BVI Virtual Asset Service Providers (VASP) Act – REVIEWED

The British Virgin Islands (“BNVI”) has recently revised its laws to provide that any entity wishing to provide virtual asset services in or from within the BVI is now required to be registered by the BVI Financial Services Commission (FSC).


New entities must register with the FSC before commencing any VASP activities. VASPs already operational when the VASP Act came into force will have until 31 July 2023 to submit an application to the FSC, or to cease its VASP related activities. After this date, the VASP Registration Guidance confirms that all VASPs that have not submitted applications for registration will be considered to be conducting unauthorised business and subjected to the full enforcement mechanisms of the FSC.


When the FSC approves a VASP application, it will register the applicant, issue a certificate of registration and impose such conditions (if any) on the registration as it considers appropriate (including a requirement to obtain professional indemnity insurance).


With regard to timing, the VASP Registration Guidance helpfully records that (i) the FSC will endeavour to process an application and provide initial comments within six weeks from the FSC’s receipt of a completed application and (ii) the FSC’s service standard requires that the application process be concluded within six months from the initial submission date. Prospective applicants will therefore be able to take some comfort that they will receive an early indication of the likelihood of success and overall processing within six months.


The VASP Act defines a “VASP” as a virtual asset service provider who provides, as a business, a virtual assets service and is registered to conduct one or more of the following activities or operations for or on behalf of another person:

  • exchange between virtual assets and fiat currencies;
  • exchange between one or more forms of virtual assets;
  • transfer of virtual assets, where the transfer relates to conducting a transaction on behalf of another person that moves a virtual asset from one virtual asset address or account to another;
  • safekeeping or administration of virtual assets or instruments enabling control over virtual assets;
  • participation in, and provision of, financial services related to an issuer’s offer or sale of a virtual asset; or
  • perform such other activity or operation as may be specified in the VASP Act or as may be prescribed by regulations.


A person engaged in any of the following activities or operations, for or on behalf of another person, will be deemed to be carrying on a virtual assets service:

  • hosting wallets or maintaining custody or control over another person’s virtual asset, wallet or private key;
  • providing financial services relating to the issuance, offer or sale of a virtual asset;
  • providing kiosks (such as automatic teller machines, bitcoin teller machines or vending machines) for the purpose of facilitating virtual assets activities through electronic terminals to enable the owner or operator of the kiosk to actively facilitate the exchange of virtual assets for fiat currency or other virtual assets; or
  • engaging in any other activity that, under the Guidelines, constitutes the carrying on of the business of providing virtual asset service or issuing virtual assets or being involved in virtual asset activity.


Whether an entity is carrying on a virtual assets service will turn on, inter alia, whether the asset in question constitutes a “virtual asset” (as such term is defined in the VASP Act). For example, crypto based derivative products would require more careful consideration and may be caught by one or both the VASP Act or the Securities and Investment Business Act (“SIBA”).


Decentralised protocols that fall within the definition of virtual asset services above will also likely be subject to the VASP Act although specialist advice is required. In this regard we note that the VASP Registration Guidance makes reference to decentralised finance platforms, the sale of non-fungible tokens and the operation of peer to peer financing platforms as being activities and operations which may fall within the VASP Act where they satisfy the conditions of the VASP Act.


A VASP application for registration must be made in the FSC’s approved form and be accompanied with the following information and documentation:


  • Details of the proposed directors, senior officers, shareholders, beneficial owners, auditor and authorised representative of the VASP, with the ownership structure to be supported by a register of members and an ownership structure chart which evidences the breakdown of percentages held in the legal structure;
  • A business plan in relation to the VASP, containing; (a) details of the knowledge, expertise and experience of the applicant, (b) information about the nature, size, scope and complexity of the VASP, (c) information about how the VASP will be marketed and the expected source of business, (d) the anticipated human resource capacity of the VASP, (e) any planned outsourcing arrangements and (f) an indication of the initial financial and capital projections of the VASP covering the first three years of operation (applicants must be able to demonstrate an adequate level of paid-up capitalisation and adequate liquidity reserves for the nature of their operations);
  • A written risk assessment of the VASP;
  • A business continuity plan;
  • A written manual showing how the applicant, if granted registration, intends to comply with the requirements of the VASP Act;
  • Details of the internal safeguards and data protection (including cyber security) systems intended to be utilised;
  • Details of the system to be put in place on how the VASP will implement to handle client assets, custodian relationships and complaints; and
  • Declarations, completed by each of the applicant and the authorised representative, affirming that the information provided to the FSC in relation to the application is true and accurate.


