Originally published by Harneys
Written by Mirza Manrah, Ayana Hull and Aki Corsoni- Husain
The sandbox regulations designed to foster the growth of FinTech related business seeking to start up in the jurisdiction, will now come into force as of 31 August 2020, as announced by the BVI Government. The Financial Services (Regulatory Sandbox) Regulations 2020 (the Sandbox Regulations) were passed on 10 June 2020 but the date of their coming into force was not set at that time. In late July, key Government stakeholders announced that the Sandbox Regulations will commence at the end of this month.
Under the Sandbox Regulations, BVI companies and other undertakings will be able to test FinTech and relevant financial services products on a trial basis within a ”light touch” regulatory environment. The regulations apply to such businesses where they engage in “Innovative FinTech”. In turn this is defined as the development or implementation of a new system, mechanism, idea, method or other arrangement through the use of technology to create, enhance or promote a product or service with respect to the conduct or provision of a financial services business. While the business operates within the regulatory sandbox the full suite of regulatory licensing requirements will not apply – instead the ”regulatory light touch” regime will apply.
Application to the BVI Financial Services Commission (the BVIFSC)
A BVI entity that would like to utilise the sandbox will need to make an application for approval to the BVIFSC. The application will need to include the following information:
The application fee which is payable on submitting the application to the BVIFSC is US$2,000 and a further fee is charged on approval ranging from US$2,000 for a simple business model to US$10,000 for a complex model.
Approval of the application
Where an application is successful, the BVIFSC will indicate to the applicant how long the applicant will be permitted to operate within the testing period of the sandbox. The maximum initial time is 18 months, extendable by a further six months on good grounds.
At any time during, or at the end of the testing period, a sandbox participant that is not the holder of a full licence from the BVIFSC and who wishes to carry out financial services business, may apply to be licensed under any regulatory legislation applicable to the offering of its products or services in the BVI and that regulatory legislation will apply to the applicant from then on.
The BVIFSC can revoke any approval granted to a sandbox participant if it is satisfied that the participant: has contravened provisions of the Sandbox Regulations; has submitted false, misleading or inaccurate reports or information to the BVIFSC; has concealed or failed to disclose any material fact in its application for approval or in its report to the BVIFSC; is undergoing or has undergone liquidation; has breached any data security whether in relation to testing within the regulatory sandbox or otherwise; is carrying on business in a manner that is or may be detrimental to its clients or to the public generally; is no longer fit and proper; or where it is not in the public interest that the sandbox participant should continue to be approved.
BVI’s offering to the industry
The BVIFSC has been consulting on the concept of a regulatory sandbox for the jurisdiction since at least 2018 (see our earlier article here). The new Sandbox Regulations are a welcome addition to the range of options open to innovative businesses seeking to operate in or through the BVI. Further, the BVIFSC is a nimble and efficient regulator that makes it the perfect venue for approving and testing start-up businesses in the sector.
Globally, the new regime also ensures that the BVI’s legislative regime in this area is on par with those of the leading trend-setter jurisdictions in Europe (Lithuania, Poland, Netherlands, Denmark and the United Kingdom), North America (Canada and some states of the US) and Asia-Pacific (Australia, China, Japan and Singapore).
A copy of the Sandbox Regulations can be found here.
A copy of the FSC’s public presentation on regulatory sandboxing (BVIFSC’s Meet the Regulator, 3 July 2019) can be found here.