Vanuatu Passes Crypto Licensing and Regulation Act

Vanuatu has officially enacted its crypto regulation and licensing framework, joining a growing list of nations implementing oversight for virtual asset service providers.

According to a report from Finance Magnates, the country’s Parliament passed the Virtual Asset Service Provider (VASP) Act on March 26.

The act grants the Vanuatu Financial Services Commission (VFSC) the authority to issue licenses and regulate crypto businesses.

The new law defines virtual assets as “digital representations of value that may be traded and function as a medium of exchange, a unit of account, or a store of value.”

However, it explicitly excludes digital representations of fiat currencies, securities, and central bank digital currencies (CBDCs).

Despite the establishment of a regulatory framework, cryptocurrencies are still not recognized as legal tender in Vanuatu.

The VFSC has mentioned that while cryptocurrencies depend on market demand and supply, they hold value due to their exchangeability for other assets.

With this legislation, the island nation aims to establish a structured digital business environment that fosters competition, attracts investment, and ensures consumer protection.

Additionally, it seeks to facilitate faster, lower-cost cross-border transactions and enhance financial inclusion.

A Move Towards Stringent Oversight

Vanuatu’s decision to regulate the crypto industry comes after years of deliberation.

The VFSC first initiated discussions in 2020, but delays due to political changes, natural disasters, and the COVID-19 pandemic postponed its passage.

However, in June 2024, VFSC Commissioner Branan Karae reaffirmed the government’s commitment to finalizing the bill, which ultimately led to its enactment in March 2025.

The legislation sets out strict licensing and compliance requirements for virtual asset exchanges, non-fungible token (NFT) marketplaces, and custody providers.

Even banks may now obtain licenses to offer crypto exchange and custody services.

Notably, the VFSC has been granted sweeping investigative and enforcement powers, allowing it to ensure compliance with Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) regulations.

Any violations of the act can result in severe penalties, including fines of up to 250 million vatu ($2 million) and prison sentences of up to 30 years.

To further encourage innovation while maintaining oversight, the VFSC has introduced a regulatory sandbox.

This provision allows companies to operate as virtual asset service providers for an initial period of one year, with the possibility of renewal.

This measure is expected to allow businesses to test their operations in a controlled environment before obtaining a full license.

Offshore Jurisdictions Competing for Crypto Businesses

Vanuatu’s move to regulate crypto services mirrors recent actions by other offshore financial hubs.

Earlier this month, the Cayman Islands updated its crypto licensing framework, requiring virtual asset service providers (VASPs) operating within its jurisdiction to obtain licenses from the Cayman Islands Monetary Authority starting April 1, 2025.

Similarly, Taiwan and Turkey have recently introduced or tightened their crypto regulations to align with global AML and investor protection standards.

Vanuatu has long been regarded as an offshore financial center and tax haven. Its around 2,300 registered institutions offer banking, insurance, legal, and trust services.

In 2023, the country mandated that brokers operating from Vanuatu must have an onshore presence.

The new crypto regulations reinforce this approach by ensuring that digital asset service providers are held to high compliance standards.

As it stands now, Vanuatu’s proactive stance may enhance its attractiveness as a destination for legitimate digital asset businesses while deterring illicit financial activities.

The success of Vanuatu’s crypto regulatory framework will depend on effective implementation and enforcement.

With the VFSC now overseeing the sector, the next few years will be crucial in determining whether the country can attract quality crypto businesses while ensuring financial integrity and security.

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