The British Virgin Islands (BVI) has been a popular and crypto friendly jurisdiction for many years. It provides an amiable regulatory framework and lax requirements with respect to KYC and AML compliances. Considering an increasing number of crypto companies incorporating in the jurisdiction and increasing pressure from the FATF, authorities decided to introduce the Virtual Asset Service Provider (VASP) Act, 2022. It has been designed to regulate the growing cryptocurrency industry within BVI and provide a framework for virtual asset service providers to operate within the jurisdiction.

VASP Act, 2022

The VASP Act has now been published and has come into effect from February 01, 2023. In this article, we will explore the key provisions of the VASP Act, 2022 and other recent regulatory changes in AML/KYC requirements to understand what it means for the BVI and the crypto industry.

As per the VASP Act, 2022, “virtual asset” means a digital representation of value that can be digitally traded or transferred, and can be used for payment or investment purposes, but does not include

(a) digital representations of fiat currencies and other assets or matters specified in the Guidelines; or

(b) a digital record of a credit against a financial institution of fiat currency, securities or other financial assets that can be transferred digitally;

This definition is wide and seems aligned with the FATF recommendations on virtual assets. Further, VASP is defined as a virtual asset service provider who, as a business, is registered under this Act to conduct one or more of the following activities:

  1. exchange between virtual assets and fiat currencies;
  2. exchange between one or more forms of virtual assets;
  3. transfer of virtual assets;
  4. safekeeping or administration of virtual asset; and
  5. participation in, and provision of, financial services related to an issuer’s offer or sale of a virtual asset.

However, the definition specifically excludes persons providing ancillary, infrastructure, software development or network related services to rationalise the impact of the new Act.

Registration and Licensing

A person who wishes to act as VASP is required to apply to the Commission for registration to undertake such business in one or more of the following categories

(a)   to carry on the business of providing a virtual assets service.

(b)  to engage in the business of providing a virtual assets custody service.                  

(c)   to operate a virtual assets exchange.

Registration related requirements

VASP Act requires the applicants to prepare and submit a comprehensive documentation providing details of various aspects of their proposed business activities. The application for registration must also contain, inter alia, the following information:

  1. the names and addresses of the persons proposed as directors, shareholders and senior officers of the VASP;
  2. the physical address in the Virgin Islands of the VASP;
  3. the name and address of the auditor of the VASP, including the auditor’s consent to act as such;
  4. a business plan in relation to the VASP which should include detailed information relating to the nature, size and scope of the VASP, underlying technology to be used, human resources, outsourcing arrangements, initial capital and financial projections;
  5. a written risk assessment of the VASP outlining the mechanism to identify, assess, monitor and control different risks; and
  6. the system to be put in place on how the VASP will handle client assets, custodian relationships and customer complaints.

Other Considerations

  • Every VASP is required to appoint an Authorized representative, a person who has been approved by the Commission. Only individuals who are resident of BVI or a company or LLP registered in BVI are eligible to become an authorised representative.
  • Every VASP is required to appoint an auditor, unless exempt by the Commission
  • A prior written approval is required from the Commissioner for any person to acquire a significant or controlling interest in a VASP
  • Client assets are required to be identified or identifiable and appropriately segregated
  • A legal framework for participating in the regulatory sandbox for crypto projects

KYC and AML requirements

Even before the VASP Act came into force (Feb 1, 2023), amendments were introduced in form of Anti-Money Laundering (Amendment) Regulations, 2022 and the Anti-Money Laundering and Terrorist Financing (Amendment) Code of Practice, 2022 to expand the definition of “relevant business” to also include VASPs. These provisions relating to VASPs came into effect on December 1, 2022 and VASPs providing any virtual asset service involving virtual assets of more than $1,000 are required to comply with the provisions of KYC and AML requirements under applicable laws. VASP Act also has a specific provision (Section 25) relating to AML / CFT compliance which requires VASPs to adopt measures to assist in   tracing and collecting the Internet Protocol (IP) addresses of its customers, including associated dates, geographical data, device indicators and virtual assets wallet addresses.

Impact on existing entities

The new crypto regulation provides a concession to persons or companies providing virtual asset services prior to coming into effect of the VASP Act in the form of a grace period till July 31, 2023. Enforcement action will be taken under the new crypto legal framework if applications are not submitted by these existing persons or entities by July 31, 2023.

Impact on token issuing entities

The definition of virtual asset service under the VASP Act includes engaging in any activity which, under the guidelines issued by FSCA, constitutes issuing virtual assets. However, the list of activities mentioned in the definition of a VASP includes  “participation in, and provision of, financial services related to an issuer’s offer or sale of a virtual asset“. There is lack of clarity on whether mere issuance of virtual assets by a BVI company will fall in the definition of VASP and require licence. It is advised to consult with a legal or compliance expert in this regard.


The VASP Act, 2022 is a positive and significant development towards digital currency regulation in BVI. This is a step towards BVI’s commitment to align with FATF recommendations on regulation of VASPs and will also provide regulatory certainty for the businesses operating from BVI or persons planning to incorporate crypto companies in BVI. Regulatory clarity will also boost consumer confidence and ensure protection of customer assets in the hands of crypto companies operating from BVI. On the other hand, the burden of increased compliance requirements and obligation to engage local residents in various capacities may force many foreign businesses to leave the islands on account of increased compliance cost. The Act has just been implemented and we will need to wait to gain further insights into the practical challenges in enforcement of and compliance with the provisions of this law.


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