BVIIntroduction to the BVI VASP License: An overview of the new BVI VASP regime

• In December 2022, the BVI introduced the Virtual Asset (Service Providers) Act, 2022 (VASP Act), which established a regulatory framework for VASPs operating in the BVI. The VASP Act aims to provide greater regulatory oversight and consumer protection for virtual asset businesses operating in the BVI and requires VASPs to meet certain requirements related to anti-money laundering (AML) and countering the financing of terrorism (CFT), as well as comply with other regulatory obligations such as record-keeping and reporting requirements. The BVI Financial Services Commission (FSC) is the regulatory body responsible for overseeing the operations of VASPs in the BVI and ensuring compliance with applicable laws and regulations.
• In recent years, the virtual asset business in the BVI has grown rapidly, with the FSC noting a significant increase in the number of registered VASPs and BVI cryptocurrency license holders. In addition, the FSC has observed a trend towards greater institutionalization of the virtual asset business in the BVI, with an increasing number of traditional financial institutions and asset managers entering the space. The BVI’s reputation as a leading offshore financial center, combined with its favorable tax and regulatory environment, has contributed to the growth of the virtual asset business in the country. The BVI VASP license provides virtual asset businesses with a clear regulatory framework and can enhance their reputation as trustworthy and reliable providers of virtual asset services.
• Moreover, in recent years, the BVI has taken steps to enhance its position as a leading jurisdiction for virtual asset businesses. For example, in March 2022, the BVI FSC issued guidance on the use of stablecoins and the regulation of stablecoin issuers and exchanges, further demonstrating the country’s commitment to supporting the growth and development of the virtual asset industry. Therefore, the BVI VASP license is an important regulatory framework for virtual asset businesses operating in the BVI, and the growing virtual asset business in the country is a testament to the attractiveness of the jurisdiction for this type of activity. As the virtual asset industry continues to evolve and mature, it is likely that the BVI will continue to play a key role in shaping the regulatory landscape for VASPs around the world.
• Tetra Consultants is an experienced service provider proficient in providing assistance with obtaining cryptocurrency licenses like a BVI VASP license. Our comprehensive service package includes everything you need to get your virtual asset business started in countries like BVI. Our team comprising of offshore financial licenses experts ensures consistent support to the clients from the steps to register company in BVI to the ultimate phase of filing of license application, we undertake everything on your behalf. In this article, our team has outlined the important provisions of the BVI VASP Act 2022 so that you can make a more informed decision. 

Background of BVI VASP Act 2022 

• The Virgin Islands Financial Services Commission has recently introduced the Virtual Assets Service Providers Act, 2022. This groundbreaking legislation, which takes effect on February 1, 2023, establishes a comprehensive legal framework for the registration and supervision of Virtual Assets Service Providers (VASPs) operating in and from within the Virgin Islands. The Financial Services Commission (FSC) is a regulatory agency that is responsible for supervising and regulating financial services in or from within the British Virgin Islands (BVI). The FSC’s mandate has been expanded with the introduction of the Virtual Assets Service Providers Act, 2022 (VASP Act). This act creates a legal framework for the registration and supervision of Virtual Assets Service Providers (VASPs) operating in or from within the BVI. The VASP Act defines key terms such as virtual assets, virtual assets services, and VASPs, and outlines the activities that require registration. The Commission is established as the competent authority for the supervision of persons engaging in any virtual asset service.
• The VASP Act also establishes the requirements for registration as a VASP, including additional specific requirements for VASPs seeking to provide virtual assets custody services or operate a virtual assets exchange. VASPs are required to appoint authorized representatives who are approved by the Commission to act in relation to VASPs. Additionally, the VASP Act requires VASPs to appoint an auditor approved by the Commission, and the auditor is obligated to report to the Commission on a regular basis. Other key features of the VASP Act include the establishment of measures to protect clients’ assets, the prohibition of making or issuing misleading advertisements, and the requirement for VASPs to comply with anti-money laundering and counter-terrorism financing regulations.
• In order to ensure a smooth transition for existing virtual assets service providers, the VASP Act also incorporates special considerations for those conducting virtual assets services before 1st February 2023. Such persons are required to submit a completed application for registration as a VASP to the Commission by 31st July 2023, in order to continue providing virtual asset services. Failure to submit an application by the deadline will result in the person being considered to be performing unauthorized business and being subject to enforcement action accordingly. These measures are designed to ensure that virtual asset services are provided in a safe, secure, and transparent manner, which benefits both the providers and the clients.

