The Republic of Vanuatu, a popular offshore jurisdiction, established a legal framework regulating the digital assets market and ensuring a licensing regime for crypto companies.
Vanuatu’s Parliament passed the Virtual Asset Service Providers (VASP) Act, creating a regulatory system for digital assets and cryptocurrencies. The law mandates the licensing of all VASPs, and the Vanuatu Financial Services Commission (VFSC) will oversee compliance.
Vanuatu is one of the favored offshore jurisdictions for financial, investment, and crypto companies, due to the absence of corporate taxes, capital gains taxes, or personal income taxes for non-residents. According to the VFSC, over 3,700 international companies are registered in the country.
The newly adopted legal framework establishes legal mechanisms for companies dealing with cryptocurrencies, virtual tokens, and other digital assets. The law applies to exchanges, custodial services, wallets, and issuers of Initial Token Offerings (ITO).
The law divides VASP licenses into five categories, each covering specific types of services, including fiat and virtual currency exchanges, digital asset transfers and storage, and financial services related to the issuance of digital assets. Banks planning to engage with cryptocurrencies can obtain a D.4 license, which will require additional approval from the Reserve Bank of Vanuatu.
This legislation fully complies with international standards, including recommendations from the Financial Action Task Force (FATF). Specifically, the law introduces the “ Travel Rule ” requirement for asset transfers exceeding $1,000 or €1,000, where VASPs must collect and transmit information about the sender and recipient of such transactions.
The press release emphasizes that cryptocurrencies aren’t recognized as legal tender in Vanuatu, and investments in digital assets aren’t protected by any compensation mechanisms.
In 2024, analysts from the International Monetary Fund warned that the rapid adoption of digital currencies in Pacific island nations, including Vanuatu, could have negative consequences for local economies.
