The Pacific Island nation of Vanuatu expects to endorse a digital asset and service provider bill in September. Branan Karae, Commissioner of the Vanuatu Financial Services Commission (VFSC), announced this at a digital assets symposium organized by the country's financial regulator on June 27. The bill is expected to be enacted during the first week of Parliament.
New Legislation to Regulate Virtual Asset Services
Loretta Joseph, a VFSC policy consultant and speaker at the conference, stated that the bill had been ready for several years but faced delays due to multiple cabinet changes. The bill, first introduced in 2020, will establish licensing and registration requirements for virtual asset service providers (VASPs), allowing them to operate legally within the nation.
Joseph explained that the bill will help Vanuatu meet standards set by the Financial Action Task Force (FATF). The FATF mandates that countries assess and mitigate risks associated with crypto service providers and activities. “The FATF is calling on countries to have legislation around virtual assets. No country in the world can ignore this,” Joseph said.
The proposed act includes five license classes, covering service providers that exchange virtual assets and fiat currencies and those offering crypto custody, among other functions.
The VFSC will monitor all VASPs to ensure adherence to Anti-Money Laundering and Counter-Terrorism financing laws. The Commissioner will have the authority to veto licenses and appoint inspectors to ensure compliance .
Launching Fintech Sandbox
The act also introduces a “Fintech Sandbox Utility,” allowing companies to operate for 12 months without a license initially. The act mandates that any person conducting VASP activities must be licensed, with penalties including fines of 25 million Vanuatu vatus ($207,700) or imprisonment for 15 years. Corporations can face fines of $2.1 million.
Vanuatu, located in the South Pacific Ocean and consisting of 13 principal islands, had a gross domestic product of $1.1 billion in 2022, according to the World Bank. The economy is primarily based on agriculture, with 80% of the population engaged in agricultural activities.
It is also regarded as a tax haven and international financial centre, according to the US State Department. The country hosts around 2,300 registered institutions offering offshore banking, legal, accounting, insurance, and trust services.
