Virtual assets offer various opportunities for the Virgin Islands financial services industry, but they also bring risks and regulatory complications, panellists said last week during the second of two related webinars hosted by BVI Finance.

Held as BVIF’s Jan. 31 breakfast forum, the second webinar was themed “Embracing the Crypto Revolution: Positioning the BVI as a Global Hub for Virtual Assets.”

In a session moderated by BVIF CEO Elise Donovan, panellists discussed the VI’s regulatory framework for virtual asset service providers, known as VASPs, as well as application processes, emerging trends, and the innovation-regulation balance, according to a press release from BVIF.

Regulation

Kishelle Blaize-Cameron, deputy director of specialised supervision at the BVI Financial Services Commission, explained challenges regulating high-risk virtual asset businesses.

“It changes so often that things that would have been relevant two years ago are no longer relevant today,” she said. “That’s a challenge, and that requires us to be a little bit more agile. Our supervisory regime requires us to have systems available to adapt to changes because they’re coming quickly and fast.”

Ayana Hull, head of private wealth and regulatory at Harneys, stressed the importance of complying with international regulatory requirements.

“The industry, as gatekeepers, have to comply with the [Financial Action Task Force] standards and the legislation to mitigate risks and to maintain the BVI’s reputation,” she said.

Applications

Mses. Blaize-Cameron and Hull also discussed the complexities of processing VASP applications.

“It’s complex. It’s new. It’s cross-border,” Ms. Blaize-Cameron explained. “We must undertake quality assessments to ensure that we have a viable and quality business in the jurisdiction going forward.”

Virtual assets, she added, can come with a high level of risk.

“There are some characteristics that are attached to virtual assets that elevate the inherent risks attached to the possibility of nefarious activities, like money laundering, terrorist financing, and proliferation financing,” she said. “Our expectation is that entities that are using the products can identify the risks and present to us proper risk management structures that mitigate those risks to the client, the company, and to the jurisdiction.”

To that end, she said, anyone seeking licensing from the FSC will have to demonstrate the financial viability of their proposal.

“Then specifically to VASP, we expect to see sufficient capital — amounts that are commensurate with the nature, size and complexity of the application,” she said.

“Given the specific inherent risks, we expect to see professional indemnity insurance that captures certain types of risks — for example, loss of customer assets or issues in relation to data breaches, etcetera.”

Both panellists expressed optimism about the territory’s ability to become a leading jurisdiction for virtual assets, according to the BVIF.

The webinar ended with a question-and-answer session for attendees.