BRITISH VIRGIN ISLANDS Law and Practice Contributed by: Chris Duncan and Katrina Lindsay, Carey Olsen
substance regime (and will be required to dem - onstrate substance in the BVI accordingly). 2.4 Variations Between the Regulation of Fintech and Legacy Players Although legacy players and fintech industry participants alike are subject to regulatory over - sight in the BVI aimed at protecting consumers and safeguarding financial stability, there are nuanced differences in the approach taken by the FSC ‒ and, indeed, by regulators around the world ‒ in regulating these industries, so as to accommodate the distinct characteristics and challenges associated with each sector. A more collaborative approach to regulation is evident under the VASP Act through, for example, the inclusion of the sandbox provisions. These dem - onstrate the FSC’s commitment to collaborat - ing with fintech participants in order to foster technological innovations in a controlled envi - ronment to assess risks. To the extent fintech industry participants under - take any activities akin to those of traditional financial institutions, they may be required to comply with the requirements of the traditional regulatory regime. Similarly, legacy players who adopt new fintech models and technologies could become subject to regulation under the crypto- and blockchain-focused VASP Act. 2.5 Regulatory Sandbox The BVI introduced the Financial Services (Regu - latory Sandbox) Regulations 2020 (the “Sandbox Regulations” ) to encourage technological inno - vation in the financial technology sector under a lighter-touch regulatory regime. The Sandbox Regulations were introduced to assist: • start-ups that wish to provide new financial services solutions involving a fintech business model that is not currently covered (whether
explicitly or implicitly) under current BVI leg - islation; • start-ups that wish to test innovative technol - ogy to deliver a licensable financial service; and • entities already licensed by the FSC that wish to test an innovative technology as part of their already-approved financial service offer - ing. A person approved under the Sandbox Regula - tions as a sandbox participant prior to the VASP Act coming into force can notify the FSC in writ - ing of their intention to provide innovative fintech in relation to virtual assets (with such notification being treated as an application for registration as a VASP). Where a VASP that is not registered under the VASP Act or approved under the Sandbox Regu - lations wishes to carry on a virtual assets service and provide innovative fintech in accordance with the Sandbox Regulations, it may submit an application to the FSC in accordance with the Sandbox Regulations. It must be noted in the application that it intends to carry on the busi - ness of providing virtual asset services in relation to which the innovative fintech will be applied. 2.6 Jurisdiction of Regulators The FSC is established as the competent author - ity for the regulation and supervision of financial services conducted in or from within the BVI, including pursuant to the VASP Act and SIBA. The FSC plays a key role in ensuring compliance with local laws and regulations, as well as inter - national standards for financial services. The BVI International Tax Authority (ITA) is the competent authority with regard to all cross-bor - der tax matters that currently affect, or have the potential to affect, the BVI. This includes over -
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