Overview of Crypto regulations

How are crypto service providers regulated in the British Virgin Islands (BVI)?

Recognition of cryptocurrencies/crypto assets

"The FSC adopts the FATF's definition of virtual asset, defining it as a digital representation of value that can be digitally traded or transferred and can be used for payment or investment purposes.  Virtual currencies do not, however, include digital representations of fiat currencies."

Source: Freeman Law

The FSC (Financial Services Commission) is the financial regulatory authority of the BVI. 

Regulatory framework

"As at the date of writing, there is no separate framework for the regulation of cryptocurrencies or crypto assets in the BVI. Instead, the BVI has relied upon existing legislation regulating financial instruments to capture digital assets where they exhibit characteristics of a financial product or security."

Source: Mondaq, last revised 19 July 2021

"The BVI Financial Services Commission (FSC) recently issued the Guidance on Regulation of Virtual Assets in the Virgin Islands (the guidance), relating to the regulation of virtual assets generally, which would include crypto-currencies and utility tokens. The FSC has taken a constructive attitude towards virtual assets and, generally, is not seeking to impose regulation on virtual assets that they would not have been subject to under the existing, "mainstream" financial services regulatory framework in the BVI."

Source: Ogier, last revised 30 July 2020

Existing regulations 

"The Securities and Investment Business Act 2010 (“SIBA”)
SIBA forbids any individual or company from carrying out investment business activity without holding a license authorized by the BVI Financial Services Commission (“FSC”).  While the act does not point to cryptocurrencies or any virtual token, it is important to consider the definitions provided in this act.

Anti-Money Laundering Regulations 2008 (“AML”)
The AML do not interfere with the launching of cryptocurrency since the legislation does not define it or any other relevant business activity. However, it may be considered as speculations, but the Act could be modified in the future to include cryptocurrency. In conclusion, the Act must be considered because it may be modified.

BVI Electronic Transaction Act 2001 (“ET”)
ET is relevant when considering a cryptocurrency entity as this act regulates all electronic contracts and records. All electronic contracts and records shall not be denied legal validity in the BVI simply because they are only maintained in electronic format. It is worth noting that crypto related transactions are carried our electronically.

Beneficial Ownership Secure Search System Act 2017 (“Boss Act”)
The Boss Act requires that resident agents in the BVI record information as to the beneficial ownership of the company on a central government-controlled database. Boss Act defines beneficial ownership as the person, juridical or natural, that holds control over the entity (i.e. share ownership, voting rights, the rights to appoint board members and influence and control over a company). As the factor of disclosure is the control of the entity, token holders in a crypto currency would not be recorded as any beneficial owner.

BVI Financial Services Commission (“FSC”)
In 2020, the BVI the Financial Services Commission (FSC) published Guidance on the Regulation of Virtual Assets in the island. The first step is to determine if a license is applicable for any financial services unless they are excluded. To determine whether licensing is required for virtual assets, the following factors must be taken into consideration:

  • The way the crypto asset is being utilized.
  • The types of business activities being proposed or conducted.
  • Whether the business activities are similar to traditional business activities; and
  • The characteristic and business activities concerning economic substance.

Once it has been determined that it conducts a regulated activity, a license is required and the entity must comply with the Anti-money Laundering Regulations, 2008, the Regulatory Code, and the Financial Services Commission Act, 2001."

Source: Quijano & Associates

Details on the types of licenses granted by the BVI FSC can be found here.