The Pacific island nation of Vanuatu is expected to approve a Digital Assets and Service Providers Act in September. Branan Karae, Commissioner of the Vanuatu Financial Services Commission (VFSC), announced this at a digital asset seminar organized by the country’s financial regulatory body on June 27. The legislation is expected to be enacted in the first week of parliament.
The new legislation aims to regulate virtual asset service providers (VASPs), and will establish licensing and registration requirements for them to operate legally within the country. According to Loretta Joseph, policy advisor at VFSC and spokesperson for the seminar, the bill has been in the making for several years but faced delays due to multiple changes in the cabinet. It was first introduced in 2020 and is intended to help Vanuatu meet the standards set by the Financial Action Task Force (FATF). The FATF requires countries to assess and mitigate risks associated with cryptocurrency service providers and activities. The proposed bill includes five license categories covering service providers for exchange exchanges. An initial 12-month license-free operation period will be allowed through the introduction of a “financial technology sandbox program”. Anyone engaging in VASP activities must obtain a license, with penalties including a fine of 25 million Vanuatu Vatu (equivalent to 207,700 US dollars) or 15 years imprisonment. Companies may face fines of up to 2.1 million US dollars.
Vanuatu, located in the South Pacific and composed of 13 main islands, had a GDP of 1.1 billion US dollars in 2022. The economy is primarily based on agriculture, with 80% of the population engaged in agricultural activities. According to the US State Department, it is also considered a tax haven and an international financial center, with around 2,300 registered entities providing offshore banking, legal, accounting, insurance, and trust services.