An entity wishing to provide Virtual Assets Custody Services or to operate a Virtual Assets Exchange (as such terms are defined in the VASP Act) need to provide additional information and confirmations to the FSC, which are primarily intended to evidence the VASPs ability to safeguard client assets and to mitigate against the heightened risk of money laundering and terrorist financing.


Subject to certain exceptions, a VASP must have certain functionaries appointed at all times. Directors and Senior Officers, Authorised Representative, Auditor and Compliance Officer along with a BVI legal Practitioner.


The VASP Act sets out a number of on-going obligations for VASPs which include: 

  • Maintaining records that (a) are sufficient to show and explain its transactions, (b) enable its financial position to be determined with reasonable accuracy, (c) enable it to prepare all necessary financial returns and statements, (d) enable its financial statements to be audited, (e) show any complaints made by clients and (f) show the steps it takes to guard against money laundering, terrorist financing and proliferation financing;
  • Submitting a copy of its auditor’s report to the FSC within 6 months of the end of its financial year;
  • Ensuring that client assets are identified, or identifiable, and appropriately segregated and accounted for;
  • Co-operating with the FSC to ensure compliance with the VASP Act, and providing the FSC with any documents or information it may require to discharge its functions; and
  • Obtaining the FSCs prior written approval to any proposed change of name, disposal of any significant interest in the VASP or changes to its functionaries.


The fees payable to the FSC in respect of a VASP application for registration under the VASP Act are confirmed in the Guidelines and summarised as follows:

  • US$10,000 for an application to provide Virtual Assets Custody Services
  • US$10,000 for an application to operate a Virtual Assets Exchange
  • US$5,000 for any other virtual assets services.




The VASP Act is not intended to regulate the technology that underlies virtual assets or VASP activities and helpfully sets out a range of services which are not subject to the VASP Act, namely:

  • providing ancillary infrastructure to allow another person to offer a service, such as cloud data storage provider or integrity service provider responsible for verifying the accuracy of signatures;
  • providing service as a software developer or provider of unhosted wallets whose function is only to develop or sell software or hardware;
  • solely creating or selling a software application or virtual asset platform;
  • providing ancillary services or products to a virtual asset network, including the provision of services like hardware wallet manufacturer or provider of unhosted wallets, to the extent that such services do not extend to engaging in or actively facilitating as a business any of those services for or on behalf of another person;
  • solely engaging in the operation of a virtual asset network without engaging or facilitating any of the activities or operations of a VASP on behalf of customers;
  • providing closed-loop items that are non-transferable, non-exchangeable and which cannot be used for payment or investment purposes; and
  • accepting virtual assets as payment for good or services (such as the acceptance of virtual assets by a merchant when effecting the purchase of goods).


In addition, it is worth noting that, whilst not expressly excluded, the issuing of virtual assets in or from within the BVI is not an activity regulated by the VASP Act. However, care is needed as financial services related to an issuance may be caught by the VASP Act and if the virtual asset is considered an ‘investment’ under the SIBAct there may be further considerations to address.  Indeed, just because the issuance of a virtual asset from a BVI entity may not be regulated under the VASP Act does not mean that other regulatory regimes can be ignored.


Any entity carrying on virtual asset services without being registered under the VASP Act is liable on conviction to a fine of up to US$100,000 and/or 5 years imprisonment (for any director, partner or senior officer who knowingly authorised, permitted or acquiesced in the commission of the offence).


