Vanuatu imposes licensing regime on businesses dealing in digital assets
By Damian Kelly
Key Points
Financial Dealers in Vanuatu must now hold a Class D License under the Financial Dealers Licensing (Amendment) Act No. 9 of 2021 if dealing in Digital Assets;
A Digital Asset means “an immaterial asset in digital form stored on a distributed ledger technology (such as blockchain) and representing a set of rights or values”;
A Class D License is available to Expert and Sophisticated Investors; and
The regime is overseen by the Vanuatu Financial Services Commission and may serve as the beginning of the regulative regime for Digital Assets in Vanuatu.
Introduction
Financial Dealers who carry on businesses dealing in Digital Assets in Vanuatu such as cryptocurrency, tokens or stable coins are now required to be licensed under the Financial Dealers Licensing (Amendment) Act No. 9 of 2021 (the Act). The license, labelled as Class D License, is only available for Financial Dealers who already hold a Class A, Class B or Class C License.[1] The regime is overseen by the Vanuatu Financial Services Commission (VFSC).
What is a Digital Asset under the Act?
Under the Act a “Digital Asset” is “an immaterial asset in digital form stored on a distributed ledger technology (such as blockchain) and representing a set of rights or values”.[2] In addition, the VSFC has provided, via a Guidance Note, that it “considers as a Digital Asset, any token in electronic/binary form which is representative of either the holder’s access rights to a service or of the ownership of an asset”.[3]
In this regard, the VSFC has stated that a Digital Asset includes a digital representation of value which:
(a) is used as a medium of exchange, unit of account, or store of value but which is not legal tender, even if it is denominated in legal tender;
(b) represent assets such as debt or equity in the promoting company; or
(c) provides access to a block-chain based application, service or product.[4]
However, according to the VSFC a Digital Asset excludes:
(a) any transaction in which a business, as part of an affinity or rewards programme, grants value, which cannot be exchanged for legal tender, bank credit or any Digital Asset; or
(b) a digital representation of value issued by on or behalf of the publisher for use within an online game platform.[5]
Who can get a license?
A Class D License is only available to Financial Dealers who hold a Class A, Class B or Class C License. However, in addition, the VSFC has stated that, given the high-risk and speculative nature of the asset class, a Class D License will only be available to “Sophisticated investors, Expert Investors, Expert Funds, Specialised Collective investment schemes, Professional Collective Investment Schemes (PCIS) and Closed-End Funds (CEF).[6]
What is required from a licensee?
A Class D License Holder is required to do several things under the Act, including but not limited to: