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Launching an ICO through a British Virgin Islands company

01 Dec 2017

Interest in the setting up and distribution of initial coin offerings (ICOs) in the BVI and other offshore locations has mushroomed during 2017; we expect this to continue going forward. We set out below a summary guide of key BVI issues for parties to consider.

What are ICOs?

For present purposes we view ICOs as, typically, a means of raising third party capital through the issue of crypto-currencies, termed ‘tokens’, on a blockchain network. The fund raising is coordinated by the individuals or establishments sponsoring the ICO, termed ‘founders’. Once sufficient funds are raised they are invested by the issuing company in a project which is set out in further detail in the ICO’s business plan, known as a ‘white paper’.

The position of ICOs in the BVI

We set out below a high level summary of the relevant considerations when launching an ICO through a BVI company. For the purposes of this note, we assume that the ICO will be structured through a BVI business company, the current vehicle of choice for ICOs in the BVI.

Perhaps the most important point is that, at present, there are no ICO or blockchain specific rules or guidance yet issued by the government or regulator. At this stage the BVI is keen to take a ‘wait and see’ approach to ICO regulation which seems at present to be broadly in line with the position in the United Kingdom and across pan-EU law. As such we are left to considering the impact of the ‘pre-existing’ legislative and regulatory framework in the BVI.

Primary legal and regulatory considerations

The following laws are the most relevant to structuring an ICO through the BVI:

  • The Securities and Investment Business Act 2010 (SIBA)
  • The Proceeds of Criminal Conduct Act 1997 and its subsidiary legislation the Anti-Money Laundering Regulations 2008 and the Anti-Money Laundering and Terrorist Financing Code of Practice 2008 (together referred to as the AML Regime)
  • The Financing and Money Services Act 2009 (the FMSA)
  • The Beneficial Ownership Secure Search System Act 2017 (the Beneficial Ownership Regime)
  • Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard (CRS).
  • The Electronic Transactions Act 2001

Below is a short description of the issues which each law seeks to address. The extent of the scope to which each law or a combination of the laws and regulations above will apply will largely depend on the unique structure of the ICO.


SIBA contains a prohibition that no person may carry on, or hold themselves out as carrying on, investment business of any kind in or from within the BVI unless they holds a licence from the BVI Financial Services Commission or else benefit from one of the safe-harbours. What constitutes “investment business”, an “investment” and an “investment activity” are all defined terms in SIBA.

Most relevant to ICOs is the definition of “investments” under SIBA. This includes shares, interests in a partnership or fund interests, debentures, instruments giving entitlement to shares, interests or debentures, certificates representing investments, options, futures, contracts for differences, long term insurance contracts etc. Importantly however, ICO tokens or any form of crypto-currencies for that matter are not expressly classed as investments in their own right under SIBA. Understanding whether tokens issued under an ICO will therefore involve a consideration, typically, as to whether the token itself it equivalent to a security or, conceivably a derivative contract caught by SIBA. This is no simple task and requires professional legal advice in each case.

That said, most ICOs would not usually fall within the scope of SIBA and as such may conduct business legitimately without the need for the BVI company to hold an investment business licence.

SIBA requires that a prospectus be registered where an offer is made to the public. However, there are two points to highlight here:

  • Part II of SIBA which deals with “public issue of securities” is not yet in force
  • As mentioned earlier, the digital tokens or crypto-currencies issued under an ICO may well fall outside of the definition of securities under SIBA

In relation to (b), determining whether the type of crypto-currency can or will be considered “securities” in the SIBA context is key and to extent they are then certain exemptions may apply in any case so as not to require a prospectus or offering document to be published.

The AML Regime

The AML Law Regime needs careful consideration with respect to ICOs launched through BVI business companies. The AML Regime primarily focuses on the regulated sector in the BVI and requires certain policies and procedures to be established by “relevant persons” conducting “relevant business”. Both the terms “relevant persons” and “relevant business” are strictly defined terms. The requirements seek generally to provide for regulatory rules to minimise and eliminate any form of money laundering or terrorist financing through the BVI.

At present, ICOs are not caught within the definition of “relevant business” within the AML Regime and therefore the vehicle through which it is structured i.e. the BVI business company is unlikely to be deemed a “relevant person”. That being said, we would urge any ICO team about thinking about anti-money laundering and counter terrorist financing obligations regardless as a way of future proofing the business.


As relevant the FMSA regulates “money services business” in the BVI. Money services business under the FMSA entails: money transmission services, cheque exchange services, currency exchange services, the issuance, sale or redemption of money orders or traveller’s cheques or other such other services. These types of services contemplate money which amounts to legal tender, ie. fiat currencies. Digital tokens and forms of crypto currencies would therefore seem to fall outside the scope of the definition of money services business.

Beneficial Ownership Regime

Any detailed consideration of this regime is beyond the scope of this article and an analysis of the same may be found here. Very briefly, considerations around share ownership, voting rights, the right to remove a majority of the board of directors and the exercise of significant influence and control over an ICO Company will play a part in determining who needs to be recorded on the register. With this in mind, we do think that it is relatively straight forward to ensure that the identity of ICO token holders will not need to be maintained on any beneficial ownership register of an ICO company.


Both of these regimes relate to the automatic exchange of tax information between Participating and Reportable Jurisdictions. The FATCA and CRS legislation will be relevant to determining the ultimate beneficial ownership of the BVI business company issuing the ICO. While these pieces of legislation will not be immediately relevant at the launch of the ICO they will need to be considered as the BVI business company acting as the issue starts to conduct business more generally.

Electronic Transactions Act

The ETA is relevant since everything in relation to the launch and conduct of the ICO will be done on an electronic platform. As such, understanding the impact of the ETA’s provisions on electronic signatures and record keeping requirements is fairly fundamental. In very general terms the ETA lends support to the position that electronic records will not be denied legal validity simply because they are maintained in electronic, as opposed to paper, format.


The BVI legislative regime is flexible and, in our view, able to foster the growing number of ICOs establishing there. Nevertheless it will be very important for each new ICO to be properly advised in order to mitigate any risks of falling into regulatory prohibitions or other legal risks.