Highlights of the BVI VASP Act, 2022

1. Definition of Virtual Asset Service Provider: The VASP Act provides a definition of the term “VASP”, which refers to any virtual asset service provider who conducts virtual asset services as a business and is registered to perform one or more of the following activities or operations on behalf of another person:

• Exchange of virtual assets with fiat currencies;
• Exchange of 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
• Performance of any other activity or operation specified in the VASP Act or prescribed by regulations.
• Each of these activities is considered a virtual assets service and requires the VASP to be registered with the Commission. It is worth noting that the VASP Act also outlines activities that do not qualify as virtual assets services, which is important to avoid confusion among businesses that are not VASPs.

2. Scope of Virtual Asset Services: Engaging in any of the following activities or operations on behalf of another person will be considered as providing a virtual assets service:

• Custody or control over another person’s virtual assets, wallet or private key, or hosting wallets;
• Providing financial services related to the issuance, offer, or sale of a virtual asset;
• Provision of kiosks such as bitcoin teller machines or vending machines to facilitate virtual asset activities through electronic terminals and exchange of virtual assets for fiat currency or other virtual assets; or
• Any other activity that is considered as the provision of virtual asset service, issuance of virtual assets or involvement in virtual asset activity under the guidelines.
• It is important to note that even if a person is not registered as a VASP, they will still be deemed to be carrying on a virtual asset service if they engage in any of the abovementioned activities or are basically engaged in the cryptocurrency business. Therefore, such persons must comply with the regulatory framework provided by the VASP Act, including BVI cryptocurrency license registration requirements and ongoing reporting obligations to the Commission.

3. Excluded VASP activities: The VASP Act has been designed to address the activities of virtual asset service providers without regulating the underlying technology that supports virtual assets or VASP operations. The Act helpfully outlines a number of services that are exempt from its provisions. These include entities:

• Offering supporting infrastructure to enable another individual to provide a service (e.g., a provider of cloud data storage or integrity services responsible for verifying the accuracy of digital signatures).
• Providing services as a software developer or vendor of self-hosted wallets whose purpose is solely to develop or sell software or hardware.
• Exclusively involved in the creation or sale of a software application or virtual asset platform.
• Offering supplementary services or products to a virtual asset network (including a manufacturer of hardware wallets or provider of self-hosted wallets) as long as these services do not involve conducting or actively facilitating any of those services for or on behalf of another individual as a business.
• Solely operating a virtual asset network without engaging in or facilitating any activities or operations of a Virtual Asset Service Provider (VASP) on behalf of customers.
• Providing non-transferable, non-exchangeable closed-loop items that cannot be used for payment or investment purposes.
• Accepting virtual assets as a means of payment for goods and services (such as a merchant accepting virtual assets as payment for purchases).

4. Virtual assets custody services: A virtual assets custody service refers to the acceptance of virtual assets or instruments by a VASP for the purpose of securely storing them and exercising control over them. Apart from the existing obligations imposed on VASPs, any BVI entity engaging in this activity must also:

• Establish safekeeping arrangements with the owner of the virtual assets or instruments, covering aspects such as the duration of the arrangement, applicable fees, client access to the assets, and security measures.
• Adopt and implement best practices in information technology to ensure the secure storage of virtual assets.
• Ensure that any additional proceeds associated with virtual assets and related instruments are rightfully attributed to the owner of the assets unless otherwise agreed upon by both parties.

