BVI business companies as corporate vehicles for digital token issuers – FAQs

• The BVI has a business-friendly regulatory framework that is favourable for fintech and blockchain businesses.

• The BVI has become a prominent jurisdiction for digital token issuers.

•  BVI business companies can be incorporated for the purpose of acting as digital token issuers.

Introduction

The British Virgin Islands ("BVI") have become a prominent jurisdiction for digital token issuers due to the flexibility of the BVI Business Companies Act, 2004 (as amended) and a robust but commercial BVI regulatory environment.

These FAQs aim to provide a snapshot for clients considering incorporating a BVI business company to issue digital tokens.

Can BVI business companies be used as vehicles for digital token issuers?

Yes. Subject to the BVI business company's Memorandum and Articles of Association ("M&A"), the objects of a BVI business company are usually unrestricted. As such, BVI business companies can be incorporated for the purpose of acting as digital token issuers.

Why should I consider using a BVI business company for issuing digital tokens?

The BVI offers several advantages, including tax efficiency, flexible corporate structures and a well-established legal system. It has a business-friendly regulatory framework that is favourable for fintech and blockchain business.This is particularly useful where there will be a public sale element because proprietary public token issuances are not generally regulated in the BVI.

How long does it take to incorporate a BVI business company?

A BVI business company can usually be incorporated within 24 hours. A BVI business company is incorporated by the registered agent (as incorporator) signing the M&A and filing the M&A with the Registrar of Corporate Affairs. Prior to incorporation, the registered agent will require the client to complete on-boarding requirements (including "know your customer" requirements) which can take up to a week (although it can be considerably quicker if all documents are in order).

Does a BVI business company need a director?

Yes. A BVI business company requires a minimum of one director (unless the company is regulated as a fund under the BVI Mutual Funds Regulations (as amended) or engaged in regulated virtual assets services under the BVI Virtual Assets Service Providers Act, 2022, in which case a minimum of two directors is required). There are no residency or qualification requirements for directors or shareholders of a unregulated company. Corporate directors are also permitted for unregulated companies. It is possible to appoint a locally-resident professional director for tax, regulatory or other reasons and there are a number of professional directors on island who are active in the digital assets space and willing to perform this role.

Does a BVI business company need to set up a bank account?

No. There is no requirement for a BVI business company to set up a bank account and it is relatively common for such companies to carry out transactions "on chain". Where a bank account is required for operational reasons, there is no need for the bank account to be in the BVI. We are familiar with a number of banks that provide services to clients in the digital assets space and, on request, can provide details of such banks.

Are there any tax benefits to using a BVI business company for digital token issuances?

BVI business companies enjoy a favourable tax regime, with no stamp duty, income taxes, corporate or capital gains taxes, withholdings, levies, estate duties, inheritance tax or gift taxes. However, it is important to obtain tax advice from your onshore counsel and tax advisers.