1. What are the regulators for fintech companies in your jurisdiction?
The BVI Financial Services Commission (FSC) is the regulatory authority responsible for financial services business in the British Virgin Islands (BVI).
The FSC’s principal functions are set out in the BVI Financial Services Commission Act 2001 (as amended) (the FSCA) and include supervising, monitoring and regulating financial services businesses carried on in or from within the BVI, monitoring the effectiveness of financial services legislation and making recommendations to the BVI Cabinet on amendments to financial services legislation.
2. Do you foresee any imminent risks to the growth of the fintech market in your jurisdiction?
We don’t foresee any immediate risks to growth in the space.
3. Are fintechs required to be licensed or registered to operate in your jurisdiction?
Licensing and relevant framework will depend on the proposed products and/or services to be offered in or from the BVI or by a BVI entity.
4. What is a Regulatory Sandbox and how does it benefit fintech start-ups in your jurisdiction?
In August 2020, the FSC launched a regulatory sandbox for companies whose proposed business model involves the development or implementation of a new system, mechanism, idea, method or other arrangement through the use of technology to create, enhance or promote a product or service with respect to the conduct or provision of a financial services business. The sandbox is designed to encourage technological innovation in financial services under a lighter touch regulatory regime.
An application for entry into the sandbox will consist principally of a business proposal to cover, among other things, the proposed product or service, and how this encompasses innovation to improve accessibility, efficiency, effectiveness, security, quality in the provision of, or addresses shortcomings or opens up new opportunities in, financial services or the regulation thereof, the testing already carried out on the proposed product (with the expectation that testing, to the extent permitted by legislation, will be carried out prior to entry into the sandbox), details on the proposed customers (including estimated numbers, investment experience and geographical reach), an analysis of the risk profile of the proposals and the measures to be taken to manage those risks, an indication of the resources (whether financial, technological, human or otherwise) available to the application and a strategy for exiting the sandbox.
5. How do existing securities laws apply to initial coin offerings (ICOs) and other crypto assets, and what steps can companies take to ensure compliance in your jurisdiction?
The FSC has confirmed that the sale of a newly issued virtual asset is excluded from the requirement to register as a VASP pursuant to the VASP Act and has further confirmed that virtual assets and virtual assets-related products used as a means of payment for goods and services (for example tokens) which provide the purchaser with an ability to only purchase goods and services (utility tokens) would not be captured by financial services legislation.
Notwithstanding, where a virtual asset product provides a benefit or right beyond a medium of exchange, it may fall within scope of the BVI’s Securities and Investment Business Act, 2010 (as revised) (SIBA). As such, particular care and consideration should be given to token characteristics, with specific advice obtained prior to launch.
6. What are the key anti-money laundering (AML) and Know Your Customer (KYC) requirements for cryptocurrency exchanges in your jurisdiction, and how can companies implement effective compliance programs to meet these obligations?
Following amendments to the Anti-Money Laundering and Terrorist Financing Code of Practice which took effect from 1 December 2022, certain virtual asset services will satisfy the definition of ‘relevant business’ under the AML Code which may result in certain virtual asset service providers being treated as a ‘relevant person’ for the purposes of the AML Regulations. Such entities which satisfy the definition of ‘relevant person’ and ‘relevant business’ will be subjected to a reduced threshold of $1,000 for a one-off transaction. Token issuances are not expected to satisfy the definition of ‘relevant business’ unless other financial services are offered in relation to the issuance.
7. How do government regulations requiring licensing or regulatory oversight impact the operations of cryptocurrency and blockchain companies in your jurisdiction, and what strategies can be employed to navigate these varying requirements?
Regulations requiring licensing provide market participants and stakeholders with the necessary regulatory certainty over relevant products and/or services, with regulatory oversight helping minimize fraudulent activities but increasing the compliance burden and cost.
For cryptocurrency and blockchain companies in the BVI, the VASP Act provides for the regulation of VASPs and for the registration and licensing of persons who are providing virtual asset services. It is not expected that the VASP Act will prove a risk or reduce the status and popularity of the BVI as a leading jurisdiction which welcomes fintech and innovation however, the VASP Act will increase the level of regulation as well as require an application fee and an annual registration fee which may result in a small reduction in fintech projects.
8. What measures should cryptocurrency companies take to comply with the governmental guidelines on tax reporting and obligations related to digital assets in your jurisdiction?
