Custodial wallet / SaaS in Barbados

Requirement: Any person wishing to operate a digital asset business that provides custodial wallet services in Barbados must obtain a license from the Financial Services Commission (FSC).

Definition of Digital Asset Business (DABA Section 2): Includes "providing custodial wallet services" (defined as "the safekeeping or control of a client's digital assets or the means to access a client's digital assets").

Primary regulator for non‑bank financial institutions (including securities, insurance, pensions, credit unions and other non‑bank custody activities) in Barbados: Financial Services Commission (FSC); primary regulator for banks and other deposit‑taking institutions: Central Bank of Barbados.

DABA Section 13(1)(a): "A licensee who receives client digital assets for safekeeping or for any other purpose shall keep client digital assets separate from the licensee’s assets."

DABA Section 13(1)(b): "A licensee shall hold client digital assets in an account or a wallet designated as a client digital assets account or wallet."

DABA Section 13(2): "A licensee shall maintain adequate insurance cover or other indemnity arrangements to protect clients against the loss of digital assets held by the licensee arising from fraud, negligence or other risks."

DABA Section 13(1)(c): "A licensee shall implement appropriate measures to safeguard client digital assets, including measures for the prevention of theft, loss or manipulation."

A "qualified custodian" in Barbados, under DABA, is essentially a licensee (an entity licensed under DABA to provide custodial wallet services) that adheres to all the obligations outlined in the Act, particularly those in Section 13. These obligations include asset segregation, insurance, and robust security measures.

Primary Legislation: Digital Assets Act, 2019 (as amended).

Regulatory Body: The Financial Services Commission (FSC) Barbados is the primary regulator responsible for licensing, supervision, and enforcement under the Digital Assets Act.

Legal Entity and Local Presence:

The applicant must typically be a Barbadian incorporated company or a foreign company registered in Barbados.

A registered office in Barbados.

The Act may imply or require key management personnel to be resident in Barbados, or at least regular physical presence for operational oversight.

Virtual Asset Business Act, 2022 (VABA, 2022): This is the cornerstone legislation specifically designed to regulate VASPs in Barbados. It provides for the registration, licensing, supervision, and regulation of virtual asset businesses, bringing them squarely under the AML/CFT regime. It aligns Barbados's regulatory framework with FATF Recommendation 15 on new technologies.

Money Laundering and Financing of Terrorism (Prevention and Control) Act, 2011-23 (as amended) is Barbados's overarching AML/CFT legislation. Other sectoral statutes, including the Virtual Asset Service Providers regime (VABA), require covered entities to comply with the AML/CFT obligations set out in this Act for financial institutions and designated non‑financial businesses and professions (DNFBPs).

VASPs must be licensed or registered by the FSC to operate legally in Barbados. This process involves demonstrating robust internal controls, governance structures, and adequate financial resources, including a sound AML/CFT compliance program.

Identity Verification: Obtaining and verifying the identity of the customer (individual or legal entity) using reliable, independent source documents, data, or information.

For Individuals: Name, residential address, date of birth, nationality, unique identification number (e.g., passport, national ID).

For Legal Entities: Name, legal form, proof of existence, registered address, principal place of business, board of directors, and verification of individuals authorized to act on behalf of the entity.

Beneficial Ownership Identification: Identifying and taking reasonable measures to verify the identity of the beneficial owner(s) of the customer, especially for legal persons and arrangements. This includes understanding the ownership and control structure.

Ongoing Monitoring: Conducting ongoing due diligence on the business relationship and scrutiny of transactions undertaken throughout the course of the relationship to ensure that the transactions are consistent with the VASP's knowledge of the customer, their business, and risk profile, including, where necessary, the source of funds or virtual assets.

Enhanced Due Diligence (EDD): Applying enhanced measures for higher-risk situations, including:

Politically Exposed Persons (PEPs)

Customers from high-risk jurisdictions (as identified by FATF or national assessments)

Obligation to Report: VASPs are legally obligated to report any suspicious transactions, including attempted transactions, to the Financial Intelligence Unit (FIU) of Barbados.

No Tipping-Off: VASPs and their employees are prohibited from disclosing to the customer or any third party that a report has been made or that a money laundering/terrorist financing investigation is being conducted.

Copies of identification documents, verification data, beneficial ownership information, and records of analysis performed.

Transaction Records: All transaction data, including dates, amounts, types of virtual assets, sender and recipient information, and any associated messages or instructions.

VASPs must determine the source of funds and source of wealth for high-risk customers.

Simplified Due Diligence (SDD) may be applied only where a documented, demonstrably low risk of money laundering or terrorist financing exists, in line with FATF and similar risk-based frameworks; it is not a blanket permission defined solely by the FSC and must follow proportionate, dynamic risk assessment criteria set by applicable AML regulators.

Digital Assets Act, 2019: This is the foundational legislation for regulating digital assets and VASPs in Barbados. It outlines licensing requirements, supervisory powers of the FSC, and penalties for non-compliance.

Relatively New Framework: Enforcement actions often take time to materialize after a regulatory framework is put in place.

Focus on Compliance: The FSC might be prioritizing encouraging compliance and licensing rather than immediately resorting to public penalties, especially if entities are making efforts to regularize.

The Financial Services Commission (FSC) is currently undertaking a major regulatory overhaul of its financial services legislation, which is superseding or replacing previous guidelines, directives, and prudential statements related to VASPs under the VABA and PMLFTA.