Vanuatu -- Licensing Requirements Regulatory Overview

**Virtual Asset Providers Act No. 27 of 2023 (VAPA 2023):** This is the cornerstone legislation for virtual assets, including custody services. It defines "virtual assets," "virtual asset service providers" (VASPs), and sets out licensing and operational requirements.

Vanuatu Financial Services Commission - Virtual Asset Providers Act No. 27 of 2023 (PDF link on VFSC website)

**Financial Dealers Licensing Act [CAP 70]:** While the VAPA 2023 is specific, the general principles and licensing framework of financial dealing can be considered complementary.

[Vanuatu Law Online - Financial Dealers Licensing Act [CAP 70]](http://www.vanualaw.vu/wp-content/uploads/pdf_law/financialdealerslicensingcap70.pdf) (PDF link on Vanuatu Law Online)

**Anti-Money Laundering and Counter-Terrorism Financing Act No. 13 of 2017 (as amended):**

Vanuatu Financial Services Commission - Anti-Money Laundering and Counter-Terrorism Financing Act No. 13 of 2014 (PDF link on VFSC website)

**Application Requirements (Section 12, VAPA 2023):** An applicant for a VASP license must submit to the VFSC:

Details of the applicant’s proposed business activities.

Proof of the applicant's financial soundness and adequate capital (Section 18).

Proposed internal controls, risk management systems, and cybersecurity framework (Section 19).

Policies and procedures for compliance with the AML/CTF Act (Section 17).

Details of directors, officers, and significant shareholders, including "fit and proper person" assessments.

Any other information required by the VFSC.

**Capital Requirements (Section 18, VAPA 2023):** A VASP must at all times maintain a minimum unimpaired paid-up capital as prescribed by the Minister through regulation. This regulation is yet to be fully detailed.

**Fit and Proper Persons (Section 14, VAPA 2023):** Directors and senior management must meet "fit and proper" criteria established by the VFSC, demonstrating competence, integrity, and financial soundness.

**Client Assets (Sections 20, 21, 22, VAPA 2023):**

A VASP must hold a client’s virtual assets separate from its own assets and the assets of other clients (Section 20(1)).

Virtual assets held by a VASP on behalf of a client are not to be used to satisfy any liability of the VASP or form part of its assets (Section 20(2)).

A VASP is prohibited from using, dealing with, or otherwise disposing of a client's virtual assets without the client's explicit consent, except as authorized by law or a court order (Section 21).

A VASP must maintain adequate records that clearly identify the ownership of each client's virtual assets (Section 22).

**Risk Management and Internal Controls (Section 19, VAPA 2023):** A licensed VASP must implement robust risk management systems and internal controls designed to ensure the security, integrity, and operational resilience of its services, which could implicitly encourage or require consideration of insurance.

**Financial Soundness and Capital Requirements (Section 18, VAPA 2023):** The requirement for adequate capital is intended to provide a buffer against operational risks, though it's not a direct substitute for insurance.

Detailed cybersecurity requirements, potentially touching on cold/hot storage ratios.

More explicit requirements for insurance or bonding.

**Exchanges (Virtual Asset Trading Platforms):**

**Required License:** Financial Dealer's License.

**Reasoning:** Operating a platform for buying, selling, or exchanging virtual assets (especially those considered securities or derivatives, or where the platform acts as a broker/dealer) is generally interpreted as "dealing in securities," "brokerage," or "operating a trading facility."

**Custody Providers (Virtual Asset Custodians):**

**Reasoning:** Providing services for the safekeeping or administration of virtual assets or instruments enabling control over virtual assets (e.g., private keys) is typically seen as "holding client money or property" or providing "safekeeping services" under financial dealer regulations.

**Payment Processors (Crypto-Fiat & Crypto-Crypto):**

**Reasoning:** If the payment processing involves conversion between fiat and virtual assets, or facilitating payments using virtual assets where the processor holds or transfers the virtual assets on behalf of clients, it often falls under "money transmission services," "foreign exchange dealing," or "dealing in securities," necessitating a Financial Dealer's License. Purely technical providers that do not touch funds or assets might be exempt, but this requires careful legal assessment.

**Legal Entity:** The applicant must be a legally incorporated entity in Vanuatu, typically a Vanuatu International Company (VIC) or a local company.

The minimum paid-up capital requirement for a Financial Dealer's License under the Act is **VUV 5,000,000** (approximately USD 40,000 – 45,000, depending on exchange rates).

