New BVI law clarifies virtual assets

In December, legislation was introduced in the British Virgin Islands for virtual assets. The authors of this article – from Ogier – discuss its impact and what the industry should do.

The British Virgin Islands recently enacted the Virtual Asset Service Providers Act 2022 (VASP Act). This is designed to create more clarity and certainty for the market on “virtual assets”. Given recent turmoil in the digital asset space – such as during the collapse of the FTX exchange – offshore and onshore jurisdictions need to manage their regulatory controls as tightly as possible.

The editors of this news service are pleased to share this guest article by Michael Killourhy, BVI-based partner at Ogier, and David Matthews, managing partner at the firm. The usual editorial disclaimers apply. Jump into the discussion! E-mail [email protected]

The rapid rise and popularity of virtual assets has created a real challenge where regulation has struggled to keep pace.

While millions of people currently own virtual assets, the lack of legislation equates to little control over the industry, including ownership.

For cross-border investments, certainty is paramount, with question marks over categorizations of certain virtual asset services and crypto or blockchain-related activities far from clear.

The regulatory world, however, is catching up.

The Financial Action Task Force (FATF) first proposed new guidelines in 2019 to strengthen its standards and clarify how AML/CFT requirements should be applied to both virtual assets and service providers. Countries providing services to owners of virtual assets were required to review and mitigate the risks associated with activities associated with virtual assets and to ensure that they were duly supervised by the competent authorities.

Consequently, in December, the British Virgin Islands (BVI) enacted the Virtual Asset Service Providers Act 2022 (VASP Act) in a bid to maintain the island’s position as a premier jurisdiction. when it comes to crypto and virtual assets.

Certain activities involving virtual assets not previously regulated in the BVI will now be regulated, requiring a license and subject to oversight by the BVI Financial Services Commission and the BVI AML laws. However, not all virtual asset activities fall under the new regulations. , with ICOs in particular not seeming to be taken.

Among the key introductions, the VASP Act will provide a framework for recording and monitoring, with ongoing requirements, as well as penalties for any breach under the law, while implementing certain FATF recommendations.

Significantly, this decision demonstrates the BVI’s desire to maintain its reputation as a highly responsive and accountable international financial center committed to complying with rapidly evolving international standards for transparency and combating abuse and criminal behavior by all. kinds.

This, however, is just the latest step BVI has taken to stay ahead of the game.

Over two years ago, the BVI Financial Services Commission issued Virtual Asset Regulation Guidelines regarding the regulation of virtual assets in general, including cryptocurrencies and utility tokens. This guidance took a pragmatic approach to virtual assets seeking not to impose additional regulation beyond what would be imposed under the country’s existing financial services regulatory framework.

It’s no secret that those operating in the virtual asset, crypto and blockchain space have faced challenges over the past six to 12 months, nor that the sector is under the microscope. as it grows and becomes more and more complex. But measures like the VASP Act, which offer a balanced regulatory strategy without stifling the industry, ensure the strength and merit of the digital asset space.

Such measures also build trust, and for the international financial community, greater certainty about the ownership and source of digital assets is essential.

By creating a clear framework supported by proportionate regulation, the VASP Act provides that certainty, both in the sector and in the jurisdiction. It reflects the BVI’s desire to maintain its attractiveness while asserting its reputation as a responsible international financial centre, committed to global standards of transparency and the fight against abuse.

And, while further guidance on the VASP Act is expected, possibly with additional regulations, the BVI stands ready to advise those operating in the digital asset space and support seamless cross-border activity so the industry can continue to thrive. thrive in this new regulatory space.