The Role Of The British Virgin Islands In The Life-cycle Of The Global Cryptocurrency And Digital Asset Sector

Against this sobering backdrop, the inherent resilience, innovation, and agility of financial centres such as the British Virgin Islands (BVI) have never been more important in enabling investment, fostering development, and ultimately boosting the global economy. 

For the BVI, this involves remaining committed to supporting emerging economies, investing in infrastructure, and championing new technologies. Indeed, for over four decades, the BVI has been world-leading in its delivery of financial services, enabling businesses and individuals to efficiently trade and invest across international borders. 

The BVI’s ongoing success can be attributed to its forward-looking approach and the jurisdiction’s inherent understanding of how progress is best achieved through collaboration and innovation. Within the last decade, this has led the BVI to emerge as a world-leading centre for FinTech and cryptocurrency, tapping into the huge potential of these new technologies and the benefits they could bring business and individuals around the world. 

An early champion for cryptocurrency and digital assets, BVI has become the natural long-term partner for this developing and exciting market - including in some cases using its expertise in the fields of insolvency, liquidations, corporate recovery, arbitration and litigation.  In this way, the BVI provides the tools for the entire life-cycle of a fund or a business company - not just from conception, birth and early nurturing of the fund or company, but also to its possible demise or resurrection.

BVI And The Caribbean

The BVI’s international business and financial centre plays a pivotal role in the global economy, facilitating cross-border investment, while also sustaining the domestic economy even in periods of economic challenges, as we have seen in recent years. Indeed, in 2021 the financial services sector generated US$196 million in revenue for the BVI, meaning the territory has the second highest gross domestic product per capita of all the Caribbean jurisdictions. 

Like the rest of the world, the BVI and the Caribbean community were deeply affected by the pandemic and the abrupt halt to overnight tourism which so many people and businesses rely on for income and work. The fact that there were more overnight tourist visitors to the BVI in 2018 as the islands rebuilt after Hurricane Irma than there were in 2020 and 2021 combined just shows the severity of the challenges faced by the BVI in this period.  

However, just like after Hurricane Irma, the BVI rose to meet these challenges with resilience and tenacity. The responsiveness of the BVI allowed firms to continue operating and the jurisdiction retained its role as a reliable facilitator for transactions and investments for the international community.  The second year of the pandemic saw the highest level of new company incorporations by financial services in the BVI since 2018, and in addition, the number of new limited partnerships formed in 2021 was more than three times that of 2019 and 2020. 

In recent times, the BVI has also excelled amongst its Caribbean peers in another area – cryptocurrency and digital assets. This global industry has well and truly taken off over the last few years, and due to a considered strategy and progressive approach developed by the BVI back in 2015, the jurisdiction is now perfectly positioned to become the leading Caribbean and international home for cryptocurrency and digital assets. 

Leading The Way In Digital Assets

The BVI has a history of making swift and impressive inroads in the cryptocurrency and digital asset space. 

The BVI’s business-friendly outlook made it one of the first jurisdictions in the world to embrace the new sector. Back in 2015 when most were not accepting digital asset funds, the BVI Investment Fund Association was working closely with the Financial Services Commission to explore ways to capitalise on this new asset, understanding how real investment and strategy into cryptocurrencies would enable the jurisdiction to keep its competitive edge. As a result, the BVI quickly drew in the top players from the West Coast of the US, and soon around the world, and quickly rose to be the top destination for digital asset funds.

Since then, the cryptocurrency sector has grown exponentially.  And whilst recent events have shown that it has not been immune to the boom bust cycle that trailblazing technologies are typically prone to, the long-term potential of cryptocurrency and digital asset funds has never been in doubt.  Often a correction or period of market sobriety can be a good thing.

The BVI has remained committed to supporting the industry and progressing the sector, finding solutions to challenges and creating an environment for innovators and investors to thrive. 

Last year, the BVI created the Regulatory Sandbox for FinTech Innovation. By creating an environment free from restrictive regulatory burdens, both tech start-ups and traditional financial institutions can build new solutions for financial services. The BVI has already attracted exceptional people with creative ideas to be a part of the Sandbox and the calibre of applications remains very high. It reflects the nature of financial services in the BVI, and the jurisdiction’s commitment to cryptocurrency and digital assets.

Supporting digital innovation in global markets is another way the BVI champions the crypto and digital asset markets. The most recent and notable example of this is the BVI FSC’s recognition of Asia’s only fully regulated end-to-end digital security exchange, the Fusang Exchange. Now, Asian-based BVI companies will be able to benefit from the efficiencies of being part of the first exchange of its kind to be registered by the BVI FSC while also taking advantage of the opportunities in the digital financial ecosystem. 

