TBA & Associates

British Virgin Islands cryptocurrency set-up company

Regulated activities

What is regulated are certain activities which may involve crypto currencies. So, each case has to be examined on its own to determine any relevant implications.

Generally, where a virtual asset or virtual asset related product is deemed an “investment” under the Securities and Investment Business Act (“SIBA”), then if the BVI entity is carrying out certain activities in relation to that investment then it could require licensing.

The “investments” under SIBA include:

Shares, etc.: shares, interests in a partnership or fund interests;

Debentures, etc.: debentures, debenture stock, loan stock, bonds, certificates of deposit and any other instruments creating or acknowledging indebtedness, other than for money borrowed to defray consideration for the supply of goods or services and also does not include a cheque or other bill of exchange, a bankers draft or a letter of credit;

Instruments giving entitlement to shares, debentures: these include warrants or other instruments entitling the holder to subscribe for investments;

Certificates representing investments: certificates which confer contractual, or property rights held by a person other than the person on whom the rights are conferred by the certificate or instrument and the transfer of which may be effected without the consent of that person;

Options: options to acquire or dispose of an investment including any currency, palladium, platinum, gold or silver;

Futures: a futures contract other than a contract made for commercial and not investment purposes. A contract shall be regarded as made for investment purposes if it is made or traded on an investment exchange, or made otherwise than on such an exchange but expressed to be as traded on such an exchange or on the same terms as those on which an equivalent contract would be made on such an exchange for commercial and not investment purposes;

Contracts for differences: rights under a contract for differences or any other contract the purpose or intended purpose of which is to secure a profit or avoid a loss by reference to fluctuations in property or an index other than a contract which involves taking delivery of any property to which the contract relates;

Long term insurance contracts: long term insurance contracts or rights and interests in any investments;

Rights and interest in investments: rights to and interests in any investment; and

Specified investments: anything specified as an investment from time to time by the relevant regulations.

Importantly, cash and real property are not investments under SIBA.

Based on the above, a virtual asset transaction which is a “contract for differences”, for example, would be an “investment” under SIBA. The types of activity constituting investment business under SIBA are as follows:

Dealing in investments;

Arranging deals in investments;

Managing investments;

Providing investment advice;

Providing custodial services with respect to investments;

Providing administrative services with respect to investments; and

Operating an investment exchange.

Crypto exchanges

Operating an investment exchange is an activity that is regulated by SIBA, but only to the extent that what is traded on that exchange would qualify as an “investment” under SIBA. Accordingly, where a token is considered to be a utility token (and thus outside of the regulatory purview of the legislation considered above), operating an exchange of such tokens would not be considered to be regulated activity, provided that nothing that would count as an ‘investment’ is used as a medium of exchange for such utility tokens. So, trading utility tokens for other utility tokens, or even fiat currency or some stable coins, would not be a regulated activity. On the other hand, trading utility tokens for a token with the characteristics of an investment would likely fall to be regulated.

Regulatory Sandbox

It should be noted that, to deal with situations where a token would be likely to be regulated (whether under SIBA, FMSA, or otherwise), or where an exchange would likely involve the trading of “investments”, the BVI has recently introduced the Financial Services (Regulatory Sandbox) Regulations, 2020 (the Regulations). The Regulations provide a “regulatory sandbox” in which it is possible for innovative fintech companies to operate, provided that they operate within a clearly defined business plan and with a limited (and set) number of clients. Accordingly, even in the rare situations that a token may be considered to be within the scope of financial regulation, it may be possible to ‘sandbox’ that activity, such that full compliance with BVI financial services regulation can be delayed while the fintech is tested.

Final considerations

Existing BVI legislation, as supported by the Guidance, is sufficiently flexible to support ICOs of utility tokens without these being subject to any additional licensing, disclosure or record keeping obligations under existing BVI financial services legislation. This, coupled with those generally advantageous aspects of BVI law, make the BVI an attractive locale for ICOs and it is expected that the number of ICOs involving BVI companies will continue to increase.

Our company licensing services

— What we do and do not do

Our company is EXCLUSIVELY engaged in assisting worldwide clients, either individuals or corporate entities, to get duly and properly licensed with local Regulators and Financial Authorities to get respective official licenses to legally carry out their cryptocurrency or financial related business activities.

TBA & Associates Tax Business Advisors does not provide or carry out any sort of Cryptocurrency or Financial services!

Disclaimer: While TBA & Associates strives to make the information on this website as timely and accurate as possible, the information itself is for reference purposes only. You should not substitute the information provided in this article for competent legal advice. Feel free to contact TBA Customer Services for advice on your specific cases.

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