Crypto License in British Virgin Islands

The crypto license in the British Virgin Islands is called the “Virtual Assets Service Providers license”. It was launched in 2023 by the Financial Services Commission (FSC) of the BVI, through a law called the VASP law of 2022. The Virtual Assets Service Providers Act was enacted by the Financial Services Commission of the British Virgin Islands in 2022. This law defines the FSC as the autonomous regulator for everything crypto in the British Virgin Islands.

The British Virgin Islands was already a popular jurisdiction among crypto businesses before the current license framework. It was crypto-neutral until 2020 when it enforced a sandbox regime for virtual assets service providers. The experience collected helped design the new VASP law while maintaining the sandbox regime for innovative crypto companies.

The AML-CFT laws and KYC requirements applicable are directly referred to in the VASP law and in the guidelines for registering as a VASP in the British Virgin Islands. These references make it simpler for compliance teams to get their hands on the requirements.

The BVI VASP license recognized two types of crypto activities: custody and exchange. It also leaves the door open for other activities, in a third option called “carry on the business of providing a virtual assets service”.

The minimum share capital of a crypto company in the British Virgin Islands depends on the activities undertaken. There is no exact sum defined by the regulator. The company capital should be coherent with its operation and activities.

Cryptocurrency isn’t considered a legal tender in the British Virgin Islands.

The Financial Services Commission (FSC) is the regulatory authority behind the crypto framework in the British Virgin Islands, as stated by the Financial Services Commission Act of the BVI.

The Financial Services (Regulatory Sandbox) Regulations classified crypto services as being “financial services” and therefore subject to related financial laws. It also introduced a “sandbox regime”, giving more flexibility to crypto businesses, while a proper crypto regulation in BVI was being designed.

The Virtual Assets Service Providers Law was consequently published in 2022 and enforced in early 2023. Along with dedicated guidelines, this new law gave a specific framework for cryptocurrency businesses in the British Virgin Islands. The VASP Act came into effect on February 1, 2023. The process to obtain a crypto license in the British Virgin Islands takes between 6 to 12 months.

Since then, cryptocurrency businesses can operate legally in and from the British Virgin Islands, provided that they got the VASP license from the BVI.

The Virtual Assets Service Providers Law of 2022 defines two main crypto activities, that requires a licensed to be performed by a company:

• to engage in the business of providing a virtual assets custodial services;
• to operate a virtual assets exchange.

Both of these activities require a separate application fee of 10,000 USD. On the application side, what will differ is the subjective appreciation of the software infrastructure by the regulator. In the case of a custodial company, requirements in terms of share capital and customer assets protection will be the most important.

The VASP law also describes a third type of activity that encompasses everything that isn’t custody or exchange: to carry on the business of providing a virtual assets service. The law covers a wide range of cryptocurrency business models, including those operating as a cryptocurrency company or investment exchange, and clarifies which virtual assets are regulated under the current framework.

For companies willing to provide a new and innovative service, the Financial Services Commission can register a crypto business within the Regulatory Sandbox. This specific type of license gives an 18 month period to the crypto company in order to test and demonstrate its innovative idea. It will then be granted a definitive license for its business activity afterwards.

The British Virgin Islands (BVI) are considered a “luxury” jurisdiction, when it comes to offshore business centers. Its financial services related industries have been flourishing for decades and the emergence of a comprehensive virtual assets business framework was a natural continuation.

• Comprehensive legal framework: The Financial Services Commission of the BVI, a veteran in enabling financial services companies, has issued an effective and simple regulatory framework for virtual assets services providers;
• Two-tiers system: Two types of authorizations are available: the Registration and the License. Each corresponds to a level of compliance requirements and financial liability coherent with the activities they regulate;
• No taxation: The British Virgin Islands apply a territorial taxation system, meaning that only income derived from activity on its soil is subject to taxation. Global income is not taxed;
• Prestige: Whether you are dealing with Bitcoin or other virtual assets, whether your business is transferring virtual assets or running a crypto exchange, the BVI have a high reputation that can benefit your image;
• Access to traditional banking: A BVI crypto license typically provides access to traditional banking and payment gateways.

