Vanuatu, a Pacific Island nation, is preparing to enforce a new law that will regulate cryptocurrencies and the firms that provide services for them. This law, eagerly anticipated and recently passed in September, represents a significant step for the country. Branan Karae, head of the Vanuatu Financial Services Commission (VFSC), announced the law’s passage during a digital asset conference, noting it will soon be introduced in parliament.
Originally drafted in 2020, the law faced delays due to changes in government. However, its recent approval means Vanuatu is establishing rules for licensing companies that deal with digital assets. This move will allow these firms to operate legally within Vanuatu for the first time.
The aim is to ensure Vanuatu meets international standards, particularly those set by the Financial Action Task Force (FATF) to combat financial crimes such as money laundering and terrorism financing.
Vanuatu’s New Cryptocurrency Regulation Law: Establishing Compliance and Economic Potential
The bill outlines detailed requirements for licensing and registering VASPs, categorizing them into five classes based on the services they offer, such as crypto exchanges and custody services.
Oversight will be conducted by the VFSC, empowered with significant authority to enforce compliance with anti-money laundering (AML) and counterterrorism financing (CTF) laws. This includes the ability to veto licenses and appoint inspectors to ensure adherence to the new regulations.
A notable feature of the bill is the introduction of a Fintech Sandbox Utility, allowing companies to operate under a provisional license for up to 12 months without initial full compliance, aimed at fostering innovation within Vanuatu’s financial sector.
However, severe penalties are outlined for non-compliance, with fines up to $25 million Vanuatu vatus or imprisonment for individuals and up to $2.1 million for corporations engaging in VASP activities without proper licensing.
Beyond regulatory objectives, proponents of the bill emphasize its potential economic benefits for Vanuatu. By positioning itself as a progressive international financial center, Vanuatu aims to attract significant economic activity and investment, which is crucial for a small island nation traditionally reliant on non-traditional economic sectors like manufacturing.
In summary, Vanuatu’s digital asset bill represents a strategic effort to regulate and capitalize on the burgeoning cryptocurrency industry while aligning with global financial standards. Its passage marks a critical step towards establishing a secure and compliant environment for crypto-related businesses, potentially transforming Vanuatu’s economic landscape in the process.
