Vanuatu Passes Virtual Asset Service Providers (VASP) Act as a Major Step Towards Controlling the Digital Asset Sector

Approved by Parliament on March 26, 2025, this law creates a thorough structure for licensing and supervising Pacific island nation bitcoin companies.

Vanuatu has made a significant move towards regulating the digital asset sector with the passage of the Virtual Asset Service Providers (VASP) Act.

Approved by Parliament on March 26, 2025, this law establishes a comprehensive framework for licensing and supervising bitcoin companies in the Pacific island nation.

The VASP Act aims to create a disciplined digital business environment that supports consumer protection, investor attraction, and the assurance of fair competition.

Main Provisions of the VASP Act

The VASP Act grants the Vanuatu Financial Services Commission (VFSC) the authority to license and regulate virtual asset service providers (VASPs).

Virtual assets are defined by this statute as “digital representations of value that can be bought, sold, exchanged, or used for making payments and which are not legal tender, fiat currencies, securities, or central bank digital currencies (CBDCs).” The term is used broadly in this legislation to cover a wide range of digital assets.

However, this legislation does not recognize cryptocurrencies as legal money in Vanuatu. The VFSC clarifies that although depending on market demand and supply, virtual assets and cryptocurrencies have value since they are exchangeable for other assets.

The VASP Act imposes stringent licensing and compliance regulations on various crypto-related businesses, including custody providers, non-fungible token (NFT) marketplaces, and crypto exchanges. Notably, banks are now permitted to obtain licenses to engage in custody and trading services for cryptocurrencies.

Furthermore, the VASP Act empowers the VFSC to enforce the Financial Action Task Force’s (FATF) Anti-Money Laundering (AML), Counter-terrorism Financing (CTF), and Travel Rule criteria among crypto companies to ensure compliance with international standards.

The Commission has been delegated broad powers for investigation and enforcement, and non-compliance will be met with fines of up to 250 million vatu (about $2 million), or imprisonment for up to 30 years.

Vanuatu’s Place Among Offshore Jurisdictions

The initiative by Vanuatu to regulate crypto services showcases the prevailing trends among offshore financial centers. Earlier this month, the Cayman Islands announced changes to its crypto licensing policy, requiring virtual asset service providers operating within their jurisdiction to register and obtain licenses from the Cayman Islands Monetary Authority by April 1, 2025.

With approximately 2,300 registered organizations providing banking, insurance, legal, and trust services, Vanuatu has long been recognized as an offshore financial center and tax haven. In 2023, the nation mandated that brokers operating from Vanuatu must be onshore.

This strategy is further confirmed by the new crypto rules, which impose rigorous compliance requirements on digital asset service providers.

Final Thoughts

The passage of the VASP Act marks a crucial step by Vanuatu in regulating the bitcoin sector within its boundaries. The country aims to attract legitimate digital asset companies while deterring illegitimate financial activity through the establishment of a robust licensing and regulatory regime.

As Vanuatu seeks to position itself as a regulated hub for digital assets in the Pacific region, the success of this initiative will hinge on effective implementation and enforcement of the VASP Act.