction. There are:

  • no specific taxes levied on virtual assets:
  • no withholding tax;
  • no capital gains tax;
  • no income tax;
  • no corporate taxes.

    • No taxation in regard to activities related to virtual assets

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    The content of this article is intended to provide a general guide to the subject matter, not to be considered as a legal consultation.