Vanuatu passed laws to regulate digital assets and provide a license structure for crypto companies that wish to operate at Pacific Island Nation. This is what government regulatory consultants call it “very strict.”
The local council passed the Virtual Asset Service Providers Act on March 26, granting the Cryptolic Licensing Authority to the Vanuatu Financial Services Commission (VFSC) along with the authority to implement the Financial Action Task Force’s anti-money laundering, counter-terrorism financing and travel rules standards with crypto companies.
The VFSC has thorough investigation and enforcement powers under the law, with fines being 250 million VATU ($2 million) and up to 30 years in prison.
“God will help scammers who go to Vanuatu because you’re going to prison,” Loretta Joseph, who consulted with the law’s regulator, told Cointelgraf. “The law is very strict.”
“The problem is, we don’t want another FTX blunder,” she added. She mentioned the former Bahamas-based crypto exchange that fell apart in 2022 due to a massive scam committed by co-founders Sam Bankman Fuel and Gary Wang along with other executives.
“Vanuatu is a small jurisdiction, and small jurisdictions are preyed by players seeking regulations and light touch regulations,” Joseph said. “This certainly isn’t.”
“I’m very proud that they are the first country in the Pacific to actually take a position and do this,” she added.
New Vanuatu Law regulates slates for crypto companies
The law establishes replacement licensing and reporting frameworks.
This law allows banks to obtain licenses specifically to provide crypto exchange and storage services. Source: Parliament of the Republic of Vanuatu
The VFSC said the law would not affect stubcoins, tokenized securities and central bank digital currencies, despite “they may actually share some similarities with virtual assets.”
The Act allows VFSC commissioners to create sandboxes so that approved companies can provide a variety of crypto services for a year.
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Joseph said Vanuatu did not have existing laws suitable for virtual assets, and therefore “needed to have standalone laws” covering money laundering and counter-terrorism financing requirements.
In a statement on March 29, the regulator said it developed a legislative framework after years of “assessing risks related to virtual assets,” and the law improved financial inclusion by opening up “a number of opportunities in Vanuatu” and allowing regulatory services for cross-border payments.
VFSC Commissioner Brannan Karae said the bill was expected to pass in June in September, but Joseph said the law was “not a lighter thing to do.” It has been under development since 2020 and has been delayed due to changes in government, natural disasters and Covid-19 pandemic-related disruptions.
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