BVI Virtual Asset Service Providers Bill Released – Financial Services

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On September 9, 2022, the Government of the British Virgin Islands (“BVI”) released a Virtual Asset Service Provider Bill (“VASP Act”) for consultation with industry. The VASP Bill introduces a detailed new registration and oversight framework for Virtual Asset Service Providers (“VASPs”) operating in or from BVIs, in line with Financial Action Task Force (“FATF”) requirements ).

The VASP Bill defines virtual asset services that will require registration of a VASP with the BVI Financial Services Commission (“FSC”), registration and ongoing requirements for VASPs, as well as broad supervisory powers for the FSC.

Definitions of Virtual Asset Services

Virtual asset services and business activities that will require registration as a VASP under the VASP Bill include:

  • Virtual asset transactions;

  • provision of financial services relating to the issue, offer or sale of a virtual asset;

  • provision of virtual asset custodial services; and

  • Operation of a virtual asset exchange.

Registration conditions

Proposed registration requirements for VASPs include:

  • A detailed business plan, written risk assessment and compliance manual;

  • Details of how the VASP will manage client assets, custodian relationships and complaints;

  • The proposed VASP, its directors, senior officers and persons having a significant or controlling interest being fit and suitable persons; and

  • Additional registration and ongoing requirements to provide virtual asset custodial services or operate a virtual asset exchange.

A proposed VASP will also be able to participate in the FSC regulatory sandbox if they wish to pursue a virtual asset service and provide innovative FinTech versus service.

The VASP Bill provides a six-month grandfathering period for existing virtual asset service providers to apply for registration with the FSC.

Continuing Requirements

Proposed ongoing obligations for registered VASPs include:

  • Have at least two individual directors, one of whom physically resides in the BVI (if required by the FSC, depending on the nature and risk associated with the VASP);

  • Appoint an auditor to audit PSAV’s financial statements, which must be submitted within six months of the end of its fiscal year. Auditors will also need to report information to the FSC in certain circumstances;

  • Appoint an authorized representative;

  • Appoint a compliance officer and establish compliance policies, systems and controls; establish an internal audit function; and comply with various parts of the BVI Code of Regulations (as revised);

  • Compliance with the BVI Anti-Money Laundering Regulations (as revised) (“AML Regulations”) and the Code of Practice against Money Laundering and Terrorist Financing (as revised) (“Code of Practice”) ). Updates to the Rules and the AML Code of Practice were published in August 2022, including provisions relating to VASPs which come into effect on December 1, 2022;

  • Notify the FSC of any material changes in the information provided as part of the registration application and other detailed information about its operations;

  • Prior written approval from the FSC for a change of name, appointment of a director or senior officer, or transfer of interest in a VASP by a person with a significant or controlling interest (unless the VASP is listed on a recognized stock exchange); and

  • Maintaining one’s business in a financially sound state, segregating and protecting client assets, not posting misleading advertisements regarding virtual assets and record keeping obligations.

FSC supervisory powers

Broad powers are included for the FSC to oversee VASPs, along with offenses and penalties of up to US$100,000 and/or five years imprisonment for violating the law.

Conclusion

The VASP Bill is a welcome addition to the BVI regulatory regime, in line with international standards for VASPs. A copy of the VASP Bill is available on the FSC website and comments may be directed to the FSC until September 23, 2022. We will provide further updates once the VASP Act is finalized and passed by the BVI.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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