A guide to blockchain and cryptocurrency laws and regulations 2026: British Virgin Islands (GLI chapter) | Carey Olsen

Authorities angle and definition

The BVI has established itself as a number one offshore finance centre that’s resilient, agile and modern within the face of regulatory adjustments, financial challenges and pure disasters. Corporations, establishments and people, together with these working within the cryptocurrency, blockchain expertise and Web3 area, use BVI autos to assist their worldwide enterprise actions so as to profit from the familiarity and stability of the BVI’s English frequent law-based authorized system, tax-neutral therapy and business-friendly flexibility of the BVI’s regulatory and judicial regime.

The Authorities of the BVI works intently with the Island’s trade leaders, from legal professionals and accountants to insolvency practitioners and regulators, recognising {that a} collaborative trade will probably be ready to higher serve the wants of these individuals doing enterprise there, while making certain that the jurisdiction is nicely geared up to establish, and mitigate in opposition to, any related dangers.

That is evident within the strategy taken by the Authorities of the BVI to regulating digital property (as detailed additional under). The Digital Property Service Suppliers Act, 2022 (the “VASP Act”) (accessible here), which seeks to make sure the BVI’s continued compliance with worldwide requirements and to adhere to particular suggestions from the Monetary Motion Process Power in respect of digital property, is the results of a public session course of during which the BVI Monetary Companies Fee (the “Fee”) sought the suggestions, opinions and feedback of all stakeholders.

This key function of the VASP Act will probably be mentioned in larger element all through this chapter. At a excessive degree, nevertheless, the VASP Act will be described as a balanced piece of laws that’s proportionate and related. Corporations engaged in custody and change enterprise, that are thought of increased threat to finish customers, entice a better degree of regulatory oversight, while different actions, equivalent to modern technology-based initiatives and issuances of tokens (an exercise that has traditionally been undertaken by BVI integrated entities), typically fall outdoors the VASP Act.

Underneath the VASP Act, a “digital asset” is outlined as a digital illustration of worth that may be digitally traded or transferred and can be utilized for cost or funding functions. Particularly excluded from this are digital representations of fiat currencies, in addition to digital information of credit score in opposition to a monetary establishment of fiat foreign money, securities or different monetary property that may be transferred digitally.

Cryptocurrency regulation

The VASP Act got here into drive on 1 February 2023. Any entity wishing to present digital asset companies or to act as a VASP (as outlined under) in or from inside the BVI is required to be registered by the Fee. While VASPs already operational on the time the VASP Act got here into drive had till 31 July 2023 to submit an software to the Fee (enabling them to then keep on offering their digital asset companies while their software is underneath evaluation), any new entities should register with the Fee earlier than commencing any of the actions prescribed by the VASP Act.

An software for registration as a VASP should be made within the Fee’s authorised kind specifying the class of VASP registration being utilized for, and accompanied by, inter alia, (a) a marketing strategy setting out the character and scale of the digital asset actions to be performed, (b) particulars of the proposed administrators, senior officers and compliance officer, together with documentation to proof that they fulfill the Fee’s match and correct standards, (c) insurance policies and procedures to be adopted by the applicant to meet the obligations underneath the VASP Act and the AML/CTF/PF legislative regime, and (d) the relevant software payment.

When the Fee approves a VASP software, it’ll register the applicant, difficulty a certificates of registration and impose such circumstances (if any) on the registration because it considers acceptable (together with a requirement to receive skilled indemnity insurance coverage).

The VASP Act defines a “VASP” as a digital asset service supplier who supplies, as a enterprise, a digital asset service and is registered to conduct a number of of the next actions or operations for or on behalf of one other particular person:

• change between digital property and fiat currencies;
• change between a number of types of digital property;
• switch of digital property, the place the switch relates to conducting a transaction on behalf of one other person who strikes a digital asset from one digital asset deal with or account to one other;
• safekeeping or administration of digital property or devices enabling management over digital property;
• participation in, and provision of, monetary companies associated to an issuer’s provide or sale of a digital asset; or
• carry out such different exercise or operation as could also be specified within the VASP Act or as could also be prescribed by regulations.

A particular person engaged in any of the next actions or operations, for or on behalf of one other particular person, will probably be deemed to be carrying on a digital asset service:

• internet hosting wallets or sustaining custody or management over one other particular person’s digital asset, pockets or personal key;
• offering monetary companies relating to the issuance, provide or sale of a digital asset;
• offering kiosks (equivalent to automated teller machines, bitcoin teller machines or merchandising machines) for the aim of facilitating digital asset actions by digital terminals to allow the proprietor or operator of the kiosk to actively facilitate the change of digital property for fiat foreign money or different digital property; or
• participating in some other exercise that, underneath the Tips, constitutes the carrying on of the enterprise of offering a digital asset service, issuing digital property or being concerned in digital asset exercise.

