Crypto-funded debit card in Solomon Islands

There are no regulated cryptocurrency exchanges operating under Solomon Islands' jurisdiction. Trading would typically occur on offshore platforms, which are outside the direct regulatory purview of the Solomon Islands authorities.

The CBSI has warned the public against the risks of trading cryptocurrencies due to their volatility, speculative nature, and lack of regulation.

Lack of Specific Legislation: Without a dedicated framework, enforcement actions are harder to initiate.

Focus on Warnings: The CBSI's primary approach has been preventive, issuing general public warnings about the risks of cryptocurrencies, scams, and their non-recognition as legal tender.

No specific classification. There is currently no specific legislation in the Solomon Islands that explicitly classifies stablecoins as e-money, payment tokens, or securities.

In the absence of specific crypto-asset regulation, their classification would likely depend on their specific characteristics and how they are offered and used:

If a stablecoin functions primarily as a medium of exchange and is widely accepted, it could potentially be viewed as an unregulated form of e-money or a payment token, subject to the Central Bank of Solomon Islands' (CBSI) general oversight of payment systems, though specific rules would be absent.

No specific licensing regime. There is no dedicated licensing regime for stablecoin issuers in the Solomon Islands.

Entities wishing to operate payment systems or conduct financial services that could involve stablecoins would need to ascertain if their activities fall under the purview of the Central Bank of Solomon Islands (CBSI) under the Central Bank of Solomon Islands Act 1976 (as amended) or the Financial Institutions Act 1998. However, neither of these acts explicitly mentions or provides a framework for virtual asset issuers.

Not specified. Given the absence of specific stablecoin regulation, there are no stipulated reserve requirements for stablecoin issuers in the Solomon Islands.

Not explicitly defined. Without specific legislation governing stablecoins, there are no legally mandated redemption rights for stablecoin holders in the Solomon Islands.

Anti-Money Laundering and Counter-Terrorist Financing Act 2021 (the AML/CFT Act): This comprehensive legislation aligns the Solomon Islands with international FATF standards, covering customer due diligence, reporting obligations, and broader AML/CFT requirements for financial institutions, which increasingly include VASPs.

Solomon Islands Financial Intelligence Unit (SIFIU)

Financial Intelligence Unit Act 2021: This Act establishes the SIFIU and defines its powers and functions.

Identification and Verification of Identity:

Natural Persons: Obtain full name, date of birth, residential address, nationality, and unique identification number (e.g., passport, national ID). Verify this information using reliable, independent source documents, data, or information.

Legal Persons/Entities (e.g., Companies): Obtain name, legal form, proof of existence, powers that regulate and bind the legal person, and the names of relevant persons holding senior management positions.

Beneficial Ownership: Identify and verify the identity of the natural person(s) who ultimately own or control the customer (typically 25% or more ownership/control threshold for legal entities).

Purpose and Intended Nature of the Business Relationship: Understand the reason for the customer establishing the relationship and the expected nature of their virtual asset activities.

Ongoing Monitoring: Continuously monitor the business relationship and transactions to ensure they are consistent with the VASP's knowledge of the customer, their business, and risk profile. This includes monitoring for unusual or suspicious activities.

Enhanced Due Diligence (EDD): Apply EDD measures in higher-risk situations, including:

When dealing with Politically Exposed Persons (PEPs).

Transactions involving high-risk jurisdictions.

Complex, unusually large transactions, or unusual patterns of transactions that have no apparent economic or lawful purpose.

Anonymity-enhancing virtual assets or technologies.

Reporting Obligation: Reports must be submitted to the SIFIU promptly. SIFIU guidance usually specifies a timeframe (e.g., within 24-48 hours of forming suspicion).

No Tipping-Off: VASPs and their employees are strictly prohibited from informing the customer or any third party that an STR has been or will be submitted.

Types of Records:

FATF Recommendation 15 specifically addresses Virtual Assets (VAs) and Virtual Asset Service Providers (VASPs), requiring countries to regulate and supervise VASPs for AML/CFT purposes. If a stablecoin issuer were to operate in the Solomon Islands and meet the definition of a VASP under FATF guidelines, they would likely fall under the purview of this Act, requiring customer due diligence, suspicious transaction reporting, etc.

Money Laundering and Proceeds of Crime Act 2002 (as amended): This is the most likely avenue through which virtual assets, including stablecoins, would face any form of regulation. The Solomon Islands is a member of the Asia/Pacific Group on Money Laundering (APG) and is committed to implementing the Financial Action Task Force (FATF) recommendations.

Solomon Islands does NOT have a general Capital Gains Tax.

However, this does not mean profits are entirely tax-free. If the activities involving cryptocurrency are deemed to constitute a "business" or if the profits are considered "income" under the Income Tax Act, they could be taxable under income tax provisions (see below).

Trading as a Business: If an individual is regularly buying and selling cryptocurrency with the intention of making a profit, and the scale and frequency of these activities resemble a business, the profits could potentially be classified as business income.

Profits from Trading: If a company trades cryptocurrency, any profits generated would generally be considered part of the company's ordinary business income and taxed at the corporate income tax rate.

For Businesses (Companies):

Income Tax Rates (General Guidance - Subject to change):

No Crypto-Specific Reporting Requirements: As there is no specific crypto tax legislation, there are no specific reporting requirements for cryptocurrency holdings or transactions.

Companies Act 2009: For breaches related to illegal offerings of unregistered securities or failures in disclosure.

Prospectus Requirements: Issuers may need to prepare and register a prospectus or offer document with the Registrar of Companies, providing full disclosure of material information about the token, the project, the risks, and the issuer.