On 13 July 2020, the BVI Financial Services Commission (FSC) issued guidance (the Virtual Asset Guidance Notes) relating to the regulation of virtual assets.
Virtual asset defined
A virtual asset is a digital representation of value that can be digitally traded or transferred and can be used for payment or investment purposes. Virtual assets do not include digital representations of fiat currencies. It is the FSC’s position that virtual assets and its related products have value, exhibit the attributes of property and meet the definition of intangible property.
Licensing and regulation
Where san intermediary or activity is caught and requires a licence or certificate under the definition of “relevant business” in the Anti-Money Laundering Regulations 2008 (the Regulations), the regulated person must ensure its on-going compliance with the Regulations, including the Anti-Money Laundering and Terrorist Financing Code of Practice 2008, the Regulatory Code 2009 and the Financial Services Commission Act 2001 (the FSC Act) and any of the financial services legislation referred to in the FSC Act.
The tests to be used to determine if an asset is a virtual asset and subject to virtual asset activities
Virtual asset products may be captured from a regulatory perspective in one of two ways:
- Firstly, when they are initially issued
- Secondly, when they are in the hands of a holder or the subject of an investment activity
When determining whether licensing is required for virtual asset related activities, an assessment of the following factors is relevant:
- The way the virtual asset (crypto asset) is being utilised
- The types of business activities being proposed or conducted
- Whether the business activities are analogous with those conducted through traditional businesses
- The characteristic and business activities relating to an offering or issuance
The Virtual Asset Guidance Notes examines the Securities and Investment Business Act 2010 (SIBA) and the Financing and Money Services Act 2009 (the FMSA) in so far as they may relate to a virtual asset and/or a virtual asset related activity.
An entity incorporated in the BVI which acts as an intermediary or conducts a virtual asset related activity captured under any existing legislation such as SIBA, the FMSA or the anti-money laundering regime or conducts a virtual asset related activity requires a licence or a certificate. An entity that is operating without a licence is conducting unauthorised financial services business.
Very importantly, a compliance period of 6 months from the issuance of the Virtual Asset Guidance Notes (this expires on 13 January 2021) is being provided for virtual asset related entities which:
- Under any existing legislation outlined above is conducting a regulated activity
- Failed to submit an application in accordance with the applicable legislation
- Submits an application within six months of the Virtual Asset Guidance Notes publication
The FSC does reserve the right to take enforcement action where an entity is engaged in any regulated activity and fails to submit an application for licensing within the compliance period.
A copy of the Virtual Asset Guidance Notes can be found here.