An early participant in the Financial Services Commission’s regulatory sandbox regime for financial technology recently spoke out about her experiences operating in a small but growing industry in the Virgin Islands.
Elaine Sun, the senior executive and chief compliance officer of crypto derivative exchange Brtuomi Worldwide Limited, noted that continued education will be needed for both businesses and regulators in order for the territory to master the digital asset space.
“We applied right after the BVI sandbox guidelines had been issued, within one or two months,” Ms. Sun said during a March 18 forum sponsored by BVI Finance. “We believe that this sandbox [has] quite a clear criterion and standard to be able to supervise the digital asset derivative exchange.”
The Financial Services Regulations 2020, which facilitated the creation of the sandbox, took effect in August 2020 as part of local efforts to support innovation in the growing fintech sector and allow businesses to trial new products and services.
The FSC announced that it had approved the first participant in the regulatory sandbox in April 2021. At that time, Bank of Asia said in a press release that the bank “has played a pivotal role in introducing, leading, and delivering this sandbox project, which is affiliated with one of the three most prominent crypto exchanges in the world.”
Ms. Sun predicted that the sandbox will continue to face challenges in how the FSC and the industry communicate with each other.
Bitcoin has only been around for just over a decade, and the language of digital assets is new even for many longtime industry practitioners, she explained.
“Those people [in the fintech industry] are pure technology backgrounds; they don’t do financial institutions,” she said. “They don’t use the terminology that we use in the banking sectors. This is their world they created up till now, [whereas] the whole world now has access to it.”
Glenford Malone, acting deputy managing director of the FSC, said applicants for the programme have been a mixture of businesses that have a good grip on fintech and those that still need more guidance. However, he said, only those that are ready to launch have been accepted.
In terms of applications, “A lot of it revolves around fintech and practically 90 percent to 99 percent of it revolves around the virtual asset space,” Mr. Malone said, adding, “We don’t intend it to be a voluminous area.”
He did not state how many applications have been accepted since the sandbox formally launched in August 2020, and FSC representatives did not provide a response to Beacon queries by press time.
Ayanna Hull, head of private wealth and regulatory practice at Harneys, also emphasised that education on the industry is an ongoing process.
“There is the technical knowledge that you need to be up to speed with and there is the legal aspect. On the technical side, because it is so new to the BVI, it is not very easy to find a lot of people that understand crypto, understand blockchain, understand platforms, or understand how [it all] works,” she said.
At Harneys, she added, “We have a fintech team internally, where there are four or five of us and we all sit and analyse everything that comes through.”
According to Lisa Lou, president of the Bank of Asia, providing services for digital assets has been a “learn-to-grow” process.
“Our experience and our observation are actually more from our clients. What our clients need, what they say, what they want to get into [are all] what we observe from our client base,” she said. “The bank has seen an increase in inquiries in digital assets-related business, and that can be an exchange or can be a funds company that has both a traditional portfolio as well as a crypto portfolio.”
“Quite a bit” of discussion, she said, has focused on security tokens and security token exchanges, which preserve ownership of assets in the blockchain.
“The BVI has made progress in that regard,” she added.
According to the World Bank, regulatory sandboxes, which facilitate businesses conducting experiments, first popped up in 2016 and now exist in over 100 countries, making competition intense.
However, Ms. Hull said that from her view, the VI is “probably the most attractive in terms of the digital asset space amongst the offshore centres.”