OCI’s Service Fees  re VASP applications:–

  • Providing an Authorised Representive in the BVI – $US2,600annually
  • Company Formation: From $1,350
  • Professional fee for an application to provide Virtual Assets Custody Services: US$6,750
  • Professional fee for an application to operate a Virtual Assets Exchange: US$6,750
  • Professional fee for any other virtual assets services. US$3,300


Would you like to know more? Then please Contact Us:


DISCLAIMER: OCI is a Company/Trust/LLC/LP/Foundation Formation Agency. We are not tax advisers or legal advisers. You are advised to seek local legal/tax/financial advice in regards to your local reporting/tax requirements before committing to set up or use an Offshore Company or other entity.





DAO Legal Wrappers – The Wyoming DAO LLC

In previous articles (see below) we have examined in detail the merits of deploying a Caymans Foundation Company and a Marshall Islands DAO LLC as a Legal Wrapper for any new DAO (Decentralized Autonomous Organization). The purpose of this article if to shine a light on a third option ie the Wyoming DAO LLC.


As previously discussed most legal systems would consider a DAO to be a Partnership with the DAO members being considered as defacto Partners. Whilst a Partnership acts as a flow through entity (ie a Partnership doesn’t pay tax – it passes on nett profits to members who then report income/pay tax on their share of Partnership profits as/if applicable) the downside of a Partnership is if ever sued the Partners would be jointly AND severally liable for any judgment debt as may arise.


Hence if you want to add legal certainty to your DAO (which would be attractive to certain kinds of investors/suppliers) and if you want to minimize the chances of members being forced to pay the DAOs debts it would be wise to create a Legal Wrapper for your DAO.


The Wyoming DAO LLC – Overview


Since decentralized autonomous organizations (DAOs) were given the same rights as limited liability companies (LLCs) in Wyoming, the blockchain and cryptocurrency industries are seeing this as a game changer in business formation and business ownership.


People forming DAO LLCs will now get the best of both worlds. The LLC model offers benefits like limited liability for its owners while having the democratized voting structure of a DAO where all members have a voice.


Most Companies issue shares have shareholders. An LLC is a form of Company which (rather than having shares) issues Membership Units that deliver certain rights, not unlike shares. Moreover an LLC is considered to be a Partnership (ia a flow through entity, see above) and not liable for Company tax.


Since DAOs in Wyoming have been given the rights of LLCs, these organizations will have the same benefits and will be established in a similar manner. You’ll enjoy these benefits if you create a Wyoming DAO LLC:


1. Protect Your Assets 


LLCs, on their own, are very popular since they offer limited liability to its owners. With a DAO LLC, you get the same benefit, which can be even more appealing since the organization is only run by its members rather than owners/partners.


Limited liability is a great thing to have since any legal troubles the organization runs into won’t affect your personal assets. For example, if the organization gets sued, the members’ personal assets can’t be used to pay off debts.


2. Easy Document Drafting 


Setting up a DAO LLC from scratch can be relatively easy. With a regular DAO, you’d typically start the process by creating a mission statement where the organization’s structure and its features are detailed. Things will play out differently, and maybe even easier, for a DAO LLC.


We hate to sound like a broken record, but it bears repeating that DAO LLCs will follow a typical LLC business model for the most part. And your document drafting process will start with creating Articles of Organization, which we’ll go into detail a little later.


3. Avoid Double Taxation


Like the Articles of Organization, a DAO LLC’s taxes will be handled similarly as a regular LLC.


LLCs avoid double taxation, meaning the company and the owners aren’t taxed separately. This is great since it can save you money, time, and paperwork. Since DAOs in Wyoming will follow the LLC structure, their taxes work the same way.


This is a huge plus since regular DAOs are presently (as of March 2022) in a grey area when it comes to how they pay taxes. Not so with DAO LLCs.


The organization’s profits will be taxed only once through each member’s individual income tax return. And, as a cherry on top, the organization’s members may qualify for a 20% deduction of their business income thanks to the Tax Cuts and Jobs Act of 2017.


4. Simple to Establish


The great thing about starting a DAO in Wyoming is that it will follow the LLC structure. LLCs are very popular with business owners since they offer some benefits like limited liability, appealing tax features, and an easy startup process.