However, for virtual asset activities, the VFSC often requires significantly higher capital, demonstrating robust financial stability. It is common for the VFSC to request a minimum of **VUV 10,000,000** (approximately USD 85,000 – 90,000) or even more, depending on the scope and perceived risk of the proposed activities. This capital must be verifiable and held in a designated bank account.

**AML/KYC Compliance:** This is a cornerstone requirement. Applicants must demonstrate robust Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) measures in compliance with Vanuatu's **Anti-Money Laundering and Counter-Terrorism Financing Act No. 13 of 2014** and its associated Regulations. Key requirements include:

**Appointing an MLRO:** Designation of a qualified Money Laundering Reporting Officer (MLRO) and a Deputy MLRO.

**Internal Policies & Procedures:** Development and implementation of comprehensive AML/CTF policies, procedures, and internal controls (e.g., customer due diligence (CDD), enhanced due diligence (EDD), record-keeping, suspicious transaction reporting (STR)).

**Training:** Ongoing AML/CTF training for all relevant staff.

**Risk Assessment:** Conducting a thorough business-wide and customer risk assessment.

**Sanctions Screening:** Implementing robust sanctions screening procedures.

**Registered Office:** A registered office in Vanuatu is mandatory.

**Local Management/Staff:** While not always explicitly requiring *all* directors to be resident, the VFSC increasingly emphasizes local substance. This often means appointing at least one resident director and/or demonstrating local operational management.

**Physical Presence:** Having a physical office space and local operational staff is highly recommended to demonstrate genuine substance and control, especially for complex VASP operations.

**Local MLRO:** It is strongly recommended, and often practically required by the VFSC, that the MLRO (or at least a deputy) be based in Vanuatu.

**Fit and Proper Persons:** All directors, significant shareholders, and senior management must undergo a "fit and proper" assessment by the VFSC. This involves submitting detailed personal information, criminal record checks, financial disclosures, and demonstrating relevant experience and integrity.

**Business Plan:** A comprehensive business plan outlining the proposed VASP activities, target market, operational procedures, technological infrastructure, risk management strategies, and financial projections.

**Technology and Security:** Detailed information on the technology stack, security measures (cybersecurity, data protection, private key management), and contingency plans. The VFSC may require independent security audits.

**Initial Consultation:** Engage with a local licensed corporate service provider or law firm experienced in VFSC licensing to assess feasibility and requirements.

**Company Incorporation:** Incorporate a Vanuatu International Company (VIC) with the VFSC.

AML/CTF manual specific to virtual assets.

Resumes, police clearance certificates, bank references, and professional references for all directors, shareholders, and key personnel.

Proof of the required paid-up capital.

Details of IT infrastructure and security protocols.

Lease agreement for the physical office in Vanuatu (if applicable).

**Submission to VFSC:** The complete application package is submitted to the VFSC.

**VFSC Review and Due Diligence:** The VFSC reviews the application, conducts its due diligence, and may request further information or clarification. This often includes interviews with key personnel.

**Approval and License Issuance:** Upon satisfactory review and fulfillment of all requirements, the VFSC will issue the Financial Dealer's License with an endorsement for virtual asset activities (or similar wording depending on the specific activities).

**Vanuatu Financial Services Commission (VFSC):**

**Financial Dealers Licensing Act [CAP 70]:**

The foundational legislation under which virtual asset service providers are typically licensed.

**Link (via VFSC site, often under "Laws"):** You may need to navigate the VFSC site under "Laws" or "Legislation" to find the most current version. A direct permanent link is often not provided for Acts, but they are generally available through legal publications or the VFSC's own portal.

*Search Term for VFSC site:* "Financial Dealers Licensing Act CAP 70"

Governs all AML/CTF obligations for financial institutions, including VASPs.

**Link (via VFSC site, often under "Laws"):** Similar to the Financial Dealers Act, navigate the VFSC site for the latest version.

*Search Term for VFSC site:* "AML CFT Act 2014" or "Anti-Money Laundering"

**International Companies Act [CAP 222]:**

Governs the incorporation and regulation of International Companies in Vanuatu, which are often used by VASPs.

*Search Term for VFSC site:* "International Companies Act CAP 222"

**VFSC Circulars/Guidance on Virtual Assets:**

The VFSC regularly issues circulars or guidance notes to clarify its stance on new technologies or interpretations of existing laws. While direct permanent URLs for specific circulars can change, these are crucial for understanding the VFSC's current approach to virtual assets. It's recommended to check the "News" or "Publications" section of the VFSC website.

