Gold Leaf Consulting Limited celebrates the introduction of the BVI’s VASP legislation

February 10th 2023 | Tortola, British Virgin Islands

This is approximately a four-minute read, to access a synopsis of this article produced by video for your convenience, click here: Gold Leaf Consulting Limited celebrates the introduction of the BVI’s VASP legislation!

Gold Leaf Consulting is a boutique firm with a global reach which specializes in legal, regulatory and compliance consulting services. Our clients are primarily regulated global financial institutions, including banks, trust companies, insurance providers and, more recently, digital asset service providers such as exchanges.

The British Virgin Islands has always been a leader within the financial services landscape, credited to its robust legislation and pragmatic solutions for commercial trading.

As a jurisdiction, the virtual assets space was first introduced with the deployment of the ‘sand-box’ regime, which was applauded by the industry and global financial players. The sandbox model offered virtual asset service providers the opportunity to test their innovative technology in a controlled space. This allowed them to be commercially pragmatic in determining whether they wanted to launch their product or proceed in a regulated space based on whether they had the necessary procedures to be regulated or the will to develop them. Following the success of the sandbox regime, the BVI passed its virtual assets services legislation at the end of 2022.

The BVI’s Virtual Asset Service Providers Act, 2022 regulates the provision of virtual asset services within and outside the Territory. Naturally, the extra-Territorial regulation only applies where an entity registered in the BVI but conducting its service outside is still deemed to be facilitated in conducting its service through the BVI’s framework. This, therefore, requires their registration under the VASP Act.

Practically speaking, one of the interesting elements of the VASP legislation is the use of the term ‘register’ when in fact this is a licensing regime. The use of the word registration does not suggest a quasi-licensing regime but establishes a robust regulatory framework which really monitors and ensures the compliance of virtual asset service providers with legislation. This is achieved by requiring virtual asset service providers to have key approved persons as a part of their licensing application. These include a compliance officer, a money laundering reporting officer (MLRO), and an authorized representative. The entity must also have a minimum of two directors, which must be individual persons and not corporate entities. There must also be an auditor in place to conduct financial audits.

Another key requirement of the VASP Act for persons seeking licensure is that of the entities demonstrating appropriate risk management and control measures. Throughout the VASP Act, the legislation makes clear that the entity is required to submit written policies and procedures which evaluate all of the risks to which the entity would be exposed. These risks include anti-money laundering (AML), counter financing of terrorism (CFT), operational risks, liquidity risks, interoperability risks, and those risks involved with safeguarding the assets of customers.

Ultimately, this is a very risk intense piece of legislation. Gold Leaf is poised to play a critical role in developing the appropriate risk management policies and procedures in response.

In determining the viability of an application, the BVI’s Financial Services Commission (BVI FSC) is not employing a ‘tick-box’ approach. The BVI FSC will only consider applications which display risk management procedures and a demonstration of the efficacy and adequacy of the procedures in controlling the risk to which the entity is exposed.

The BVI Government and the BVI FSC must be applauded for the VASP Act. While sufficiently robust to regulate the industry, the legislation does not over-regulate, resulting in a commercially impracticable sector. This was achieved by the BVI FSC through its establishment of a Fintech Committee when designing the legislation. The Committee was comprised of a few industry stakeholders, including Gold Leaf’s CEO Julia Shamini Chase, who contributed to the process.

Gold Leaf has an extensive track record with matters within the virtual assets space. Our focus on the VASP legislation will include licensing applications. Prior to the introduction of this specific legislation, we earned a 100% approval rate with all of the licensing applications submitted to the BVI FSC on the behalf of our clients. With VASP applications, we can actually consult with our clients to help them understand the requirements, evaluate their existing procedures, determine the weaknesses and deficiencies, and strengthen them by establishing revised procedures which support the application. We credit this ability to our unique blend of regulatory law and compliance services capacity and experience.

Unlike a typical law firm, we operate as consultants going beyond merely advising clients as to what their legislative requirements are. We sit with clients, handholding them as we evaluate their policies and procedures. We also travel to these clients to view their operations firsthand, conduct GAP analyses, and help to train them as they upscale their policies and procedures to satisfy the BVI’s regulatory framework.

Bringing additional value, we also provide corporate compliance services to licensing applications. Gold Leaf, through its affiliated entity, has a license in the BVI to provide corporate compliance services; a requirement of the legislation for virtual asset service providers is for the appointment of a Compliance Officer, to be approved by the BVI FSC. We are staffed with legal, accounting, and other professionals, all with specializations in this area. Recently, we also established Gold Leaf Authorized Representative Service; an authorized representative, which is another functionary required under the Act.

As it relates to drafting the legislation, Gold Leaf has enjoyed many virtual asset-related successes! We were the first firm to steer a successful sandbox applicant and thereafter were also able to upscale the application to allow for the first-ever BVI crypto-currency exchange to be granted within a period of nine to twelve months. This client was one of the world’s five largest digital exchanges.

We have observed that a significant challenge facing persons interested in entering the virtual assets space is pivoting from a mostly unregulated global industry to the BVI’s financial landscape. This is where we work with clients, mainly through our consulting service line, to help clients understand their obligations and devise pragmatic solutions that comply with the BVI’s regulatory regime without straining their business lines. We achieve this by using our unique blend of expertise and skills and our understanding of the operational aspect of clients’ businesses. The intuitive application of commercially viable solutions is the most important to us.

Gold Leaf has developed solutions-focused compliance, SFC, as a proprietary methodology which goes beyond simply advising clients of their requirements. Our experience and tools help clients to develop practical solutions which ensure their compliance with and satisfaction with the standards of their regulatory obligations. At this point, we prioritise working with clients to develop the solutions necessary to support their licensing applications. The importance of adequate, effective, robust risk management policies and procedures accompanying a regulatory application for a VASP license must be recognized.

The team at Gold Leaf is equipped, experienced, and eager to help navigate you through the complexities of the BVI VASP regime. To engage with us call us at +1 (284) 494-9559 or send us an email, info@goldleafbvi.com.