Ready to start your BVI business company dealing with digital assets? Any questions holding you back? Our consulting team is available every working day to assist and accompany you through the different stages of forming a cryptocurrency company and getting the necessary authorizations and licenses. Reach out today and let’s get to work together.

• Tax-free environment: BVI companies engaged in virtual assets regulated businesses pay no taxes.
• Crypto-enthusiast jurisdiction: the FSC issued a clear and easy-to-follow framework and registration process for VASPs.
• Low licensing fees: the BVI VASP license is one of the most affordable in terms of upfront costs.
• No minimum share capital: though an adequate amount of solvency funds is expected by the regulator, this is one less complication for new businesses.

The British Virgin Islands is home to a diverse ecosystem of crypto businesses, ranging from virtual asset exchanges and digital asset management firms to companies specializing in custodial services. These businesses can be structured as International Business Companies (IBCs) or limited liability companies, providing flexibility in how they organize their operations and ownership.

Under the Virtual Assets Service Providers Act, 2022, virtual assets are defined as digital representations of value that can be digitally traded, transferred, or used for payment or investment purposes. The Act covers a wide array of activities, including operating virtual asset exchanges, providing virtual asset transfer services, and offering virtual asset custody or safekeeping services. Companies engaged in these activities are required to obtain a VASP license from the BVI Financial Services Commission, ensuring that they meet the jurisdiction’s high standards for transparency and regulatory compliance.

To secure a VASP license, crypto businesses must submit a detailed business plan outlining their operations, risk management strategies, and compliance procedures. They must also demonstrate adequate capital to support their activities and appoint key officers, such as a Money Laundering Reporting Officer (MLRO), to oversee anti-money laundering efforts. Companies must appoint an independent auditor approved by the FSC to ensure compliance and perform regular audits. The BVI’s regulatory framework is designed to protect investors and promote responsible innovation, making it an ideal environment for companies engaged in asset management, virtual asset exchanges, and other virtual asset related services. By fostering a secure and reputable setting for digital asset companies, the BVI continues to attract forward-thinking crypto businesses seeking to operate on a global scale.

The Virtual Assets Service Providers Law of 2022 defines two main crypto activities, that requires a licensed to be performed by a company:

• to engage in the business of providing a virtual assets custody service;
• to operate a virtual assets exchange.

Both of these activities require a separate application fee of 10,000 USD. On the application side, what will differ is the subjective appreciation of the software infrastructure by the regulator. In the case of a custodial company, requirements in terms of share capital and customer assets protection will be the most important.

The VASP law also describes a third type of activity that encompasses everything that isn’t custody or exchange: to carry on the business of providing a virtual assets service.

For companies willing to provide a new and innovative service, the Financial Services Commission can register a crypto business within the Regulatory Sandbox. This specific type of license gives an 18 month period to the crypto company in order to test and demonstrate its innovative idea. It will then be granted a definitive license for its business activity afterwards.

The Financial Services Commission, regulating crypto activities in the British Virgin Islands, has set numerous requirements for getting a license.

A crypto project can only apply for the BVI VASP license if it has appointed an Authorized Representative, which should be an individual or a company in the British Virgin Islands, which has received the approval of the FSC to act as such. The Authorized Representative will be the contact point between the project and the regulator.

Corporate documentation such as a detailed business plan and a chart detailing the ownership structure of the company.

There is no minimal share capital but the FSC expects its applicants to present an “adequate level of paid-up capitalization for the nature of their operations”.

The company board must demonstrate its skills, knowledge, and expertise. A company can be appointed as a director. Foreign investors are permitted to establish and own crypto companies in the BVI, subject to compliance with local regulations. An independent auditor approved by the FSC must be appointed for the licensed crypto company.

