Cryptocurrency Regulation in Vanuatu Prior to 2024

Vanuatu’s legislative landscape for cryptocurrencies prior to 2024 illustrates a significant development in embracing digital assets, while also grappling with regulatory challenges.

Legal Status and Oversight

Cryptocurrency is legal in Vanuatu, with the government recognizing the potential of digital currencies and blockchain technology. The Vanuatu Financial Services Commission (VFSC) oversees cryptocurrency-related activities and imposes penalties for non-compliance with laws. This includes compliance with the Anti-Money Laundering and Counter-Terrorist Financing Act​​​​.

Regulatory Framework Development

As of 2023, the VFSC was actively working on a regulatory framework for cryptocurrencies. This framework aimed at consumer protection and maintaining financial market integrity. Key aspects of this framework included licensing requirements for cryptocurrency exchanges and regulations for Initial Coin Offerings (ICOs), treating them similarly to other securities​​.

Cryptocurrency Trading and Gambling

Cryptocurrency trading was legal, with traders required to be licensed by the VFSC. While there were no specific laws prohibiting cryptocurrency gambling, all forms of gambling were subject to general gambling laws​​​​.

Digital Asset Legislation

A significant legislative development occurred on July 22, 2021, when Vanuatu amended the Financial Dealers Licensing Act to include the term “digital asset.” This amendment authorized services related to the distribution, trading, custodial storage, and provision of investment advice for digital assets. This change indicated Vanuatu’s commitment to incorporating digital assets into its financial services sector​​.

Cryptocurrency and Citizenship

Vanuatu also approved the use of cryptocurrency for Citizenship by Investment applications. Known as the Vanuatu crypto passport, this program allowed investors to obtain Vanuatu citizenship in exchange for bitcoin, without any stay requirements​​.

Regulatory Challenges

However, concerns were raised about the nascent stage of Vanuatu’s regulatory environment for managing cryptocurrency dealings. There was apprehension that the country might struggle to keep pace with technological advances in the digital asset sector. The amendment to the Financial Dealers Licensing Act was seen as a potential factor in the EU’s continued blacklisting of Vanuatu due to non-compliance with Anti-Money Laundering/Combating the Financing of Terrorism (AML/CTF) regulations​​.

This period in Vanuatu’s history marks a pivotal moment in its approach to digital currencies. The nation’s efforts to integrate cryptocurrencies into its financial system, coupled with the challenges of developing a robust regulatory framework, reflect the broader global trends and dilemmas faced by many countries in adapting to the rapid evolution of digital assets.