BRITISH VIRGIN ISLANDS Law and Practice Contributed by: Chris Duncan and Katrina Lindsay, Carey Olsen
10.6 Staking Generally, staking is unregulated in the BVI (pro - vided that the staking activities do not involve establishing or operating an investment vehi - cle or otherwise provide the BVI company with access to, or control over, the staked assets). There are no restrictions on the provision of lend - ing services relating to cryptocurrencies in the BVI. If a BVI company makes cryptocurrency loans available to borrowers resident in the BVI, that company may be required to obtain a Class C financing business licence from the FSC under FMSA. Further advice is recommended. 10.7 Crypto-Related Lending As regards BVI companies carrying on the busi - ness of international financing and lending in the peer-to-peer fintech market and BVI companies that make an interest-bearing loan (for consid - eration), whether their services relate to crypto - currency or fiat currency makes no difference to the way they are regulated. Please see 4.1 Dif- ferences in the Business or Regulation of Fiat Currency Loans Provided to Different Entities for details of the regulation of fiat currency loans, which also apply to cryptocurrency loans made by such companies. 10.8 Cryptocurrency Derivatives Carrying on any investment business activities in relation to derivatives is an activity that is caught by SIBA and any BVI company carry - ing on such activities would likely need to be regulated accordingly. The VASP Act does con - tain an exemption from regulation under SIBA if the activity falls within the definition of a virtual assets service under the VASP Act (and that per - son is registered under the VASP Act accord - ingly). Whether any dealing in derivatives could be considered a virtual asset service will depend
on whether the derivatives themselves can fall within the definition of a virtual asset. On the basis that cryptocurrency derivatives are likely not themselves cryptocurrencies, this is some - thing that would need to be considered on a case-by-case basis. 10.9 Decentralised Finance (DeFi) There are no specific regulations governing DeFi but rather, the DeFi activities of a BVI company would likely need to be considered in light of the SIBA and VASP legislative frameworks. If a person (whether, for example, a creator, owner or operator of a software program) maintains con - trol or sufficient influence in any DeFi arrange - ments ‒ or profits from such arrangements – that person may be required to be registered under the VASP Act or SIBA, even if portions of the process are automated or if the arrangements are self-identified as being decentralised. 10.10Regulation of Funds There is no separate regulatory regime for funds that invest in blockchain assets and funds that invest in other more traditional asset classes. When a BVI entity pools investor funds for the purpose of collective investment, that entity will be required to be regulated as a BVI fund and will choose the investment fund product best suited to their business (whether a private fund, public fund, professional fund, incubator fund, approved fund, or private investment fund). The BVI incubator funds product appeals to the increasing number of pioneer managers who are looking to gain a track record before converting the incubator fund to a more sophisticated fund product. It works well for the growing fintech and crypto-asset fund type, as it minimises initial requirements in order to enable start-up cryp - tocurrency managers to come to market faster and more seamlessly.
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