In Wyoming, the process of starting a DAO LLC will be the same as starting a regular LLC. This includes mostly the same fees and steps needed to establish one as you would an LLC.


There will be a few minor differences, though, like choosing the “Decentralized Autonomous Organization” option as the additional designation for your LLC.


The Wyoming Secretary of State’s website has a complete list of FAQs for setting up a DAO LLC.


5. All Members Have a Voice 


A DAO LLC’s structure can be identified as democratized. This means that each member of the organization can vote for changes to be made in how it operates, how it does business, or other functions.


In a corporation, for example, only the board of directors handles these decisions by voting on them. With a DAO LLC, things work in the opposite direction.


No one single person or group of persons do this, and it’s left up to the members of the DAO LLC. This gives everyone a voice through a vote.


6. Full Transparency


Unlike a regular LLC where the business’s inner workings are typically left for the owners to know, a DAO LLC’s members are always kept in the light about the organization’s functions.


This is a huge plus if you’re going into business with people you need to trust. Since DAOs involve people working together through the internet, 100% transparency is needed. The basic DAO model offers this, and it’s the same with a DAO LLC.


The organization’s code (that we’ll talk about later) is fully trustworthy, transparent, and verifiable to all members at all times. The only way the code can be changed is by a vote, meaning all members will be aware that a change is being considered.


7. Opportunity to Become an Industry Trailblazer


DAOs and DAO LLCs are new compared to other business types. Today’s internet users and younger generations consider DAOs to be the future of business. Wyoming is already on the forefront for making them legal entities, and DAOs appear to be picking up steam across the country. Starting one now may be the innovative move that’s right for you.





Articles of Organization 

With a DAO LLC, you’d be drafting Articles of Organization, which can be much easier since most of these documents follow the same drafting process across all 50 states. This includes adding information like the DAO LLC’s name, identifying its owners, etc. OCI can/will assist you to draft these Articles. Note that the Articles of Organization should state that the LLC is a DAO. You’ll also need to file these articles with the Wyoming Secretary of State.


Meeting Necessary Requirements  

Also remember that since your DAO will use the LLC legal entity status, it will need to meet certain requirements as stated in the Wyoming DAO law. For example, it must have a registered agent (a service OCI Can provide as we hold a Wyoming Corporate Service Provider Sublicense)


Wyoming DAO LLC History 

Wyoming officially recognized DAOs, specifically DAO LLCs, as a legal business entity on July 1, 2021. This business type is the first of its kind, paving the way for future business owners to see just how beneficial the structure is.


If you’re familiar with LLCs, then you might be wondering what the point of merging one with a DAO model is. Both have their upsides, and combining them can be something that could bring a handful of benefits like the ones we went over above.


The Wyoming DAO LLC as a DAO Legal Wrapper


Most online guides on the Wyoming LLC for DAO incorporation provide only the information on registering the company as a Wyoming LLC for DAO purposes. It’s hard to use this information to make an informed decision on whether to choose this option for your DAO or whether they may be more suitable options offered by alternative jurisdictions.


We’ve created this guide to help you decided whether a Wyoming LLC could work for you as a DAO Legal Wrapper and also to help you better understand how it works for a DAO from a legal standpoint.


Why might Wyoming work for your DAO? 


Like the Marshall Islands, Wyoming has drafted a special regulation for DAO, under which a DAO can be established in Wyoming in the form of an LLC, with certain characteristics. From our point of view, the advantages of this US jurisdiction include:

  • The flexible legal system of the U.S. common law;
  • Easy and relatively inexpensive establishment process;
  • Quick setup—a company can be registered in as little as 2 weeks;
  • Your project will be structured in the U.S., which is considered an investment Mecca;
  • Wyoming offers one of the first working legal regulations for a DAO wrapper;
  • Limitation of personal liability: the DAO LLC members are not personally liable for the LLC’s debts or legal liabilities;
  • No Corporate tax: LLCs have a “pass-through” taxation system: the DAO LLCs receive “pass-through” treatment allowing allocated profits to be taxed only once on each member’s individual income tax return; and
  • Less bureaucracy and paperwork as the registration process is very simple with minimal  documentation required.


