Virtual Assets Service Providers Act, 2022

Summary

This Act establishes the registration and supervision framework for virtual assets service providers (VASPs) in the Virgin Islands, covering VASPs generally as well as specialised categories offering virtual asset custody services or operating virtual asset exchanges. It prohibits carrying on virtual assets business in or from the Virgin Islands without registration by the Financial Services Commission, and sets out ongoing obligations, enforcement powers, and a regulatory sandbox regime for innovative FinTech.

• Registration: No person may carry on a virtual assets service (including custody or exchange activities) in or from the Virgin Islands without being registered by the Commission; applicants must submit detailed information on directors, shareholders, controlling interests, business plans, risk assessments, AML/CFT compliance manuals, and data security systems.
• Ongoing governance: VASPs must maintain a financially sound condition, appoint suitable directors and senior officers, appoint an authorised representative in the Virgin Islands, and appoint and cooperate with an auditor, including submitting audit reports and group financial statements.
• General obligations: VASPs must report information to the Commission, notify changes in significant or controlling interests, maintain records, safeguard client assets, avoid misleading advertising, and comply with AML/CFT requirements under the AMLR and AMLTFCOP.
• Custody and exchange specific rules: VASPs providing virtual asset custody services or operating virtual asset exchanges face additional registration conditions, obligations, and restrictions under Part IV, including safeguarding client virtual assets and restrictions on encumbering client deposits.
• Sandbox and compliance officer: The Act creates a regulatory sandbox for innovative FinTech participants (subject to Commission approval and termination powers) and requires VASPs to appoint a compliance officer and maintain adequate systems and controls.
• Enforcement: The Commission has broad enforcement powers, including cancellation and revocation of registration, and the Act sets out a detailed schedule of offences and penalties (fines up to $100,000 and/or up to five years imprisonment for corporate and individual contraventions of specific sections).

The Act came into force on a date to be appointed by the Minister via Notice in the Gazette, meaning its commencement is not fixed within the text itself. Existing licensees under prior arrangements are addressed under a transitional provision (section 40), and the Commission may issue Guidelines and Regulations to supplement the Act's requirements.

Key obligations

• A person must not carry on the business of providing a virtual asset service, virtual asset custody service, or virtual asset exchange in or from the Virgin Islands without registration by the Commission (section 5).
• Applicants for registration must supply prescribed information including details of directors, senior officers, shareholders, controlling interests, business plan, risk assessment, AML/CFT compliance manual, and data protection systems (section 6).
• VASPs must notify the Commission of any change in information provided in their registration application (section 8).
• VASPs must maintain a financially sound condition (section 10) and appoint suitable directors and senior officers (section 11).
• VASPs must appoint an authorised representative in the Virgin Islands and ensure that representative performs its statutory functions (sections 12-13).
• VASPs must appoint an auditor, cooperate with audit requirements, and submit audit reports (and group financial statements where applicable) within required periods (sections 14-19).
• VASPs must report information to the Commission as required and notify the Commission of any disposition or acquisition of a significant or controlling interest in the VASP (sections 20-21).
• VASPs must maintain sufficient records, including customer due diligence information, for the prescribed period (section 22).
• VASPs must safeguard client assets in accordance with prescribed requirements (section 23).
• VASPs must not issue misleading advertisements, statements, promises or forecasts (section 24).
• VASPs must implement systems and procedures to comply with AML/CFT requirements, including tracing and collecting required information (section 25).
• VASPs must cooperate with the Commission and provide required documents, information or amendments upon notice (section 26).
• VASPs providing virtual asset custody services must take steps to safeguard virtual assets and related instruments and must not encumber client virtual asset deposits without beneficial owner agreement (section 29).
• VASPs operating virtual asset exchanges must comply with restrictions and prohibitions set out in section 32.
• VASPs approved as regulatory sandbox participants must comply with conditions and restrictions imposed on their innovative FinTech activities (section 34).
• Existing licensees must cease providing virtual assets service if directed to do so upon notification under section 40.
• VASPs must appoint a compliance officer and establish and maintain adequate systems and controls to ensure compliance with the Act (section 41).

Applies to

virtual asset service providers (VASPs), virtual assets custody service providers, virtual assets exchange operators, regulatory sandbox participants (innovative FinTech providers), existing licensees under the FSCA

Deadlines

• date to be appointed by the Minister by Notice in the Gazette: Commencement date of the Act; the Act does not itself take effect until this date is fixed and published.