The system of tax information exchange in the BVI is largely modelled on international principles developed by the Organisation for Economic Co-operation and Development (OECD) with the competent authority responsible for dealing with tax information exchange in the BVI, the International Tax Authority (ITA).
As of the date of publishing, all BVI entities with reporting obligations under the US Foreign Account Tax Compliance Act (FATCA), the OECD Common Reporting Standard (CRS) and the OECD country-by-country (CbC) reporting rules must submit their reports through the BVI Financial Accounting Reporting System (BVIFARS).
Notwithstanding, specific advice should be obtained by cryptocurrency companies to ensure legal as well as regulatory compliance.
On tax more generally, the BVI is a tax-neutral jurisdiction with zero income, corporate or capital gains taxes for any entities incorporated within the BVI making it attractive to directors and shareholders of BVI companies. There is no withholding tax on interest or distributions paid by BVI entities to investors, and investors will not otherwise be subject to income or capital gains tax within the BVI. Assuming the company does not hold, directly or indirectly, any real property in the BVI, no stamp duties or similar documentary taxes are imposed by or in the BVI.
9. How can blockchain companies address data privacy and protection regulations in your jurisdiction, while ensuring transparency and security on decentralized networks?
The BVI Data Protection Act (DPA) came in to force in July 2021. It was drafted around a set of EU-style data protection principles to which data controllers must adhere and state that personal data must be collected in a fair and transparent manner and only be used and disclosed for purposes properly understood and agreed to by data subjects. Any personal data collected must be adequate, kept up-to-date and should not be retained for longer than is necessary to fulfil the collection purposes.
To this end, BVI blockchain companies will need to be conscious of the limitations and interplay between the DPA and any privacy and/or data protection requirements and desired blockchain network characteristics.
The DPA is enforced by the Information Commissioner who has the power to issue guidance, investigate complaints of breach and initiate investigations. Enforcement is generally administrative but criminal sanctions are possible as well. The BVI has not yet appointed an Information Commissioner. The DPA extends to all BVI companies and limited partnerships whom process, have control over or process personal data. The location of the processing of the personal data does not impact the application of the DPA to a BVI company or limited partnership.
Another very exciting area of growth has been in the area of computer gaming, in-game NFTs, and play-to-earn projects.
10. How do immigration policies, such as the U.S.’s H-1B and L-1 visas, impact the ability of fintech companies to hire international talent in your jurisdiction?
A work permit must be obtained for any expatriate who wishes to engage in employment in the BVI, whether it is paid or unpaid, full-time or part-time. Employers must advertise any position in a local newspaper in the BVI for two consecutive weeks and give preference to any belonger or Virgin Islander who has applied and is qualified for the position. Subject to obtaining a work permit for individuals, there is no quotas or caps.
11. What are the key regulatory and compliance requirements that a fintech must address when entering the market in your jurisdiction, and how can the company ensure adherence to all applicable laws and regulations?
There is no obligation on a BVI company to have a presence in the BVI unless it is required to satisfy the BVI Economic Substance test pursuant to The Economic Substance (Companies and Limited Partnerships) Act, 2018 and the Economic Substance (Companies and Limited Partnerships) (Amendment) Act 2021 (Substance Legislation).
In order to engage in any business, profession or trade in the BVI, as distinct from establishing an offshore trust, limited partnership or company, all persons and companies must obtain a license under the Business, Professions and Trade Licences Act (Trade Licences Act). However, a person who is a licensee under SIBA or the VASP Act is exempt from the need to obtain a license under the Trade Licences Act to carry on any class of investment business in respect of which they are licensed or to carry on the business of providing a virtual assets service in and from within the BVI.
12. How should a fintech approach market entry strategy in your jurisdiction, considering factors such as target customer demographics, competitive landscape, and potential partnerships with banking and other financial institutions?
Prior to entering the market, the fintech entity should understand and be familiar with the regulatory landscape in the BVI. The factors relevant to market entry will vary depending on the business, product and/or service and desired outcomes.
The jurisdiction benefits from strong regulatory frameworks and a Regulator willing to engage with innovation and enterprise in the virtual asset sector.
