Vanuatu has recently joined the ranks of countries with a solid legal framework for cryptocurrencies, with the passing of the Virtual Asset Service Provider (VASP) Act by its Parliament. This legislation defines virtual assets as “digital representations of value that may be traded and function as a medium of exchange, a unit of account, or a store of value.”
It is important to note that the VASP Act does not cover digital representations of fiat currencies, securities, and national digital currencies, including central bank digital currencies (CBDCs). Despite this regulation, cryptocurrencies are not considered legal tender in Vanuatu.
The Vanuatu Financial Services Commission (VFSC) played a key role in the development of this regulatory framework for crypto, ensuring compliance with international standards such as the Financial Action Task Force’s (FATF) “travel rule” policy. The VFSC will be responsible for regulating the local crypto industry, providing a stable regulatory environment for digital business transactions.
With the implementation of the VASP Act, Vanuatu hopes to unlock numerous opportunities both economically and socially. The legislation is expected to encourage healthy competition, attract investment, reduce business costs, and ensure consumer protection. Additionally, it aims to improve financial inclusion by offering benefits such as greater speed, lower cost, and increased efficiency in virtual asset transactions, including cross-border payments.
In a similar vein, the Cayman Islands recently updated its crypto regulatory regime by introducing new licensing rules through a legislative amendment. Entities offering virtual asset custody and trading platform services in or from the Cayman Islands will be required to obtain a license starting from April 1, 2025.
Both Vanuatu and the Cayman Islands are popular offshore destinations for forex and contracts for differences (CFDs) brokers, who obtain licenses from these jurisdictions to offer services globally. In 2023, Vanuatu mandated that brokers operating from the island must have an onshore presence, further solidifying its position as a regulatory-friendly environment for crypto companies.
Overall, the establishment of a proper regulatory framework for cryptocurrencies in Vanuatu marks a significant step towards embracing the potential of virtual assets. With a focus on compliance, consumer protection, and economic growth, Vanuatu is poised to become a key player in the global crypto industry.