Whether or not an entity is carrying on a digital asset service will activate, amongst different issues, whether or not the asset in query constitutes a “digital asset”. For instance, crypto-based spinoff merchandise would require extra cautious consideration and could also be caught by one or each the VASP Act or the BVI Securities and Funding Enterprise Act, 2010 (“SIBA”).

Equally, consideration also needs to be given to the record of excluded actions that will take a BVI firm outdoors the scope of the VASP Act, equivalent to offering ancillary infrastructure to enable one other particular person to provide a service, equivalent to a cloud knowledge storage supplier or integrity service supplier answerable for verifying the accuracy of signatures.

While not supposed to regulate cryptocurrency particularly, a BVI entity working within the cryptocurrency, blockchain expertise and Web3 area is also caught by the BVI’s current regulatory regime, together with underneath:

• the BVI Enterprise Corporations Act, 2004 (as amended);
• SIBA (as mentioned additional under);
• the Financing and Cash Companies Act, 2009 (“FMSA”) (as mentioned additional under);
• the Anti-Cash Laundering Regulations, 2008 (as amended) (the “AML Regs”) (as mentioned additional under);
• the Anti-Cash Laundering and Terrorist Financing Code of Follow (as mentioned additional under); and
• the Financial Substance (Corporations and Restricted Partnerships) Act, 2018 (as amended) – this will probably be of explicit relevance if the BVI firm is proposing to maintain any mental property rights in reference to the underlying expertise.

To keep away from duplication of regulation, the VASP Act does particularly present that an individual registered underneath the VASP Act who carries on solely the enterprise of offering a digital asset service needn’t be licensed underneath SIBA or FMSA.

Gross sales regulation

VASP Act

Underneath the VASP Act, while not expressly excluded, it’s typically accepted that the only real act of issuing or promoting digital property in or from inside the BVI will not be an exercise regulated by the VASP Act in and of itself. Nevertheless, the supply of economic companies associated to a digital asset issuance, in addition to the switch of digital property, if being carried out by a BVI entity as a enterprise on behalf of one other get together, will doubtless represent digital asset companies and require that entity to be registered with the Fee underneath the VASP Act.

SIBA

SIBA regulates, amongst different issues, the supply of funding companies from inside the BVI. SIBA supplies that any particular person carrying on, or presenting themselves as carrying on, funding enterprise of any type in or from inside the BVI should achieve this by an entity regulated and licensed by the Fee (topic to the secure harbours in SIBA). Funding enterprise is broadly outlined and covers: (i) dealing in investments; (ii) arranging offers in investments; (iii) funding administration; (iv) funding recommendation; (v) custody of investments; (vi) administration of investments; and (vii) working an funding change.

“Investments” can also be broadly outlined and could embody: (i) shares, pursuits in a partnership or fund pursuits; (ii) debentures; (iii) devices giving entitlements to shares, pursuits or debentures; (iv) certificates representing investments; (v) choices; (vi) futures; (vii) contracts for distinction; and (viii) long-term insurance coverage contracts.

Whether or not a digital asset falls underneath the SIBA regime will depend upon whether or not it has traits comparable to the shares, and many others. inside the definition of investments.

Moreover, any pooling automobile that’s investing into the digital asset area, or accepting digital property by the use of subscription and then investing into extra conventional asset courses, can be suggested to search BVI authorized recommendation as to whether or not such actions would require registration as a fund.

Taxation

The BVI Worldwide Tax Authority has not issued any formal assertion in relation to the taxation of digital property. Nevertheless, the BVI is a tax-neutral jurisdiction and its revenue tax is about at 0%, which implies that there is no such thing as a revenue tax truly levied or paid to the Authorities of the BVI. As such, there is no such thing as a requirement for BVI entities to file an revenue tax return, though they have to submit an annual financial substance declaration and an annual return. As well as, there aren’t any capital features taxes, reward taxes, income taxes, inheritance taxes or property responsibility within the BVI.