BVI corporate legislation is generally regarded as non-prescriptive, in that companies are able to devise the corporate structure and procedures applicable to their business, subject to certain limited statutory requirements which provide flexibility to run the entity and to provide for changes to corporate governance which may be required in a fast moving sector such as fintech. The corporate structure and procedures applicable to a BVI company are set out in the company’s constitutional documents (i.e., its memorandum and articles of association), which govern the relationship between the company, its members and its directors. The flexibilities inherent in such a system make BVI companies extremely attractive as part of asset-holding structures and fintech structures. Based on the attractiveness of BVI corporate vehicles for international businesses, asset holding and investments, there has been a steady increase in the use of BVI companies as holding and operating companies across the technology industry. The incorporation and annual costs of a BVI company are low compared with other offshore jurisdictions such as the Cayman Islands and Bermuda. Save for regulated entities, the BVI does not operate or impose capital control or maintenance rules and there are no restrictions on the flow of funds in and out of the BVI or requirements that a BVI must undertake a transaction in a particular currency.
In the event that a fintech entrepreneur wishes to engage in a project which may be caught by the BVI securities framework, the BVI has a modern securities law framework which is recognised by foreign regulators as well as a strong commitment to provide anti-money laundering, anti-terrorist financing and anti-proliferation financing frameworks providing further confidence to investors, shareholders and counterparties.
English common law authority is highly persuasive under BVI law which creates invaluable jurisprudential resource and provides confidence to investors and counterparties. The BVI has a robust legislative suite on matters relating to corporate and commercial law. The English common law will only apply to the extent that it has not been modified by such statutes.
13. What are the primary financial and operational risks associated with entering the market in your jurisdiction, and how can the fintech effectively mitigate these risks to ensure a smooth transition and sustainable growth?
Broadly speaking the primary operational or start-up risk associated with entering the market will be regulatory and compliance risk, which can be effectively mitigated by obtaining advice as to providing the proposed product and/or service in or from within the BVI.
From a financial risk perspective on entering the market, should the proposed product and/or service fall within the BVI’s financial services regulatory framework, the entity will be required to submit and application to the FSC and pay the relevant application fee and annual registration fee.
14. Does your jurisdiction allow certain business functions to be outsourced to an offshore location?
Outsourcing is permitted under BVI financial services legislation subject to certain rules and restrictions which apply to entities that are licensed or registered under the following regulatory frameworks:
- Banks and Trust Companies Act 1990 (as revised);
- Company Management Act 1990 (as revised);
- Insurance Act 2008 (as revised);
- Financing and Money Services Act 2009 (as revised);
- SIBA;
- VASP Act.
It is worth noting that outsourcing covers all activities that a licensee would otherwise normally have undertaken itself, not just those activities that are regulated activities pursuant to the frameworks indicated above.
A licensee shall not outsource however — (a) the compliance function or a core management function; or (b) an activity if the outsourcing of that activity would— (i) impair the FSC’s ability to supervise the licensee; or (ii) affect the rights of a customer against the licensee, including the right to obtain legal redress.
15. What strategies can fintech companies use to effectively protect their proprietary algorithms and software in your jurisdiction, and how does patent eligibility apply to fintech innovations?
Protection of intellectual property (IP) in the BVI is based upon the laws of the United Kingdom. The BVI is not a party to the Paris Convention but has substantial IP protections. BVI IP protection should be supplemented with protection in all other jurisdictions in which the company utilises its IP
BVI Trademark legislations provide, amongst other characteristics (i) the Nice Classification system to classify and register goods and services, (ii) provisions of the registration of collective and defensive marks, (iii) multiple class filings and (iv) 10-year registration.
16. How can a fintech company safeguard its trademarks and service marks to protect its brand identity in your jurisdiction?
Patents registered in the UK or the EU can be afforded protection in the BVI by extension with registration at the BVI Registry of Patents and Trademarks. The period of protection is dependent on the underlying UK or EU patent. In practice, only existing UK registered patents will be registered in the BVI, and such patents will be valid for the same period as specified on the underlying UK registration on which it is based.
17. What are the legal implications of using open-source software in fintech products in your jurisdiction, and how can companies ensure compliance with open-source licensing agreements?
There is no legislation or regulatory framework in the BVI governing the use of open-source software in fintech (or financial services) products. Notwithstanding, BVI companies should be mindful that open-source software is released under licenses that define their terms of use, which can vary. For example, certain open-source software licenses may contain only limited warranties with no liability infringement indemnity protection, similarly, incorporating open-source software into products may, depending on the open-source software license, require the derivate works or modified software to be distributed under the same open source license – with such consequence often severe for fintech companies attempting to innovate within the space.
18. How can fintech startups navigate the complexities of intellectual property ownership when collaborating with third-party developers or entering into partnerships?