5. Virtual assets exchange services: The VASP Act defines a virtual assets exchange as a trading platform that facilitates the buying and selling of virtual assets for money or other virtual assets. 

• Operating a virtual assets exchange may be subject to various restrictions and prohibitions, including limitations on the geographic area of business, targeted client types, traded virtual asset types, disclosure obligations to clients regarding operations and insurance, supervision of trading activities, freezing and suspension of virtual asset trading, financing regulations for virtual asset purchases, and other necessary control measures to protect the integrity of the exchange and investors’ interests.
• Registered VASPs operating virtual assets exchanges are prohibited from providing client financing for virtual asset purchases without FSC permission and appropriate disclosures, engaging in trading or marketing activities detrimental to clients’ interests without prior disclosure, allowing misleading or fraudulent trading practices, permitting clients to trade without understanding associated risks, offering fiat currency exchange services without FSC approval, and engaging in activities that could compromise the exchange’s integrity or public confidence.

6. Functional requirements: A VASP must have the following officers/functionaries who have been approved by the FSC:

• At least two individual directors (of at least one director recommended to be the resident of BVI or such other number as FSC may require depending on the nature and risk associated with a VASP);
• An authorized representative (registered with the FSC as such under the VASP Act);
• An auditor;
• A compliance officer; and
• A money laundering reporting officer.
• As part of the regulatory compliance framework, we provide guidance and assistance in providing nominee director services as well as the recruitment of a qualified compliance officer. We help the entity identify suitable candidates, establish their roles and responsibilities, and provide ongoing support to ensure effective compliance oversight.

7. Documentation and informational requirements: An entity applying for a BVI VASP license is required to include the below information and attach supporting documents (if any) with the application form. These should include: 

• The physical address of the Virtual Asset Service Provider (VASP) in the British Virgin Islands (BVI).
• The names and addresses of the directors and senior executives.
• The names and addresses of the shareholders, including their shareholding levels.
• The name and address of the auditor appointed by the VASP.
• The name and address of the authorized representative.
• A business plan that covers the following aspects:
• The knowledge, expertise, and experience of the applicant.
• Detailed information about the nature, size, scope, and complexity of the VASP.
• Description of the underlying technology, method of delivering the virtual asset service, and the virtual asset to be utilized.
• Marketing strategies and the expected sources of business for the VASP.
• Information about the expected human resources capacity of the VASP at the beginning and in the long term.
• Planned outsourcing arrangements and the governance systems to be implemented.
• Indication of the initial capital, financial projections, and setup costs for the first three years of operation.
• A written risk assessment specific to the VASP.
• A regulatory compliance manual.
• Proposed internal safeguards and data protection systems.
• Proposed system for handling client assets, custodian relationships, and complaints.
• Details of the applicant’s legal advisors.
• Any other information deemed appropriate by the Financial Services Commission (FSC).
• Entities desiring to offer Virtual Assets Custody Services or operate a Virtual Assets Exchange, as defined in the VASP Act, must provide the Financial Services Commission (FSC) with additional information and assurances. The purpose of these requirements is to demonstrate the VASP’s capability to protect client assets effectively and mitigate the increased risks associated with money laundering and terrorist financing. These measures aim to ensure compliance with regulatory obligations and enhance the overall security of virtual asset services provided by the entity.

8. Ongoing obligations: A Virtual Asset Service Provider (VASP) will also have several ongoing obligations, including:

• Notifying the Commission of any changes to the information provided in the initial application.
• Submitting an annual copy of the auditor’s report.
• Filing a return containing various details about the VASP’s financial position, client base (including exposure level and geographical location), key performance indicators, and information about client complaints and their resolutions.
• Ensuring that client assets are clearly identified, appropriately segregated, and accounted for, and promptly informing both the client and the Commission if there is any unlawful interference or compromise of an asset (including providing details of the actions taken or being taken to restore and protect the client’s assets from further unlawful interference).
• Conducting customer due diligence, adhering to laws related to money laundering, terrorist financing, and proliferation financing, and maintaining relevant records (including implementing measures to trace and collect the IP addresses, associated dates, stamps, geographical data, device indicators, virtual asset wallet addresses, and transaction hashes of its customers).

