1. What are the sources of payments law in your jurisdiction?
The primary legislation in respect of payments laws are the Banks and Trust Companies Act (BTCA) and the BVI Financing and Money Services Act (FMSA).
The BTCA regulates persons carrying on any form of banking business or trust business or company management business in or from within the BVI. Banking business includes the business of accepting deposits of money which may be withdrawn or repaid on demand or after a fixed period or after notice, by cheque or otherwise and the employment of such deposits, either in whole or in part in making or giving loans, advances, overdrafts, guarantees or similar facilities, or the making of investments, for the account and at the risk of the person accepting such deposits. A fintech entity which wishes to produce payment technology without accepting deposits will not be required to comply with the BTCA.
FMSA regulates persons engaged in or holding themselves out as being engaged in, among others transmission of money in any form, including electronic money, or currency exchange services, providing credit to borrowers’ resident in the BVI and peer-to-peer lending markets. Current feedback from the Financial Services Commission (FSC) confirms that the FSC does not currently anticipate that the requirements of FMSA capture transmission or lending of virtual currencies or the exchange of virtual currencies.
2. Can payment services be provided by non-banks, and if so, on what conditions?
Non-banks can provide payment services provided they do not accept deposits from customers, transmit fiat or provide credit to borrowers’ resident in the BVI.
3. What are the most popular payment methods and payment instruments in your jurisdiction?
The most prominent method of payment in the BVI is debit and credit cards however cheques and cash are still prominent in the jurisdiction.
4. What is the status of open banking in your jurisdiction (i.e. access to banks’ transaction data and push-payment functionality by third party service providers)? Is it mandated by law, if so, to which entities, and what is state of implementation in practice?
Open banking and the use of application programming interfaces (APIs) is not used in the BVI at present. Banks in the BVI currently follow traditional banking methods and data sharing. Open banking is not mandated by BVI law. The sharing of the bank’s transaction data with third party service providers is likely to be restricted by the implementation of data protection legislation brought into force in 2021 (see below). There are no public releases relating to BVI banks looking at or utilising open banking at present.
5. How does the regulation of data in your jurisdiction impact on the provision of financial services to consumers and businesses?
The BVI Data Protection Act (DPA) came in to force in July 2021. It was drafted round a set of EU-style data protection principles to which data controllers must adhere and states 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.
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.
6. What are regulators in your jurisdiction doing to encourage innovation in the financial sector? Are there any initiatives such as sandboxes, or special regulatory conditions for fintechs?
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.
7. Do you foresee any imminent risks to the growth of the fintech market in your jurisdiction?
The BVI enacted the Virtual Assets Service Providers Act, 2022 (VASP ACT) which came in to force in February 2023. The VASP Act provides for the regulation of VASPs and for the registration and licensing of persons who are providing virtual asset services. The VASP Act also provides a number of activities which will not qualify an entity as a VASP. 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 tax incentives exist in your jurisdiction to encourage fintech investment?
The BVI operates a tax neutral regime. The BVI does not impose any form of corporate tax on income or distributions including dividends and therefore no withholding taxes exist in respect of BVI structures. There is also no form of capital gains tax, wealth tax or stamp duties on transfer in respect of BVI companies other than companies that own real property in the BVI.
9. 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 Virtual Assets Service Provider pursuant to the Virtual Assets Service Providers Act, 2022. 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.
10. If a fintech entrepreneur was looking for a jurisdiction in which to begin operations, why would it choose yours?
The BVI has established itself as an attractive jurisdiction for blockchain businesses. The jurisdiction benefits from strong regulatory frameworks and a Regulator willing to engage with innovation and enterprise in the virtual asset sector. 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. Furthermore, 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.
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.
11. Access to talent is often cited as a key issue for fintechs – are there any immigration rules in your jurisdiction which would help or hinder that access, whether in force now or imminently? For instance, are quotas systems/immigration caps in place in your jurisdiction and how are they determined?
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.
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 (the 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. If there are gaps in access to talent, are regulators looking to fill these and, if so, how? How much impact does the fintech industry have on influencing immigration policy in your jurisdiction?
The FSC does not identify talent gaps in private practice and there are no specific policies in place to assist closing talent gaps however, the BVI has long held itself out as a supporter of technology and innovation particularly in respect of fintech and financial services. The fintech industry does not have an influence on immigration policy.
BVI Finance, is a private company based in the BVI which promotes and markets the BVI financial services industry, its products and services. BVI Finance assists in closing gaps in access to talent through its presence at conferences and trade events in core and emerging markets for the BVI.
The H. Lavity Stoutt Community College: Robert Mathavious Institute for Financial Services, the National University Singapore: School of Computing (FinTech Lab and Strategic Technology Management Institute), BVI Finance Ltd, and the Government of Virgin Islands: Ministry of Education, Culture, Youth Affairs, Fisheries and Agriculture offer a collaborative project, called “The BVI FinTech Training Programme” (Programme). The Programme is designed to “nurture the FinTech ecosystem in the BVI by developing a cadre of certified FinTech professionals”.
13. What protections can a fintech use in your jurisdiction to protect its intellectual property?
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 intellectual property protections. BVI intellectual property protection should be supplemented with protection in all other jurisdictions in which the company utilises its intellectual property.
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.
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.
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.
14. How are cryptocurrencies treated under the regulatory framework in your jurisdiction?
The primary legislation in the BVI which would govern cryptocurrencies is (i) the Securities and Investment Business Act, 2010, as amended (SIBA), which provides for the licensing and control of persons engaged in securities investment business in or from within the BVI and (ii) the VASP Act.
