FINANCIAL TECHNOLOGY: 5 THINGS THE BVI MUST GET RIGHT By CAREY OLSEN
T
he British Virgin Islands (“BVI”) as a jurisdiction, is a natural fit for rapidly evolving industries such as financial technology (“FinTech”). The global popularity of companies under the Business Companies Act 2004 (as amended, the “Act”), multiple innovative fund products, recent amendments to the Act to broaden the use of segregated portfolio companies and the sweeping changes under the Limited Partnership Act, 2017 (the “LPA”), all demonstrate a jurisdiction that matches a long established and stable legal framework, with an ability to be forward looking. The challenges faced by the BVI in capitalizing on its existing strength and continuing to grow its participation in the global rise of FinTech, mirror the myriad of challenges that governments and regulators around the world face in keeping up to speed with the rapid growth and development of the industry. In order to attract innovation and a concentration of business, there are many different factors, however, in respect of the FinTech marketplace the most important of these is regulation.
Of the following five things that BVI must get right for FinTech, there is a strong focus on the development of regulation: (1) the overall regulatory regime, (2) sandboxing, (3) anti-money laundering (“AML”) and know your client (“KYC”) regimes, (4) physical and digital infrastructure, and (5) data protection and cyber security.
1. REGULATORY REGIME How the BVI develops its regulatory regime in respect of FinTech will have a key impact on the willingness of market participants to utilize the jurisdiction. The BVI is one of the world’s largest crypto-currency markets, with BVI entities being involved in a number of initial coin/token offerings. This usually takes the form of funds investing in crypto or block chain assets. There is also the traditional use of BVI entities to hold intellectual property. Digital assets are not regulated in and of themselves. The BVI Government has indicated its intention to establish a legal framework that is supportive of the cryptocurrency and FinTech sectors in the BVI, with further regulatory changes expected soon (as set out below). In the meantime, the consensus is that the BVI is following a “wait and see” approach to the development of FinTech regulation.
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