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Vanuatu Finally Approves its Long-awaited Crypto Regulations, which Introduce Stricter Rules

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  • Under the Virtual Asset Service Providers Act passed by Vanuatu, all virtual asset service providers need to obtain full licenses.
  • The New crypto regulations serve two purposes: first to combat fraud and also to protect the nation from exploitation brought on by the FTX collapse.
  • Vanuatu’s new crypto regulations are expected to enhance cross border payment as well as financial accessibility.

The island nation of Vanuatu has enacted new laws that regulate the cryptocurrency industry on the island, introducing licensing standards for local crypto businesses. These crypto regulations are described as ‘strict’ in nature and are designed to prevent those who could use smaller countries as a ‘shophouse’ for fraudulent activities.

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The Vanuatu Financial Services Commission (VFSC) was authorized by the local parliament on March 26, with the Virtual Asset Service Providers Act passed to issue licenses for crypto businesses.

Specifically, this law requires the VFSC to comply with Financial Action Task Force recommendations regarding money laundering and financing of terrorism. During investigations, it uses available legal tools and enforcement past penalties to ensure compliance.

Serious consequences are also outlined in the law, with a fine not exceeding 250 million vatu or a jail term not exceeding thirty years.

VFSC Introduces Stricter Crypto Regulations

Loretta Joseph, a consultant who helped draft these laws, told in an interview about the strictness of these regulations, warning that criminals attempting to commit fraud in Vanuatu could be taken seriously. Given some of the events of late related to the FTX exchange collapse in 2022, where the founders were engaged in major fraud, she stressed the importance of having good regulatory systems.

The VFSC confirmed that the new laws include regulations referring to stablecoins, tokenized securities, and central bank digital currencies, which fit the definition of virtual assets. Additionally, the VFSC said that the development of this legislative framework was dependent on years of determining the levels of risk surrounding virtual assets. For this reason, it is expected to create many opportunities for Vanuatu as well as lead to financial inclusion through the provision of regulated services for cross-border crypto payments.

From the beginning, the crypto regulation bill was expected to be approved by VFSC commissioner Branan Karae in September 2024. But Joseph said lawmakers chose not to rush the process. The bill was introduced in 2020 but was shelved by changes in government, natural disasters, and the disruptions of the COVID pandemic.

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India inches closer to acquiring regulations on Cryptocurrency

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India’s road map in regulating cryptocurrency is gradually taking its shape. As per government sources, an all-encompassing bill on digital assets might be submitted for Cabinet approval before the Parliament session, beginning on November 29 this year. The much-anticipated bill would reportedly contain detailed aspects of crypto regulation, classification of these assets, and intent to tax earnings from them.

According to the sources, after the intent to tax earnings gets clearance, the provisions for implementation would be formally announced in the finance bill at the time of the Budget session, starting in January next year. Sources further said that India’s Finance Minister Nirmala Sitharaman’s budget might finally remove the regulatory ambiguity among the growing crypto enthusiasts in the country.

India working on the Crypo Tax framework

On the taxation aspect, a top government representative revealed that the authorities are currently working on framing legislation on the crypto assets. That being said, any profits or gains that arise from cryptocurrencies would be taxed in accordance with the rules of capital gains and might attract the regular Good and Services Tax [GST].

Reiterating similar sentiment, Revenue Secretary Tarun Bajaj recently stated,

We will take a call. I understand that people are already paying taxes on it. Now that it has really grown a lot, we will see whether we can actually bring in some changes in the law or not. But that would be a Budget activity. We are already nearing the Budget; we have to look into it at that point in time. if we come up with a new law, then we will see what is to be done. But yes, if you make money you have to pay taxes. We have already got some taxes. Some have treated it as an asset and paid capital gains tax on it.

Nevertheless, the latest developments with regards to regulating the cryptocurrencies and taxing the earnings from them are positive signs that the administration is adopting a more ‘balanced approach,’ unlike the Reserve Bank of India‘s [RBI] conservative stance. However, It needs to be seen whether the government’s position would follow the example of the moderate regulations in the European countries or be entirely unique in nature.

