Guidance on Regulation of Virtual Assets in the Virgin Islands (BVI)

Summary

This is guidance from the BVI Financial Services Commission explaining how existing financial services legislation (the Securities and Investment Business Act 2010, the Financing and Money Services Act 2009, and the Anti-Money Laundering Regulations) applies to virtual assets and related products. It sets out when a virtual asset, token or related activity is caught by licensing requirements, both at the point a token is issued and afterwards when it is held, traded or serviced.

• Initial issue: Pure utility tokens (usable only to buy goods/services) fall outside financial services legislation, but tokens carrying rights akin to shares, debentures, warrants, certificates, options, futures or contracts for differences can be captured as SIBA Schedule 1 investments, and pooled investment tokens may qualify as mutual funds under SIBA.
• Post issuance activities: Dealing in, arranging deals in, managing, advising on, custodying or administering virtual asset investments, or operating an exchange for them, requires an SIBA investment business licence if the underlying token qualifies as an investment.
• Money services: Under the current definitions in the FMSA and Regulatory Code, transmission of virtual assets does not itself require a money services business licence, but firms are urged to seek the Commission's views before proceeding given the planned regulatory sandbox.
• AML/CFT: Where an activity meets the definition of relevant business under the Anti-Money Laundering Regulations 2008, the person must comply on an ongoing basis with those Regulations, the AML/CFT Code of Practice, the Regulatory Code and the Financial Services Commission Act.
• Outside the regulatory remit: Pure utility token issuances, ICO facilitation limited to utility tokens, passive personal holding of virtual assets via non-custodial software, and mining for one's own use are not regulated activities.

The Commission gives entities already conducting a now-identified regulated virtual asset activity a six-month compliance period from publication of the guidance (10 July 2020) to submit a licensing or certification application; entities operating without a licence are otherwise in immediate contravention and risk enforcement if they miss this window.

Key obligations

• Entities conducting a regulated virtual asset activity under existing BVI financial services legislation must hold the requisite licence or certificate.
• Entities already conducting such an activity without a licence must submit a licensing application within six months of the guidance's publication (by 10 January 2021) to benefit from the compliance period.
• Persons whose virtual asset activity meets the definition of relevant business under the Anti-Money Laundering Regulations 2008 must comply on an ongoing basis with those Regulations, the AML/CFT Code of Practice, the Regulatory Code, and the Financial Services Commission Act.
• Firms uncertain whether a virtual asset product is captured by SIBA, or intending to conduct virtual asset money transmission activity, should obtain the Commission's views/guidance before proceeding.
• Entities failing to submit a licensing application within the six-month compliance period may face enforcement action for unauthorised financial services business.

Applies to

virtual asset issuers, intermediaries conducting virtual asset activities, wallet providers/custodians, virtual asset exchange operators, investment business licensees under SIBA, mutual funds involving virtual assets, money services businesses, ICO facilitators

Deadlines

• six months from the publication date of this Guidance (10 July 2020): Compliance Period within which virtual asset related entities conducting a now-regulated activity without a licence must submit a licensing/certification application to avoid enforcement action.