Applying for a VASP licence in BVI

The Virtual Assets Service Providers Act, 2022 (VASP Act), creates a legal framework for registration and supervision of Virtual Assets Service Providers (VASPs) – such as virtual asset exchanges, marketplaces and brokerages, and perpetual futures exchanges – operating in the British Virgin Islands (BVI).

Key features of VASP Act

(1) Details of the application and approval requirements for registration as a VASP, including additional specific requirements for VASPs seeking to provide virtual assets custody services or operate a virtual assets exchange;

(2) Particulars of the functions of authorised representatives and the requirement for them to be approved by the Financial Services Commission to act in relation to VASPs;

(3) Details of information that a registered VASP must report to the commission on an ongoing basis;

(4) Establishing measures to protect clients’ assets; and

(5) Anti-money laundering/countering the financing of terrorism and other compliance matters.

Defining virtual assets

A virtual asset is defined in the VASP Act as: “a digital representation of value that can be digitally traded or transferred and can be used for payment or investment purposes”. This broad definition covers all types of virtual assets, including non-fungible tokens.

The VASP Act provides that a company may apply to the above-mentioned commission to be regulated as a VASP in one or more of the following categories:

1. The business of providing a virtual asset service;
2. Engaging in the business of providing a virtual assets custody service; and
3. Operating a virtual assets exchange.

Defining virtual assets service

The term “virtual assets service” is defined in the VASP Act as the business of engaging on behalf of another person in the following activities:

1. Exchange between virtual assets and fiat currencies;
2. Exchange between one or more forms of virtual asset;
3. Transfer of virtual assets, where the transfer relates to conducting a transaction on behalf of another person that moves a virtual asset from one virtual asset address or account to another;
4. Safekeeping or administration of virtual assets or instruments enabling control over virtual assets; and
5. Participation in, and provision of, financial services related to an issuer’s offer or sale of a virtual asset.

The VASP Act states activities that would be considered the provision of a virtual assets service:

1. Hosting wallets or maintaining custody over another person’s virtual asset, wallet or private key;
2. Providing financial services relating to the issuance, offer or sale of a virtual asset; and
3. Providing kiosks (such as automatic teller machines) for facilitating virtual assets activities through electronic terminals to enable the owner or operator of the kiosk to facilitate the exchange of virtual assets for fiat currency or virtual assets.

Requirements for functionaries

A VASP must have the following functionaries:

• Authorised representative;
• Auditor; and
• Individual approved by the commission, acting as compliance officer, to ensure VASP compliance with the VASP Act and other legislation.

Documents for VASP licence

Applicants for a VASP licence must provide the following information together with the application:

(1) Names and addresses of persons proposed as directors and senior officers of the VASP;

(2) Names and addresses of persons holding shares in the VASP, including their level of shareholding;

(3) Names and addresses of persons with controlling interest in the VASP;

(4) Physical address in the BVI of the VASP;

(5) Name and address of the VASP auditor, including auditor’s consent to act as such;

(6) Name and address of proposed authorised representative of the VASP;

(7) Business plan, which includes the following:

• (a) Information on the nature and complexity of the VASP; underlying technology to be used; delivery method of the virtual asset service; and the virtual asset to be utilised;
• (b) Any outsourcing arrangements and systems to be put in place to govern them; and
• (c) Indication of initial capital and financial projections covering the first three years of operation, including projected set-up costs;

(8) Written risk assessment of the VASP;

(9) Written compliance manual showing how the applicant, if granted registration, intends to comply with the requirements of the VASP Act and any rules made thereunder;

(10) Internal safeguards and data protection (including cybersecurity) systems intended to be utilised; and

(11) System to be put in place on how the VASP will handle client relationships and complaints.

Gary Smith is a partner at Loeb Smith Attorneys in the Cayman Islands and Frost Wu is a legal manager at Loeb Smith Attorneys in Hong Kong

LOEB SMITH ATTORNEYS
Fifth Floor, Zephyr House
122 Mary Street

George Town, PO Box 31493

Grand Cayman KY1-1206

Cayman Islands

www.loebsmith.com

Contact details:
Tel: +1 345 749 7591
E: gary.smith@loebsmith.com
E: elizabeth.kenny@loebsmith.com