Ask anybody who knows the real deal about the crypto business, and they would know of certain places regarded as so-to-speak “safe spaces” for crypto projects and crypto-related businesses. In this article, Gabriela Hornáčková, Crypto Legal Mind at Sparring discusses the benefits of setting up a business in the British Virgin Islands (the BVI) and how recent regulation is changing obligations.
Why is the BVI attractive?
The BVI has been able to attract a considerable number of businesses in recent decades and recent years. In fact, businesses of all kinds, flock to the jurisdiction given the fact that they do not have unnecessarily strict and limiting tax laws. Many businesses, therefore, opt to set up their offices or at least their main office in the BVI.
Among the more well-known crypto projects that have turned to the BVI are Gemini, Bittrex, with Huobi becoming one of the latest projects to gain a license to operate in the jurisdiction. Of course, the list would not be complete without referring to Alameda Research, one of the most well-known crypto trading firms in the world founded by the CEO of FTX back in 2017 in the BVI. It is therefore clear that with its relative tax laws and welcoming policy for all businesses, the British Virgin Islands has naturally become a chosen destination for crypto companies.
New anti-money laundering rules
Recently the wind of a legal change has swept this island nation, and BVI has been the latest of jurisdictions to update their anti-money laundering (AML) laws. In the past, the BVI has been actively making attempts to align its policies, as with most other nations, with the guidelines and regulations set by the Financial Action Task Force (the FATF). The FATF imposes standards to combat money laundering to bring more transparency and scrutiny to financial operations in countries across the globe, and specifically to tackle money laundering that ultimately leads to funding terror groups and terrorist activities. As such the British Virgin Islands has amended its AML laws to also include crypto companies, something that did not exist up to this point.
Therefore, since December 1, 2022, all crypto companies that fall within the definition of VASPs, or Virtual Asset Service Providers, must comply with the new AML laws.
The new AML regulations require crypto companies to:
- appoint an anti-money laundering officer in their office in order to report to the responsible office for the AML in BVI with regard to compliance procedures and such. train staff with regard to AML guidelines, among other compliances that are imposed on such firms with this new AML regulation.
New licensing requirements
Crypto projects should also be aware of a new licensing process for VASPs. The new licensing process will include new requirements for companies to be registered such as:
- Compliance with anti-money laundering obligations
- Compliance with data protection and cyber security obligations
- FSC and ongoing financial reports that need to be done on an annual basis
- Senior managers and beneficiary owners to be “proper persons” as defined by the new framework
- Senior managers and officers’ appointments are to be pre-approved by the FSC;
What impact will these changes have on the BVI?
While a shift in the regulation, many experts predict that these new changes might not have a negative impact on the BVI being the top destination for crypto businesses. The reason that they propose is that a lot of countries and jurisdictions have been on the run to impose new regulatory frameworks and processes for crypto companies. As a result, crypto companies will eventually have to face the music and pick the best crypto jurisdiction. With a mix of friendly regulations, the British Virgin Islands might still be able to remain to be the crypto haven it has always been.