For tax functions, BVI entities could develop into resident in any jurisdiction, primarily based on such assessments as “administration and management”. All BVI entities are exempt from tax within the BVI and can receive a certificates from both the BVI registrar or the Inland Income to that impact. Furthermore, the BVI operates a source-based tax system underneath which BVI entities will probably be taxed within the BVI on their BVI web revenue in any case BVI bills. Consequently, BVI entities working outdoors of the BVI, if tax resident within the BVI, shouldn’t have their overseas supply revenue taxed within the BVI.

The place there’s an preliminary token/coin providing, the change operators will want to be cognisant of the affect of the International Account Tax Compliance Act (“FATCA”) and Frequent Reporting Requirements (“CRS”).

Cash transmission laws and anti-money laundering necessities

The related cash transmittal legislation within the BVI is FMSA, which regulates cash companies enterprise. FMSA defines cash companies enterprise as together with:

• automated teller machine companies;
• cash transmission companies;
• cheque change companies;
• foreign money change companies; and
• the issuance, sale or redemption of cash orders or travellers’ cheques.

While the consensus is that “cash” and “foreign money” refer to fiat currencies slightly than cryptocurrencies, the precise exclusion within the VASP Act, famous above, whereby any particular person registered underneath the VASP Act to keep on solely the enterprise of offering a digital asset service will probably be exempt from FMSA, will probably be of explicit relevance, and helps to present certainty to many digital asset service suppliers (for instance, these concerned within the switch of digital property from one account to one other). Care will, nevertheless, want to be taken the place an organization is deemed to be finishing up any actions that fall outdoors the scope of the VASP Act, because the above-noted exemption wouldn’t apply in these circumstances.

Additionally relevant to VASPs are the Anti-Cash Laundering (Modification) Regulations, 2022 and the Anti-Cash Laundering and Terrorist Financing (Modification) Code of Follow, 2022, which, from 1 December 2022, introduced VASPs inside scope of the BVI AML/CTF regime for transactions involving digital property valued at $1,000 or extra.

Though an in depth consideration of the precise necessities of the BVI’s AML/CTF regime falls outdoors the scope of this chapter, any particular person topic to the regime will typically want to do, amongst different issues, the next:

• appoint a named particular person as an AML compliance officer to oversee its adherence to the AML Laws and to liaise with the supervisory authorities (and, underneath the VASP Act, a VASP will need to have such officer authorised by CIMA);
• appoint a named particular person as the cash laundering reporting officer to act as a reporting line inside the enterprise; and
• implement procedures to be certain that counterparties are correctly recognized, risk-based monitoring is carried out (with particular regard to the character of the counterparties, the geographic area of operation, and any dangers particularly related to new applied sciences equivalent to digital property), correct information are stored, and staff are correctly educated.

As well as, the Fee has issued the Digital Property Service Suppliers guide to the prevention of cash laundering, terrorist financing and proliferation financing (accessible here), and new regulatory necessities have been put in place to be certain that adequate data is obtained relating to transfers of digital property by intermediaries.

In our expertise, most events will probably be finest suggested to seek the advice of specialist third-party suppliers to help with this course of.

The BVI launched the Monetary Companies (Regulatory Sandbox) Regulations, 2020 (the “Sandbox Regulations”) to encourage technological innovation within the monetary expertise sector underneath a lighter contact regulatory regime. The Sandbox Regulations had been launched to help:

• start-ups that want to present new monetary companies options that contain a FinTech enterprise mannequin that isn’t presently lined (whether or not explicitly or implicitly) underneath present BVI laws;
• start-ups that want to check modern expertise to ship a licensable monetary service; and
• entities already licensed by the Fee that want to check an modern expertise as a part of their already authorised monetary service providing.

A particular person authorised underneath the Sandbox Regulations as a Sandbox participant prior to the VASP Act coming into drive can notify the Fee in writing of its intention to present modern FinTech in relation to digital property (with such notification being handled as an software for registration as a VASP).

The place a VASP that isn’t registered underneath the VASP Act or authorised underneath the Sandbox Regulations needs to keep on a digital asset service and present modern FinTech in accordance with the Sandbox Regulations, it could submit an software to the Fee in accordance with the Sandbox Regulations, with it being famous within the software that it intends to keep on the enterprise of offering digital asset companies in relation to which the modern FinTech will probably be utilized.

Possession and licensing necessities

There aren’t any restrictions within the BVI on an funding supervisor proudly owning cryptocurrencies for funding functions. While presently untested, due to the infancy of the VASP Act, we might anticipate that an funding supervisor may have to apply for registration underneath the VASP Act so as to maintain these digital property (whether it is decided that the funding supervisor is holding these digital property for and on behalf of a 3rd get together). Whether or not an funding supervisor that’s licensed underneath the Accepted Supervisor regime would additionally want to be registered individually underneath the VASP Act can also be but to be confirmed.