India working towards a “balanced” crypto law: Source

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India’s leadership is contemplating how to take a balanced stance on cryptocurrencies. The government is in the process of finalizing legislation on the crypto-asset industry which may be presented this year in the coming winter session of Parliament. A source close to the administration revealed that an absolute ban on cryptocurrency would be extreme and unfeasible considering the large-scale investments by both retail and institutions in India.

The government source speculated that the upcoming laws will be more balanced and is likely to address all relevant concerns of the stakeholders. In an interview with a leading newspaper, the person stated,

A balance has to be found. A middle path that balances the concerns of all stakeholders is more likely.

Recently, a meeting was held in the presence of policymakers, including from the finance ministry, which discussed the benefits and pitfalls with regards to other country’s regulatory stances on the cryptocurrency industry. The detailed presentation also weighed in on the crypto investments steered by Indians.

To top that, the Reserve Bank of India’s [RBI] position on the issue was put forward in the meeting. The gov representative divulged that the taxation part arising out of crypto trading would be discussed and finalized in the next scheduled presentation. The source also mentioned it would then go to the Cabinet for final considerations after the legal vetting.

Indian gov’s position on cryptocurrency

Previously, a high-profile government panel proposed a total ban on all forms of cryptocurrencies back in 2019. Subsequently, it had introduced a fine of up to $33.74 million and jail terms of 10 years to any individual dealing in them.

The hard-stance drastically changed when in August this year, India’s Finance minister Nirmala Sitharaman had stressed that the government would not put a blanket ban on the crypto assets but would instead adopt a “wait and watch” approach to understand how this emerging sector would benefit the fintech industry at its maximum potential.

To sum things up, the Indian government and the regulatory agencies have so far failed to provide much-needed clarity in finalizing the rules that could benefit the crypto players and other stakeholders. Only time will tell if the authorities are able to stitch a “balanced” yet progressive crypto law.

Japan to Implement Revised Crypto Laws By 1 May 2020

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As the world continues to tackle the immediate threat of COVID-19 spread across the globe, recent reports suggested that the Japanese government was moving forward with their plans to instill new laws in the country in order to regulate cryptocurrencies.

According to an official government newsletter dated 3 April, it was reported that the revised reversion of PSA and FIEA will be administered in Japan from the beginning of next month, i.e. 1 May.

PSA or the Payment Services Act and the Financial Instruments and Exchange Act (FIEA) are two separate bills passed by the Japanese House of Representatives at the beginning of 2019 to regulate digital assets in Japan. The legislation was expected to come into effect by the beginning of April 2020, but with the current pandemic outbreak tightening up on various enforcement actions, the dates were postponed to May.

Japan has always been active in the digital asset ecosystem as the infamous Mt.Gox exchange operated from Shibuya, Tokyo, before meeting an uneventful end.

At the time of writing, the country had lacked official regulations to supervise crypto in Japan, hence the amendment of current regulations was identified as the best-case scenario to introduce a form of legal status to digital assets in the country.

With the PSA, basic terminology was also altered, as ‘crypto-assets’ rather than ‘virtual currency’ would be used to tighten restrictions on crypto custodians.

The legislation also emphasized that crypto exchanges in the country would now need to manage their user’s capital separately and not mix them up with their own cash flows, by using ‘reliable methods’ such as cold wallets.

However, in the event that any users insist on the use of hot wallets, it is mandatory for the platform to hold the same kind and amount of crypto assets in order to repay to its users in the event of a hack or theft.

Certains changes were also made to the FIEA, which included the idea of electronics recorded transferable rights (ERTRs), which will be used to categorize ICOs and STOs, and these will be regulated under the act. It was indicated that ERTRs would be referred to tokens that are expecting a certain amount of profitability, such as security tokens.

Japan’s push for CBDC on the horizon?

The country has been plotting its move in the crypto-space for a long period of time and earlier this year, A member of the ruling party in Japan, disclosed to Reuters that some of the country’s policymakers were contemplating on the issuance of a CBDC or Central Bank Digital Currency, which will be a joint initiative between the government and the private organizations.

Norihiro Nakayama, the parliamentary Vice-Minister for Foreign Affairs, believed that such a partnership would put Japan in line with the current changes taking place in the global financial ecosystem and the country will be more than inept to adopt technological changes.