Vanuatu, an island nation in the South Pacific Ocean, is set to introduce a crypto licensing scheme this year. The mandate is part of the nation’s long-awaited digital asset and service provider bill.
According to Loretta Joseph, policy consultant at Vanuatu Financial Services Commission (VFSC), the bill is set to be passed as early as September.
Joseph believes the bill would help position the Island nation as a global financial hub.
The development has been confirmed by Branan Karae, the VFSC commissioner, during a June 27 digital assets symposium run by the commission.
Per Joseph, the bill, first introduced in 2020, had been delayed due to changes to the cabinet. It seeks to implement a licensing and registration scheme for virtual asset service providers (VASPs).
Licenses and penalties
With this bill, five licensing classes will be introduced. One of the key goals of the framework would be to facilitate a means of exchange between virtual assets and fiat currencies for crypto providers.
Once in place, the VFSC will have the authority to veto licenses. The watchdog will also monitor all VASP activities and ensure compliance with the nation’s Anti-Money Laundering and Counter-Terrorism financing laws.
In this regard, the commission would also appoint inspectors to ensure compliance.
The bill also puts in place penalties up to $207.7 million (25 million Vanuatu vatus) or imprisonment for 15 years for VASPs operating without licenses.
Meanwhile, corporations would be subject to a higher penalty of $2.1 million.
Joseph believes the new bill would help Vanuatu align its standards as mandated by the Financial Action Task Force (FATF), he added:
The FATF is calling on countries to have legislation around virtual assets. No country in the world can ignore this.
Per an updated guide issued by the FATF in October 2021, countries are required to assess and mitigate risks associated with VASPs.
This includes defining what constitutes VASPs and the implementation of travel rules, among other requirements.
A tax haven
According to data from the World Bank, Vanuatu boasts a gross domestic product of $1.1 billion as of 2022. The nation has long been considered a tax haven and international financial centre.
Vanuatu has zero capital gains tax on profits, dividends, or income tax for traditional and crypto investments for individuals or corporations. The nation also allows paying for citizenship with cryptocurrencies.
The island nation is also home to Satoshi Island, an ambitious project looking to build a crypto-centric community in the South Pacific.
The project was officially endorsed by the nation’s former prime minister, Bob Loughman.
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