*Search Term for VFSC site:* "Virtual Assets," "Cryptocurrency," "Blockchain."

**Shares or Stock:** Representing ownership in a company.

**Debentures, Bonds, Notes:** Representing debt obligations.

**Warrants, Options, Rights:** Pertaining to the acquisition or disposal of other securities.

**Units in a Collective Investment Scheme:** Where investors pool funds for collective management.

**Derivatives:** Financial contracts whose value is derived from an underlying asset.

**"Investment Instruments" or "Financial Products":** This is often the catch-all category that can encompass cryptocurrency tokens if they exhibit characteristics of an investment. It typically refers to:

An investment of money (or equivalent value, including crypto).

In a common enterprise or venture.

With an expectation of profit, income, or return.

Principally from the efforts of others (the issuer, a management team, or third parties).

**Investment Tokens (Security Tokens):** Tokens that represent an ownership interest (like shares), a debt obligation (like bonds), a right to a portion of profits, or other traditional financial rights in an underlying asset or enterprise. This includes tokens issued in Security Token Offerings (STOs) or Initial Coin Offerings (ICOs) where the primary purpose is capital raising for a venture with an expectation of investor return.

**Fractionalized Assets:** Tokens that represent fractional ownership of real-world assets (e.g., real estate, art, precious metals) where the investor expects a return based on the asset's performance or management efforts.

**Hybrid Tokens:** Tokens that combine utility and investment features. If the investment component is significant or the token is primarily marketed as an investment, it would likely be deemed a security.

**Pre-Functional Utility Tokens (if speculative):** Tokens that are marketed and sold primarily as an investment opportunity before the underlying platform or service is fully functional, where investors speculate on future value appreciation based on the efforts of the development team. Once the utility is fully realised and the token's primary use is for accessing goods/services, its classification might shift, but the initial offering would still be scrutinised.

**Pure Utility Tokens:** Tokens that solely provide access to a product or service within a network and are used for consumption rather than investment, without any expectation of profit or financial return derived from the efforts of others (e.g., paying for computing resources, in-game currency).

**Purely Collectible NFTs:** Non-fungible tokens that represent unique digital items primarily for aesthetic, cultural, or social value, without any attached rights to profit sharing, income, or ownership in a broader enterprise.

**Stablecoins (potentially):** If designed purely to maintain a stable value against a fiat currency and primarily used for payments or as a store of value, they may not be classified as securities *unless* they offer an investment return or are part of a broader investment scheme. However, they are subject to other regulations like AML/CTF and potentially e-money regulations.

**Offering and Issuance:** The public offering or issuance of security tokens in or from Vanuatu would typically require registration with, or approval from, the VFSC. This would involve:

**Prospectus Requirements:** Preparation and submission of a detailed prospectus or offering document providing full disclosure of material information to potential investors, in line with the Act's provisions.

**Disclosure Requirements:** Ongoing disclosure obligations for issuers of publicly traded securities.

**Licensing of Issuers/Dealers:** Entities involved in issuing, underwriting, dealing in, or advising on security tokens would likely need to obtain a **Financial Dealer's License** (or a similar license under the new Act) from the VFSC. The **Financial Dealers Licensing Act [CAP 70]** sets out these general licensing requirements, which would extend to security token activities.

**Exemptions:** The Securities Act may provide for certain exemptions from registration or prospectus requirements, such as:

**Private Placements:** Offerings made to a limited number of sophisticated or institutional investors.

**Small Offerings:** Offerings below a certain monetary threshold.

**Professional Investors:** Offerings exclusively to qualified professional or accredited investors.

These exemptions are usually subject to strict conditions and notification to the VFSC.

**Licensed Exchanges:** Any platform or exchange facilitating the secondary trading of security tokens in or from Vanuatu would need to be licensed as a securities exchange by the VFSC. This involves meeting robust regulatory requirements for market integrity, investor protection, operational resilience, and financial soundness.

**Market Conduct Rules:** Standard market conduct rules would apply, including prohibitions against insider trading, market manipulation, wash trading, and other fraudulent or deceptive practices.

**Investor Protection:** Measures for investor protection, such as client asset segregation, dispute resolution mechanisms, and compensation schemes, would be expected.