When collaborating or partnering with third-party developers or service providers, fintech startups should ensure that such arrangements are documented comprehensively, with the agreements clarifying IP ownership and rights and creation (if relevant) and include protections relating to infringement by way of warranties and indemnity provisions.
19. What steps should fintech companies take to prevent and address potential IP infringements, such as unauthorized use of their technology or brand by competitors?
BVI IP protection should be supplemented with protection in all other jurisdictions in which the company utilises its IP. With regard to copyright, copyright protection in the BVI is based on the United Kingdom’s Copyright Act of 1956, which was extended to the BVI by the Copyright (Virgin Islands) Order 1962 (with certain amendments). The BVI does not have its own copyright registry and it is not possible to formally register copyright in the BVI.
20. What are the legal obligations of fintechs regarding the transparency and fairness of AI algorithms, especially in credit scoring and lending decisions? How can companies demonstrate that their AI systems do not result in biased or discriminatory outcomes?
There is no legislation or regulatory framework in the BVI governing AI in the BVI.
21. What are the IP considerations for fintech companies developing proprietary AI models? How can they protect their AI technologies and data sets from infringement, and what are the implications of using third-party AI tools?
Please see the responses to questions 15, 16 and 19.
22. What specific financial regulations must fintechs adhere to when deploying AI solutions, and how can they ensure their AI applications comply with existing financial laws and regulations? Are there specific frameworks or guidelines provided by financial regulatory bodies regarding AI?
There is no legislation or regulatory framework in the BVI governing AI in the BVI.
We are not aware of the extent to which financial institutions are using artificial intelligence in their business activities. Based on current BVI regulations, we do anticipate that this will be a major growth area where existing regulations are unlikely to impede development.
23. What risk management strategies should fintech companies adopt to mitigate potential legal liabilities associated with AI technologies?
The primary risk management strategies should be to: develop and implement strong internal controls and procedures relating to the use/deployment of the AI technology within the business (including compliance assessment and management of AI vendors); conducting risk assessments with a particular focus on cybersecurity and operational resilience relating to the use/deployment of AI technology; regular audits and ongoing monitoring of the AI technology’s use/deployment within the business.
24. Are there any strong examples of disruption through fintech in your jurisdiction?
To date, there has been no significant displacement of traditional financial service providers in the BVI. Nonetheless, as one of the largest international business and financial centres, it is expected that this will be an area of significant growth in the coming years, with recent drives from the BVI government for local entities to embrace FinTech solutions. In order to stay competitive, it is anticipated that traditional service providers will look at new innovations driven by technology-focused new entrants to the market. Similar to other offshore jurisdictions, one area of focus is on technology solutions that deliver performance improvements to existing paper-based checks and balances in areas such as customer due diligence, fraud detection and beyond. For larger financial institutions with substantial compliance overheads, the promise of FinTech to replace manual processes with technologies that are cheaper and more cost effective at achieving compliance and managing risk has yet to be realised but the possibilities are certainly being explored.
25. Which areas of fintech are attracting investment in your jurisdiction, and at what level (Series A, Series B, etc.)?
In recent years the BVI has witnessed the steady growth of digital assets as an alternative to traditional debt and equity financing, including tokenised fund. Tokenised funds (where the investor’s interest is represented by a cryptographic token instead of shares, units or other interests offered to investors in a more traditional fund structure) have proved increasingly popular.
Traditional BVI investment fund products have also increased in popularity where the fund’s investment objectives include investment in virtual asset projects. As a crypto friendly jurisdiction, which is already home to a large number of exciting new virtual asset projects, fund managers routinely point to the crypto friendly approach of the BVI regulators, local digital asset expertise and available fund products as key factors in their decision. The BVI offers a range of open-ended fund products with differing amounts of regulatory oversight depending on the characteristics of the fund. This range of fund products has proven to be very attractive, particularly amongst small to medium sized funds with a maximum of $100 million of assets under management.
Token issues and initial coin offerings continue to be popular in the BVI which was reinforced by the BVI FSC’s guidance that the sale of a newly issued virtual asset is excluded from the requirement to register as a VASP pursuant to the VASP Act. The BVI is also seeing an increase in the tokenisation of real-world assets whereby the token represents a direct, proportional interest in underlying assets such as gold, collectibles, art or real estate.
The BVI remains popular with projects looking to utilise virtual assets to facilitate advances in both payment and crypto lending services.
Another very exciting area of growth has been in the area of computer gaming, in-game NFTs, and play-to-earn projects.
Originally provided for Legal 500’s Guide to Fintech in BVI, 2025.
