31 ASIAN LEGAL BUSINESS CHINA • 亚洲法律杂志-中国版 WWW.LEGALBUSINESSONLINE.COM/CHINA David Mathews, a managing associate at Ogier’s BVI office, says the BVI VASPA represents a well-balanced approach to virtual asset regulation by the FSC. “For the most part, it sticks close to FATF recommendations in the space, focussing in a practical manner on AML and other misuse concerns, but without implementing harsh, blanket regulation across all aspects of virtual asset activity.” Unlike other offshore jurisdictions, the issuance by a BVI entity of a virtual asset is not included in the definition of virtual assets service, and so, to the extent that a BVI company is involved in a crypto project solely as the issuer of tokens, the BVI VASPA would not require the entity to be regulated in respect of that activity, says Mathews. “For this reason, we are seeing many blockchain projects based in Asia choosing BVI as the place of incorporation for the token issuer,” he adds. Mathews says that the BVI VASPA increases reporting and compliance requirements on VASPs on the island. The entity is also required to have a compliance officer, approved by the BVI FSC, who is responsible for ensuring compliance by the entity with the requirements of the BVI VASPA. VASPs will also be subject to the provisions of the BVI Anti-Money Laundering Regulations (the BVI AMLR) and the BVI Anti-Money Laundering and Terrorist Financing Code Practice (the BVI AML Code). “The BVI AML Code has implemented ‘the travel rule’ and, as such, any licensed VASP will need to undertake KYC on its clients and any persons to whom they transfer virtual assets. Under the BVI AMLR, this is mandatory for any transaction valued at $1,000 or more, or if the transaction has any characteristics that would make it high risk (for example, the involvement of a politically exposed person),” says Mathews. To ensure a smooth transition into compliance with the new regulations with minimal disruption to growth and innovation, the BVI VASPA incorporated a six-month grandfathering period during which time persons who were already operating a virtual assets business using a BVI entity were able to continue operating before they had to apply for a licence. And after the licence application was made, these entities were able to continue operating until the BVI FSC finally approved or refused to grant a licence to them. The availability of experienced financial and legal advisors on the islands also eases the risk of business disruption from the increased compliance burdens. Mathews says that as a matter of best practice, it is always advisable to engage the services of a specialist AML advisor, and legal counsel to assist any licensee under the BVI VASPA to comply with its obligations under the BVI AMLR and BVI AML Code. “This will ensure that the client is able to comply with its obligations, and has the confidence that it is doing so, while freeing up the time and energy of its management team to focus on delivering and developing their product,” Mathews advises. CAYMAN ISLANDS The Cayman Islands have been regulating virtual assets and their service provers since 2020 under the Virtual Assets (Service Providers) Act in two phases, says Chris Wall, an Ogier counsel in the Cayman Islands. Phase 1 focuses on AML/CFT compliance, supervision and enforcement, and other key areas of risk. Phase 2 refers to the licensing approval process that will begin when the relevant provisions relating to licensing of the Cayman VASP Act come into effect. Wall expects that Phase 2 will also provide for the approval process for virtual asset issuances. “Once Phase 2 is in effect, businesses providing custodial services of virtual assets and businesses that operate or intend to operate a virtual asset trading platform will require a licence from, and be regulated by the Cayman Islands Monetary Authority (CIMA). All other persons carrying on or intending to carry on virtual asset services will require registration.” Wall says. “It is expected that due to the nature of such services being undertaken by Cayman VASPs, strict prudential requirements will be imposed to ensure customers and their assets are adequately safeguarded under the Phase 2 regime,” he adds. “In much the same way as BVI, we see the main challenge here is complying with the ‘travel rule’. However, there are now a number of high-quality tech solutions available to participants which can assist in achieving compliance with this requirement,” Wall explains. While Cayman has very high standards for VASPs, this has not deterred top global market participants from setting up shop and creating innovative products. Cayman has 19 virtual asset service providers registered with CIMA, as of the date of this piece. Technology companies are also continuously looking to create solutions for specific compliance requirements to assist VASPs in the Cayman Islands. Wall advises VASPs doing or looking to commence business in the Cayman Islands to engage advisors in the islands to ensure compliance with its unique requirements and laws. “For example, unlike other jurisdictions such as the BVI, Cayman regulates public issuances of tokens. Accordingly, care must be taken when issuing tokens in or from within the Cayman Islands such that they are deemed private sales, otherwise, any public offering or sale would require regulation under the Cayman VASPA,” Wall advises. “Furthermore, consideration must be given as to whether an entity is participating in virtual asset services, which, given the complexity of the asset class and decentralised nature of some structures, may not always be obvious,” he adds. OFFSHORE 离岸司法管辖区对于虚拟资产 服务提供者（VASPs）具备颇强的吸 引力，其原因不言而喻：这些地区往 往具备更有利的监管环境，成熟的金 融服务市场，税收优惠政策，以及战 略性的地理位置。 不过，全球范围内对虚拟资产的 审查，以及从高监管市场经济危机中 所汲取的教训，使离岸市场的政策制 定者依旧对去中心化的数字金融从 业者保持警惕，英属维尔京群岛、开 曼群岛和泽西岛等司法管辖区纷纷 对VASPs强化了监管。
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