**AML/CTF Compliance:** All licensed entities involved in secondary trading would be subject to strict Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) obligations under the **Anti-Money Laundering and Counter-Terrorism Financing Act No. 13 of 2017 (as amended)**, requiring robust Know-Your-Customer (KYC) procedures, transaction monitoring, and suspicious activity reporting.

**Imposing administrative penalties and fines.**

**Seeking injunctions from the courts.**

**Referring matters for criminal prosecution.**

**Vanuatu Financial Services Commission (VFSC) Official Website:**

https://www.vfsc.vu/ (This is the primary portal for official information, legislation, and guidance.)

**Securities Act No. 34 of 2023:**

The full text of the Act is generally published in the Vanuatu Government Gazette. While a direct URL to the full gazetted Act may not be permanently stable, it would be available via the VFSC website or the Vanuatu Law Publications portal once officially released and consolidated. Users should check the "Legislation" or "Acts" section of the VFSC website.

While the Securities Act 2023 is newer and more specific to securities offerings, the Financial Dealers Licensing Act remains relevant for the licensing of intermediaries.

Access to consolidated Acts: Typically available through the Pacific Legal Information Institute (PacLII) or Vanuatu Laws Online, though updated versions might require checking the VFSC site directly.

*Example PacLII link (check for latest amendments):* https://www.paclii.org/vu/legis/consol_act/fdla70/

Crucial for all financial entities, including those dealing with virtual assets.

Relevant for the incorporation and general corporate governance of entities involved in token issuance.

**Vanuatu Financial Services Commission (VFSC)**

The VFSC is the primary regulator for non-bank financial services, including the licensing and supervision of financial dealers who may offer virtual asset services. It ensures compliance with financial services laws and AML/CFT obligations.

**Financial Dealers Licensing Act [CAP 70]**

**Date:** Original Act, with amendments over time.

**Relevance:** This is the primary act under which the VFSC licenses financial dealers. The VFSC has interpreted that certain activities involving virtual assets (e.g., acting as an exchange, broker, or custodian for fiat-to-crypto or crypto-to-fiat transactions) fall within the scope of "dealing in securities" or "providing financial advice" as defined in this Act. Therefore, entities undertaking such activities must obtain a Financial Dealers License.

**Date:** Enacted in 2014, with subsequent amendments (e.g., in 2017, 2020) to align with international standards set by the Financial Action Task Force (FATF).

**Relevance:** This Act is crucial. All financial institutions and designated non-financial businesses and professions (DNFBPs), which now explicitly include virtual asset service providers (VASPs), are obligated to comply with its provisions. This includes customer due diligence (CDD), record-keeping, suspicious transaction reporting (STR), and risk assessments.

**URL:** Similar to the Financial Dealers Licensing Act, it's usually found on the VFSC's legislation page: `https://www.vfsc.vu/legislation-acts/`

**VFSC Public Statement on Virtual Assets (and subsequent guidance/circulars)**

**Date:** The VFSC issued a significant Public Statement on Virtual Assets around **November 2018**, clarifying its stance. Subsequent circulars or guidance notes may have been issued to further elaborate.

**Relevance:** This statement clarified that entities involved in virtual asset activities, particularly those involving fiat-to-crypto conversions or offering virtual assets as an investment, would be subject to the Financial Dealers Licensing Act and the AML/CFT Act. It emphasized the need for proper licensing and adherence to regulatory obligations.

**URL:** While specific URLs for public statements can change, you would typically find such announcements in the "News," "Publications," or "Public Statements" section of the VFSC website. An example search might be for "VFSC Public Statement Virtual Assets" on their site.

**Licensing Required:** Entities wishing to operate crypto trading platforms, exchanges, brokerage services, or provide other virtual asset services (especially those involving fiat currency conversions or treating virtual assets as investments) are generally required to obtain a **Financial Dealers License** from the VFSC.

**AML/CFT Compliance is Paramount:** Licensed entities must strictly adhere to the Anti-Money Laundering and Counter-Terrorism Financing Act. This means implementing robust customer identification and verification (KYC), transaction monitoring, and suspicious activity reporting procedures.

**No Explicit Ban:** Vanuatu does not explicitly ban crypto trading or the operation of exchanges. Instead, it seeks to regulate these activities under its existing financial services and AML/CFT framework to ensure oversight and mitigate risks.

**Focus on Reputability:** The VFSC aims to attract reputable financial service providers and maintain the integrity of its financial system. Unlicensed or non-compliant operations are subject to penalties.