9. Registration and timeline: Any entity intending to offer virtual asset services within or from the British Virgin Islands (BVI) is now obligated to register with the Financial Services Commission (FSC). New entities must complete the registration process with the FSC before initiating any activities related to Virtual Asset Service Providers (VASPs). Existing VASPs that were operational when the VASP Act came into effect have until July 31, 2023, to submit their registration applications to the FSC or cease their VASP activities altogether. 

• Upon approval of a VASP application, the FSC will proceed to register the applicant, issue a certificate of registration, and impose appropriate conditions as deemed necessary (which may include the requirement to obtain professional indemnity insurance).
• In terms of timeline, the VASP Registration Guidance provides helpful information. Firstly, the FSC aims to process applications and provide initial feedback within six weeks of receiving a complete application. Secondly, as per the FSC’s service standard, the application process should be concluded within six months from the date of initial submission. This timeline offers prospective applicants reassurance that they can expect an early indication of their application’s likelihood of success and anticipate completion within six months.
• If an entity engages in virtual asset services without being registered under the VASP Act, it may face penalties upon conviction. This includes a potential fine of up to US$100,000 and/or imprisonment for a period of up to 5 years. This penalty applies to any director, partner, or senior officer who knowingly authorized, permitted, or acquiesced in the commission of the offense.

10. License application fee: The fees required by the Financial Services Commission (FSC) for registering a Virtual Asset Service Provider (VASP) under the VASP Act are outlined in the guidelines and can be summarized as follows:

• An application fee of US$10,000 is applicable for individuals applying to offer Virtual Assets Custody Services.
• An application fee of US$10,000 is applicable for individuals applying to operate a Virtual Assets Exchange.
• For any other virtual asset services, an application fee of US$5,000 is applicable.

How can Tetra Consultants assist with BVI VASP License? 

• As an experienced business consulting firm specializing in regulatory compliance and corporate services, Tetra Consultants provide a wide range of services to assist entities throughout the entire process of applying for a BVI VASP license. Our approach is designed to offer comprehensive support and streamline the application process for our clients. We begin by conducting a thorough initial consultation to understand the entity’s specific needs, business model, and objectives for obtaining a BVI cryptocurrency license. This allows us to develop a tailored approach and provide customized solutions that align with their goals.
• In addition to the VASP license application, we offer comprehensive support for company registration in the BVI and assist with securing specified virtual asset licenses like the BVI cryptocurrency license. Our services cover all aspects of the incorporation process, ensuring compliance with legal and administrative requirements. We facilitate corporate bank account opening, working closely with reputable banks in the BVI. Our team assists in preparing the required documentation, managing due diligence procedures, and ensuring compliance with anti-money laundering (AML) and Know Your Customer (KYC) regulations.
• Even after obtaining the VASP license, our support does not end there. We offer ongoing compliance support, providing regular updates on regulatory changes, assisting in the development and implementation of robust compliance policies and procedures, conducting compliance audits, and delivering tailored training programs for staff. Our goal is to ensure the entity’s ongoing compliance with regulatory obligations and help them navigate any challenges that may arise.
• With our comprehensive approach, combining regulatory expertise, corporate services, and in-depth knowledge of the BVI jurisdiction, we aim to streamline the application process, mitigate risks, and support entities in successfully obtaining and maintaining their BVI VASP license. Our focus is on providing high-quality, customized solutions that address each client’s unique requirements and position them for long-term success in the virtual asset services industry.
• Contact us now to know more about the process of applying for a BVI VASP license and our team of experts will revert within the next 24 hours.