Digital assets are easily tradable across jurisdictions and, when operating in the right ecosystem, have real potential to elevate the range of cross-border business and investments. The BVI’s work with Fusang will help to unlock the corporate value and make digital assets more accessible to a wider range of investors, allowing for enhanced inclusion. 

To cement its position as a leading FinTech and digital asset jurisdiction, the BVI is also working to promote education and accessibility of the sector. Towards this goal, the BVI recently launched a FinTech training programme, in collaboration with the prestigious National University of Singapore School of Computing. In support of the development of the sector and of professionals in the BVI, the Minister of Education supported and allocated resources to the programme, with the mission to equip aspiring BVI professionals for the dynamic digital space and nurture the natural innovative mindset that exists in the BVI. 

This September the BVI Financial Services Commission granted an investment business licence to subsidiary Brtuomi Worldwide Limited (BWL) to operate a virtual asset exchange. BWL plans to offer a range of crypto trading services, including spot trading of cryptocurrencies like Bitcoin (BTC) and Ether (ETH) as well as derivatives trading. According to the company, they are the first digital asset trading platform operator in the BVI, licensed to run an institutional-grade crypto trading platform for both professional and retail investors.

The Legislative Landscape

Today, cryptocurrencies and digital assets are facing an increasingly complex legislative landscape as regulators across the world try to catch up with the pace of innovation. For example, the EU recently agreed to the Markets in Crypto-assets (MiCA) law, and it is widely expected that new legislation from other jurisdictions will be implemented soon.

The swift implementation of legislation also stems from the fact that a few bad players have managed to take advantage of the lack of long-established structures and laws in some jurisdictions, giving way to some cases of rising financial crime in cryptocurrency. This has left lawmakers in a rapid dash to create new systems and regulations that protect both individuals and companies from being targeted, and figure out how to better regulate cryptocurrency without stifling the sector.  Indeed, a good example of this is the FSC’s soon-to-be published Virtual Assets Service Providers (VASP) Law.

The BVI has a world-leading beneficial ownership register and stringent anti-corruption laws which ensures the jurisdiction is well-placed to assist lawmakers around the world with these regulations. Its comprehensive laws on anti-money laundering (AML) and combatting the financing of terrorism (CFT) and due-diligence are guided by a risk-based approach in line with AML/CFT recommendations set out by the Financial Action Task Force (FATF).   

Indeed, the BVI was among the first jurisdictions to introduce AML laws back in 1999 and every company incorporated in the BVI must be verified by a Registered Agent, licensed, and supervised by the integrated regulator, the Financial Services Commission (FSC), and by law, companies and their owners must pass stringent tests to ensure they are fit for purpose to be incorporated into the jurisdiction.  Fitness is not a one-off expectation but remains an ongoing requirement.

In addition to this, through the Beneficial Ownership Secure Search system (BOSSs), the BVI’s autonomous law enforcement agency the Financial Investigation Agency (FIA) can provide rapid access to verified beneficial ownership information on any BVI company or fund, and share information with law enforcement agencies around the world. In practice, this means that the BVI is better placed than most jurisdictions to provide beneficial ownership information to competent authorities and global law enforcement agencies when suspicious activity reports are filed. 

The ability to adapt to changing circumstances has meant the BVI has remained a steadfast partner, adjusting seamlessly to these new regulations, supporting companies as they navigate through the fast-shifting landscape, and continuing to find ways to advance the sector in a safe and secure manner.

A good example of the life-cycle of funds and companies is the BVI’s formidable reputation for excellence in insolvency and corporate recovery and, where required, litigation or arbitration.  The current 3 Arrows Capital liquidation is a good example of this flexibility.

Looking Forward

The BVI’s core principles of agility and innovation make it the natural home for cryptocurrency and digital asset funds, with its uniquely international outlook continuing to attract the top players from across the globe and building a global community committed to progress in the sector.  

International Financial Centres have helped move crypto into the mainstream. As one of the earliest jurisdictions to adopt digital assets, with its diverse range of financial services from creating funds and companies to facilitating their demise or recovery, the BVI is perfectly positioned to take on the new challenges facing cryptocurrency, lead the way in finding solutions, and move the sector forward. 

Simon Gray
Simon is a senior financial services’ professional with strong GCC and international background and major experience in both public and in private sectors with an established track record of success in both regulator and regulated. He has significant experience in corporate governance and in turning around compliance and risk functions amidst increasing regulatory scrutiny. Combining an investigative background with 20+ years of first-hand experience of corporate governance, compliance, AML / CTF and risk management within the diverse international financial services sector, including designing and running comprehensive training programs. Significant policy and educational experience. Accountable executive for new regulatory implementation with close board level liaison. His remit has included the supervision of Islamic Financial Institutions as well as conventional Firms offering Islamic Windows.