If an entity (i) carries out an investment activity by way of business, (ii) that activity is carried out in or from within the BVI, and (iii) no exemption is available for that activity, such entity will require an investment business licence issued by the BVI Financial Services Commission (FSC) under SIBA. SIBA sets out an exhaustive list of financial instruments that constitute investments’ including but not limited to options, futures and contracts for differences. If the relevant virtual assets are not considered ‘Investments’, the company would not require a license pursuant to SIBA. Whether a virtual asset is an ‘Investment’ is a fact-specific enquiry dependent on the unique functionalities exhibited by the relevant virtual assets. As general guidance and subject, in each case, to specific review, most cryptocurrencies would not be considered to be ‘Investments’, unless they entitled the holder to specific additional benefits, such as title or other rights to underlying assets or to a share in the profits of the issuer. For example, bitcoin (BTC), ether (ETH), litecoin (LTC), Ripple (XRP), USDC, USDT or EOS would not be considered to be ‘Investments’.
Once an instrument has been established to be an Investment, it must be established as to whether the entity is carrying on an ‘investment activity’, by way of business, in or from within the BVI and, if so, whether there are any exemptions available for that activity. Securities investment business includes, amongst other activities:
- Dealing in Investments (Dealing as Agent or Dealing as Principal);
- Arranging Deals in Investments;
- Investment Management (Managing Segregated Portfolios (excluding Mutual Funds), Mutual Funds, Managing Pension Schemes, Insurance Products, Managing Other Types of Investment);
- Investment Advice (Excluding Mutual Funds, Mutual Funds);
- Custody of Investments (Excluding Mutual Funds, Mutual Funds);
- Administration of Investments (Excluding Mutual Funds, Mutual Funds); and
- Operating an Investment Exchange.
No securities should be offered to members of the public in the BVI.
The VASP Act derives from recommendations made by the Financial Action Task Force (FATF) in 2019 and updated in 2021. As the BVI is committed to meeting international standards with regard to anti-money laundering and countering the financing of terrorism (AML/CFT) measures, the VASP Act provides for the regulation of VASPs and for the registration and licensing of persons who are providing virtual asset services. The VASP Act provides that:
- virtual asset service providers (VASPs) incorporated in the BVI are required to comply with the Anti-Money Laundering Regulations, 2008 (as amended) and the Anti-Money Laundering and Terrorist Financing Code of Practice, 2008 (as amended) and to collect KYC documentation on their users for deposits of US$1,000 or more (or its equivalent in any currency), in line with FATF guidance (including implementation of recommendation 16 of the FATF guidance, commonly referred to as the ‘crypto travel rule’);
- VASPs are required to register or become licensed by the FSC; and
- there was a grace period between the changes coming into force and being implemented, to allow existing BVI VASPs to apply for registration and to meet the requirements.
The VASP Act provides a number of activities which will not qualify an entity as a VASP as follows:
- providing ancillary infrastructure to allow another person to offer a service, such as cloud data storage provider or integrity service provider responsible for verifying the accuracy of signatures;
- providing service as a software developer or provider of unhosted wallets whose function is only to develop or sell software or hardware;
- solely creating or selling a software application or virtual asset platform;
- providing ancillary services or products to a virtual asset network, including the provision of services like hardware wallet manufacturer or provider of unhosted wallets, to the extent that such services do not extend to engaging in or actively facilitating as a business any of those services for or on behalf of another person;
- solely engaging in the operation of a virtual asset network without engaging or facilitating any of the activities or operations of a VASP on behalf of customers;
- providing closed-loop items that are non-transferable, non-exchangeable, and which cannot be used for payment or investment purposes; and
- accepting virtual assets as payment for goods and services (such as the acceptance of virtual assets by a merchant when effecting the purchase of goods).
15. How are initial coin offerings treated in your jurisdiction? Do you foresee any change in this over the next 12-24 months?
The FSC confirmed in October 2023 that the sale of a newly issued virtual asset is excluded from the requirement to register as a Virtual Assets Service Provider pursuant to the Virtual Assets Service Providers Act, 2022. The FSC stated that further guidance would be provided however, as at 5 January 2024, such guidance has not yet been published.
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.
It is not expected that this position will change over the next 12-24 months save that it is expected that the FSC guidance will be released to provide further clarity in respect of initial coin offerings.
16. Are you aware of any live blockchain projects (beyond proof of concept) in your jurisdiction and if so in what areas?
As one of the leading jurisdictions in the blockchain industry, we are aware of a large number BVI domiciled blockchain projects. The areas cover everything from DeFi projects involved in trading, payments, lending, and staking, to digital asset exchanges, tokenisation, NFTs and computer gaming.
17. To what extent are you aware of artificial intelligence already being used in the financial sector in your jurisdiction, and do you think regulation will impede or encourage its further use?
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.
18. Insurtech is generally thought to be developing but some way behind other areas of fintech such as payments. Is there much insurtech business in your jurisdiction and if so what form does it generally take?
Insurtech is not currently a staple or prominent part of the BVI technology and innovation landscape.
19. Are there any areas of fintech that are particularly strong in your jurisdiction?
As an attractive jurisdiction for blockchain businesses, the BVI has substantial investment in all areas of the fintech sector. Please see question 9 for further information.
20. What is the status of collaboration vs disruption in your jurisdiction as between fintechs and incumbent financial institutions?
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.
21. To what extent are the banks and other incumbent financial institutions in your jurisdiction carrying out their own fintech development / innovation programmes?
While domestic financial institutions have been slow in adopting their own fintech programmes, new entrants to the market (servicing international businesses, including BVI companies) have sought to offer different approaches to banking with a greater tech focus. These new entrants are increasingly using advanced digital and FinTech channels to provide a wide range of cross-border financial services.
22. 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.
Originally provided for Legal 500’s Guide to Fintech in BVI, 2024.