However, establishing a DAO LLC in Wyoming for the purpose of creating an investment DAO is not considered a great option due to the strict securities regulations in the U.S. There is a risk that your token (if publicly issued) will be deemed as a Security by the U.S. Securities and Exchange Commission. Instead, the Wyoming DAO LLC is usually recommended as a pure governance DAO for your project, due to the transparent and specifically designed regulation.


How does a Wyoming DAO LLC work?


The main concern with a DAO is that your DAO, if you have no proper legal wrapper, could be recognized as a general partnership, exposing its members to personal liability for any of the DAO’s actions and obligations. At the same time, an LLC is a recognized legal/business structure in the U.S. (and throughout the world) that protects its owners from personal responsibility for the company’s debts or liabilities.


Management of the DAO LLC must be vested in its members (similar to the classical model of LLCs) if it’s member-managed, or in the smart contract if it’s algorithmically managed (similar to the classical DAO model, where decision-making is encoded in the protocol). 


No member of the DAO LLC shall have any fiduciary duty to the organization or any member with the exception that members shall be subject to the implied contractual covenant of good faith and fair dealing or unless otherwise specified in the articles of organization or operating agreement. Fiduciary duty requires that a particular person works in another person’s best financial interest in certain circumstances. For example, directors of corporations (or managers of LLCs) are charged with certain fiduciary duties in fulfilling their managerial responsibilities. The primary duties are the duty of care and the duty of loyalty. In the case of a DAO LLC, the members have no such duties to the DAO LLC and, therefore, have more freedom for their business activity.


How does decentralized governance work in a Wyoming DAO LLC?


Articles of organization and smart contracts take the role of the operating agreement in the DAO LLC in terms of what they govern. But, to the extent the articles of organization or smart contract do not otherwise provide for, an operating agreement may supplement the operation of the DAO LLC. Under the applicable law, an algorithmically managed DAO LLC may only form if the underlying smart contracts can be updated, modified or otherwise upgraded.


The articles of organization and the operating agreement of the DAO LLC are effective as statements of authority. Where the articles of organization and operating agreement conflict, the articles of organization shall take precedence over any conflicting provisions. But where the articles of organization and smart contract conflict, the smart contract shall take precedence over any contradictory provisions of the articles.


Taking this into account, it is wise to very clearly and very consistently “build” the governance and management provisions in all the constitutional instruments of your DAO LLC: smart contract, articles of organization, and operating agreement.


Each article of organization of the DAO LLC must contain certain statements about DAO, the wording of which you may find in the special regulations for DAOs. It must also include information on:

  • the rights and voting rights of members;
  • transferability of membership interests;
  • relations among the members and between the members and the DAO LLC; and
  • activities of the DAO LLC and the conduct of those activities, etc.


Registering a Wyoming LLC for DAO


First of all, a DAO LLC may be formed by either establishing a new legal entity or converting an existing LLC to a DAO LLC by amending its articles of organization to include the statement provided for in the relevant regulation.


Any person may form the DAO LLC (which must have at least one member) by signing and delivering one original and one exact duplicate or verified copy of the articles of organization to the secretary of state for filing. The person forming the DAO LLC should not be a member of the DAO LLC. You can deliver these documents either online or by mailing the paper form. Each DAO LLC must also have a registered agent.


Getting started with your DAO Legal Wrapper


If you need a Legal Wrapper for your DAO and are planning, among other things, to accumulate profits or distribute them among DAO members, you may want to consider Wyoming as an option. The main benefits of this jurisdiction are investment attractiveness, simplicity, speed, and flexibility.


You might also like to check out the Wyoming Secretary of State FAQs re DAO LLCs:


Cost Estimator:

Set up: $US1,400

From 2nd year $990


Would you like to know more? Then please Contact Us:


DISCLAIMER: OCI is a Company/Trust/LLC/LP/Foundation Formation Agency. We are not tax advisers or legal advisers. You are advised to seek local legal/tax/financial advice in regards to your local reporting/tax requirements before committing to set up or use an Offshore Company or other entity.