Once more, while as but untested, an funding fund integrated or fashioned within the BVI that proposes to deal in digital property as a part of its funding technique will doubtless have the option to achieve this with out being registered by the Fee underneath the VASP Act, offered that it’s coping with these digital property on a proprietary foundation.

Mining

Mining cryptocurrencies will not be inside scope of the VASP Act and subsequently stays an unregulated exercise from a BVI perspective, whether or not performed within the BVI or by a BVI firm outdoors of the BVI. The BVI has excessive electrical energy prices and as such, mining inside the BVI, notably on a big scale, is unlikely to be environment friendly.

Border restrictions and declaration

The BVI doesn’t impose any basic border restrictions on the possession or importation of digital property.

As a part of the BVI’s dedication to combatting cash laundering and terrorist financing, the Customs Administration and Responsibility Act, 2010 mandates that any particular person getting into or departing the BVI shall make a declaration of something contained within the particular person’s baggage or carried with the individual that, being an amount of money (which incorporates cash, notes, travellers’ cheques and negotiable devices equivalent to cash orders, cheques, inventory and bonds in any foreign money), exceeds $10,000. While the VASP Act does require that value-based phrases contained in any monetary companies laws or some other enactment relating to cash laundering, terrorist financing and proliferation financing shall be construed to embody digital property, there’s a conceptual query of what would quantity to the importation or transportation of such property given the character of those property, notably these primarily based or recorded on a distributed ledger. As such, we might not anticipate such a requirement to apply to digital property.

Reporting necessities

As famous above, a BVI firm offering a digital asset service in reference to a transaction involving digital property valued at $1,000 or extra will probably be deemed to be carrying on a “related enterprise” for the needs of the AML Regs and will probably be required to adjust to the BVI AML/CTF/PF legislative regime, together with complying with the “journey rule” and reporting suspicions of cash laundering or different felony exercise with the Fee and/or the BVI’s Monetary Investigation Company, as relevant.

The OECD has additionally revealed a closing model of its Crypto-Asset Reporting Framework (“CARF”) and 2023 replace to the CRS, making a cross-border reporting framework to present for standardised change of knowledge on transactions in crypto-assets. As such, we will anticipate amendments to be made to the CRS legislative framework within the BVI so as to implement the suggestions underneath CARF.

Property planning and testamentary succession

Cryptocurrencies and different digital property haven’t been broadly used for the needs of property planning and testamentary succession underneath BVI legislation.

Neither the VASP Act nor some other explicit regime underneath BVI legislation offers particularly with the therapy of digital property upon the dying of a person holding them. Because of this, in precept, and assuming BVI legislation governs succession to the deceased’s property, digital property will probably be handled in the identical means as some other asset.

As is the case in lots of jurisdictions past the BVI, there’s doubtless to be some uncertainty as to the place the situs of a digital asset is situated (or certainly whether or not or not a situs will be decided in any respect). To the extent that the asset will be analysed underneath conventional conflict-of-laws guidelines as sited within the BVI, then a deceased’s digital asset couldn’t be validly transmitted to his/her heirs or beneficiaries till an software is made to the BVI Excessive Courtroom Probate Registry (the “Registry”). To cope with a deceased’s digital asset, an individual would wish to be appointed as authorized private consultant of the deceased, by acquiring the suitable grant from the Registry. There are two kinds of grant that could be obtained:

• Grant of Probate (the place the deceased left a will that expressly offers with the BVI situs digital asset); and
• Grant of Letters of Administration (the place the deceased didn’t go away a will expressly protecting the BVI situs digital asset).

In respect of the latter, the deceased can be deemed to have died “intestate” in relation to the BVI situs digital asset – even when that they had a legitimate will protecting property in different jurisdictions. The primary potential issue that will come up is sensible; particularly that anybody inheriting a digital asset will, on the face of it, typically solely have the option to entry that digital asset if the private consultant of the deceased or the beneficiary (because the case could also be) has or can receive the knowledge wanted so as to acquire entry and management over that digital asset (e.g. a personal key to the pockets during which it’s saved). Most exchanges have insurance policies in place to switch digital property to subsequent of kin, however these insurance policies, and the switch necessities, will range throughout exchanges, and it’s typically thought to be prudent to keep away from leaving important worth on exchanges for any size of time due to the dangers of hacking and insolvencies.