On-shore VASP 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.

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.

Licensing: While not explicitly for "token issuers," entities offering or dealing in securities might need to be licensed or authorized if such a framework exists for traditional securities brokers or investment advisors under a future Securities Act or related regulations.

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)

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:

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:

No specific crypto custody license: There is no dedicated license for virtual asset custodians.

Potential application of existing licenses: If an entity's activities involving digital assets were deemed to fall under the definition of banking business, financial institution services, or securities trading, it would likely require a license under the Financial Institutions Act 1998 or other relevant financial legislation administered by the CBSI. However, this would depend on how digital assets are legally characterized, which is currently ambiguous for custody.

No specific crypto rules: There are no explicit rules mandating the segregation of client digital assets from the custodian's proprietary assets.

General fiduciary principles: For traditional financial institutions, general principles of fiduciary duty and client asset protection would typically apply, implying segregation. However, without specific legislation for digital assets, the enforceability and interpretation for crypto assets would be unclear.

No specific mandates: There are no legal mandates in the Solomon Islands for using cold storage or any particular security measures for digital assets under custody. This is an operational detail typically specified in advanced crypto regulatory frameworks.

Not Adopted: The Solomon Islands does not have a specific regulatory framework for Virtual Assets (VAs) or Virtual Asset Service Providers (VASPs). Consequently, the FATF Travel Rule (Recommendation 16, as applied to VASPs under Recommendation 15) has not been adopted or made effective.

Since there is no regulatory framework for VASPs or the Travel Rule, there are no established threshold amounts for information exchange in the Solomon Islands.

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).

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.

Companies: The general corporate income tax rate is typically around 30%.

There is currently NO crypto-specific tax legislation in the Solomon Islands.