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 the obligations of crypto startups.
Why is the BVI attractive?
The BVI has been able to attract a considerable number of businesses in recent decades and years. In fact, businesses of all kinds flock to this jurisdiction as it does not have unnecessarily strict and limiting tax laws. Many crypto 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 best-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 appealing 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 the BVI has been the latest of countries to update their anti-money laundering (AML) laws. In the past, the BVI has been actively making attempts to align its policies, as have many other countries, with the guidelines and regulations set by the Financial Action Task Force (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 terrorist groups and activities. As such, the British Virgin Islands has amended its AML laws to also include crypto companies, which have not been regulated up to this point.
Therefore, from December 1, 2022, all crypto businesses 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 responsible for reporting to the BVI AML authorities and, among other obligations, train staff with regard to AML guidelines.
New licensing requirements
Crypto projects should also be aware of a new licensing regime for VASPs under the Virtual Assets Service Providers Act (the VASP Act) effective from February 1, 2023. The new licensing process will include new registration requirements for crypto businesses, such as:
- compliance with anti-money laundering obligations;
- compliance with data protection and cyber security obligations;
- ongoing financial reports to the Financial Services Commission (FSC);
- senior managers and beneficiary owners to be “proper persons” as defined by the new framework;
- senior managers’ and officers’ appointments to be pre-approved by the FSC.
What impact will these changes have on the BVI?
While there is a shift in the BVI’s crypto regulation, many experts predict that these new changes might not have a negative impact on the BVI being one of the top destinations for crypto businesses. The rationale behind these changes stems from the recent trend among numerous countries and jurisdictions to establish novel regulatory frameworks and procedures for cryptocurrency businesses. With a mix of crypto-friendly regulations, the British Virgin Islands might still be able to remain the crypto haven it has always been.
Are you a crypto startup interested in starting your project in the BVI or unsure if it’s the right fit? Our Crypto team is ready to assist you – reach out to us here!