Source: Cointelegraph Original: "{title}"
Vanuatu has established a licensing system for cryptocurrency companies wishing to operate in the Pacific island nation through a digital asset regulatory bill. Government regulatory advisors have described the bill as "extremely strict."
The local council passed the "Virtual Asset Service Providers Act" on March 26, authorizing the Vanuatu Financial Services Commission (VFSC) to implement licensing management for cryptocurrency companies and enforce the Financial Action Task Force (FATF) standards for anti-money laundering, counter-terrorism financing, and the Travel Rule.
Under the new regulations, the VFSC is granted comprehensive investigative and enforcement powers, with violators facing fines of up to 250 million Vatu (approximately $2 million) and up to 30 years in prison.
"Fraudsters who dare to come to Vanuatu will only face imprisonment," regulatory expert Loretta Joseph, who participated in the legislative consultation, told Cointelegraph. "These laws are extremely harsh."
She added, "We will never allow an FTX-style scandal to happen again," referring to the collapse of the former Bahamian cryptocurrency exchange due to massive fraud by co-founders Sam Bankman-Fried, Gary Wang, and other executives in 2022.
"Vanuatu is a small jurisdiction often targeted by bad actors seeking regulatory loopholes or lax regulations," Joseph emphasized. "But this time is completely different."
"As the first country in the Pacific region to legislate in this area, I am proud of them," she added.
New Law Regulates Various Crypto Businesses The bill establishes a licensing and reporting framework for exchanges, non-fungible token (NFT) markets, crypto custodians, and initial coin offerings (ICOs).
The law specifically allows banks to obtain licenses to provide cryptocurrency exchange and custody services. Source: Parliament of the Republic of Vanuatu
The Vanuatu Financial Services Commission (VFSC) noted that while stablecoins, security tokens, and central bank digital currencies (CBDCs) "may share certain characteristics with virtual assets," this legislation does not currently cover these areas.
According to the new regulations, the VFSC commissioner has the authority to establish a regulatory sandbox, allowing approved companies to conduct various crypto services for a one-year period (which can be renewed). Regulatory expert Loretta Joseph stated that due to the lack of existing laws suitable for virtual assets in the country, "special legislation" is needed to meet anti-money laundering (AML) and counter-terrorism financing (CFT) requirements.
In a statement on March 29, the VFSC stated that the framework was developed after years of "assessing the risks associated with virtual assets," and the new law will create "significant opportunities" for Vanuatu while enhancing financial inclusion through the regulation of cross-border crypto payment services.
VFSC Commissioner Branan Karae had predicted last June that the bill would pass in September, but Joseph emphasized that the legislation "is by no means a hasty move." The bill has been in drafting since 2020 and has faced multiple delays due to government changes, natural disasters, and the COVID-19 pandemic.
Related: zkLend hacker claims to have suffered heavy losses in stolen ETH due to a Tornado Cash phishing site.
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