To successfully conduct the application, the crypto company must prepare policies, procedures, and systems such as:

• Technological audits, “such as, but not limited to smart contract defects, the underlying protocol’s ability to scale, interoperability and code integrity/security”;
• Risk management strategies, policies, and overall framework;
• Consumer protection provision;
• Policies and procedures regarding transactions with identified third parties & outsourcing agreements;
• Detailed plan for custody and safekeeping of assets;
• Virtual assets custody services must meet specific regulatory requirements;
• Business continuity plan and business cessation plan, with the scope of protecting customers;
• Implementation of the virtual assets “transfer rules”;
• Detailed audit plan, including the profile of the auditor;
• Manuals of compliance, procedures, and internal controls;
• Data protection & cybersecurity framework;
• Statement of Technological Infrastructures (description of the software);
• Appoint a qualified individual as a Money Laundering Reporting Officer (MLRO).

Applicants should note that providing investment advice related to virtual assets may require additional compliance under the Investment Business Act, as certain activities may fall under its regulatory scope.

The FSC may also ask the applicant to contract with professional indemnity insurance.

The requirements shall be considered once the legal entity has been registered in the BVI. Every aspect of the crypto business has to be prepared beforehand. Once the application is ready, the VASP applicant must pay a fee depending on the activities it wants to provide:

• To provide Virtual Assets Custody Service, the application fee is 10,000 USD;
• To provide Virtual Assets Exchange services, the application fee is 10,000 USD;
• To perform other crypto activities, the application fee is 5,000 USD.

The British Virgin Islands do not levy corporate income taxes or capital gains taxes. This applies to virtual assets service providers as well, whether they are doing business in or from the British Virgin Islands.

There are also no withholding taxes. Dividends shall only be taxable in the residence country of the shareholder receiving a dividend payment.

All the requirements laid out by the Virtual Assets Service Providers law of 2022 and the different regulations and laws pertaining to AML-CFT and preventing financial crime shall be respected at all times by a licensed crypto company in the British Virgin Islands. Client assets must be segregated and identifiable according to the VASP Act regulations.

Most of the obligations are about controlling the good enforcement of the provisions of the laws and regulations. This includes:

• Have an approved auditor carry out a financial audit of the VASP every year;
• On request by the Financial Services Commission, provide information pertaining to compliance with the law, with customer information (geographical location, exposure, assets);
• Financial information on the VASP;
• The events or situations flagged as risky and how they have been evaluated and managed;
• Customer complaints and their resolution;
• Companies must maintain accounting records and provide regular reporting as required by the regulator.

A BVI VASP company shall also keep all-time records regarding:

• Transactions from the company;
• Financial statements (before audit);
• Actions taken in the scope of AML-CFT.

Basically, a BVI VASP shall do everything in its power to ensure compliance with AML-CFT laws and to protect clients’ data and assets. It should also be transparent on its financial and fiscal situations, by keeping up-to-date records of customers’ transactions.

A licensed crypto company in the British Virgin Islands should monitor and report any suspicious transactions to to the Financial Investigation Agency (FIA). The VASP’s appointed Money Laundering Reporting Officer (MLRO) is required to make a report to the FIA of every suspicious transaction or customer.

No, the British Virgin Islands aren’t an unregulated jurisdiction for cryptocurrency companies. As for most countries, it used to be the case when crypto was a new industry and regulators were still assessing what had to be done to protect market participants. Nowadays, the BVI has a full framework specific to cryptocurrency businesses: the Virtual Assets Services Providers Act. Failure to operate under the VASP Act may result in severe penalties, including fines and imprisonment.

No, the fact that there is no minimum capital requirements doesn’t mean that a BVI VASP should not have share capital at all. This indication means that the regulator does set an adequate level of capital for each applicant to a VASP registration or license.

The cryptocurrency regulation in the British Virgin Islands is now fully relying on the Virtual Assets Service Providers Law of 2022. It details the requirements and obligations of cryptocurrency-related companies, to secure and maintain the BVI crypto license.

These requirements are tied to another set of laws, which are relative to anti-money laundering, countering terrorism financing, and combating financial crime:

• AMLTFCOP, AML Regulations, Proceeds of Criminal Conduct Act (“PCCA”), Criminal Justice (International Cooperation) Act of 1993;
• Counter-Terrorism Act of 2021 (“CTA”);
• Proliferation Financing (Prohibition) Act of 2021 (“PFPA”).

The regulations pertaining to crypto in the BVIs are therefore combining a dedicated law, the VASP law, and acts regarding AML-CFT and KYC.