British Virgin Islands
Answer ... The Financial Services Commission guidance notes (see question 1.1) use the Financial Action Task Force (FATF) definition of a ‘virtual asset’, being a digital representation of value that can be digitally traded or transferred and that can be used for payment or investment purposes. ‘Virtual assets’ do not include digital representations of fiat currencies. It is the commission’s position that virtual assets and their related products:
- have value;
- exhibit the attributes of property; and
- meet the definition of intangible property.
The guidance notes do not define the term ‘cryptocurrency’.
British Virgin Islands
Answer ... The British Virgin Islands (BVI) expects to introduce new anti-money laundering and combating the financing of terrorism (AML/CFT) legislation, which adopts the FATF recommendations on virtual asset services providers, in the near future. In the meantime, all BVI entities should adhere to existing AML laws.
British Virgin Islands
Answer ... Individuals who invest in unregulated cryptocurrencies will be limited to seeking assistance from the BVI courts if an unlawful activity has occurred. The Financial Services Commission can only assist where a BVI entity is regulated.
British Virgin Islands
Answer ... The BVI tax authority has not issued any formal statement in relation to the taxation of cryptocurrencies. However, the BVI is a tax-neutral jurisdiction and its income tax is set at 0%, which means that there is no income tax actually levied or paid to the BVI government. As such, there is no requirement for BVI entities to file an income tax return, although they must submit an annual economic substance declaration. In addition, there are no capital gains taxes, gift taxes, profits taxes, inheritance taxes or estate duty in the BVI.
For tax purposes, BVI entities may become resident in any jurisdiction, based on such tests as ‘management and control’. All BVI entities are exempt from tax in the BVI and can obtain a certificate from either the BVI registrar or the Inland Revenue to that effect. Moreover, the BVI operates a source-based tax system under which BVI entities will be taxed in the BVI on their BVI net income after all BVI expenses. Consequently, BVI entities operating outside of the BVI, if tax resident in the BVI, will not have their foreign source income taxed in the BVI.
Where there is an initial token/coin offering, the exchange operators will need to be cognisant of the impact of the Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standards (CRS). FATCA and the CRS will not be immediately relevant at the launch of the initial token/coin offering, but they will need to be considered when a BVI issuer starts to conduct business more generally.
British Virgin Islands
Answer ... No regulatory requirements apply to individuals who trade cryptocurrencies on their own behalf, provided that they are not offering any regulated or investment services under the Securities and Investment Business Act (SIBA). However, where a cryptocurrency provides a benefit or right beyond a medium of exchange (eg, because it grants rights to shares or creates or acknowledges a debt), SIBA can apply. Some cryptocurrencies can provide other benefits to the holder, such as rights to:
- vote on different protocol proposals;
- be eligible for part of the protocol profits or fees; or
- take part in a decentralised autonomous organisation.
BVI entities that hold fiat currency on behalf of their clients and invest the same will need to consider whether they need to apply for a licence under the Banks and Trust Companies Act. Advice should therefore always be taken prior to engaging in activities involving cryptocurrencies in or from within the BVI, to determine whether it needs to be regulated by the Financial Services Commission.
British Virgin Islands
Answer ... These terms are not currently defined in the BVI and there is no specific regulation in relation to the same. Whether an initial coin offering or securities token offering needs to be regulated in the BVI will depend on how it is structured and what the token subsequently represents. If the token is merely a medium of exchange, with no benefits or rights other than ownership of the asset, it will not be considered an ‘investment’. As such, we would expect such asset to fall outside the scope of SIBA regulation – a position confirmed in the Financial Services Commission guidance notes (see question 1.1). However, if the value of a token is determined by reference to the performance of some other asset or business, such that it becomes a form of derivative, it may be considered an ‘investment’ and therefore caught by SIBA. We therefore recommend that specialist advice be sought to determine whether a token is caught by the SIBA licensing requirements.