Why a BVI VASP licence matters: penalties, banking, the Travel Rule and Indian users

Founders often ask whether a British Virgin Islands company can run a crypto business "under the radar" and register later. Since the Virtual Assets Service Providers Act, 2022 came into force on 1 February 2023, that question has a clear legal answer, and a practical one: many banks, exchanges and investors now check. This note explains why the registration matters. Our earlier note on when a BVI company needs VASP registration covers which activities are caught and what the application involves.

Licence or registration?

Many people search for a "BVI VASP licence". In law it is a registration with the BVI Financial Services Commission (FSC), and a custody or exchange business needs approval for that category on top of the basic registration. In practice it works much like a licence: the Act requires registration to provide virtual asset services in or from the BVI, and a registered business that provides only virtual asset services does not also need a separate BVI business licence or a securities or money services licence.

1. Operating without it is an offence

• The regime covers exchanging, transferring, holding or administering virtual assets as a business for or on behalf of other people, and financial services for a token issuer's sale. A company that trades only for its own account, a merchant that accepts crypto as payment, or a developer that never holds or moves customer assets is generally outside it. The line can be fine, so it is worth confirming with BVI counsel.
• Carrying on a virtual assets service without registration is a criminal offence. The Act provides for a fine of up to US$100,000 for a company or US$75,000 for an individual, imprisonment of up to five years, or both.
• On the Act's wording, a BVI business company that provides, or holds itself out as providing, these services outside the BVI is treated as providing them from within the BVI. Serving only customers in India or elsewhere does not by itself take the company outside the regime.
• VASPs have also been required to comply with the BVI anti-money laundering legislation since 1 December 2022, so obligations such as customer due diligence, record-keeping and suspicious activity reporting apply whether or not the company has registered.

2. Banks, exchanges and payment partners check

A crypto business needs fiat banking, payment processors and, often, accounts with other exchanges or liquidity providers. Most of them have their own anti-money laundering duties and commonly ask who regulates the business. A BVI company that is not on the FSC's list has a hard time answering that question, and its counterparties take on the risk of dealing with an unregistered provider. Registration does not guarantee an account, but without it the business has no BVI regulator to point to.

3. The Travel Rule puts counterparties under scrutiny

BVI VASPs must apply the Travel Rule: originator and beneficiary information has to accompany virtual asset transfers of USD 1,000 or more, the threshold in the FSC's guidance, with smaller transfers scrutinised on a risk-based approach. VASPs must assess the risks posed by the counterparty VASPs they deal with, and when sending to a jurisdiction without full Travel Rule implementation, take reasonable steps to check that the receiving VASP can properly receive the information. An unregistered business is likely to attract closer scrutiny under that due diligence.

4. Investors and acquirers ask for it

Investors, lenders and buyers of a crypto business often check whether it holds the registrations its activities require. An unregistered operating history can mean a warranty claim, a price reduction or a deal that does not close. Registration also brings governance that investors commonly look for: at least two individual directors (corporate directors are not permitted, and the FSC may require one director to be resident in the BVI), an approved auditor, a compliance officer and money laundering reporting officer, and documented cybersecurity and business continuity plans.

5. What registration commits you to

6. How to check whether a BVI firm is registered

The FSC publishes a list of registered virtual assets service providers on its website, showing each entity's name, its category (VASP, custody provider, virtual assets exchange or authorised representative) and, for most, its approved activities. As at the date of this note it named only around a dozen firms. Check the category as well as the name: a firm listed only as an authorised representative is not itself a registered VASP. If a platform describes itself as "BVI licensed" but does not appear on the list, ask which registration it holds before sending money or signing an agreement.

7. What BVI registration does not cover

• Tokens with investment rights. Where a token is in substance a security or other investment, the BVI Securities and Investment Business Act may apply. The VASP Act's exemption from that licensing covers only a business that provides virtual asset services alone.
• Other markets. BVI registration does not authorise the business to serve customers in other countries; each target market, such as the UAE, the EU or the UK, applies its own rules.
• India. A BVI platform that provides exchange, transfer, custody or related services to users in India in the course of business is a reporting entity under India's Prevention of Money-laundering Act and must register with the Financial Intelligence Unit-India (FIU-IND); the obligation does not depend on physical presence in India. FIU-IND issued show-cause notices to nine unregistered offshore platforms in December 2023 and asked for their websites to be blocked. The 1% TDS under section 393 (194S) on consideration paid to Indian residents for transfers of virtual digital assets also has to be dealt with, by the exchange or the buyer depending on how the trade is structured.
• The founder's Indian position. An Indian-resident founder's shares in the BVI company must be acquired under India's overseas investment rules through an authorised dealer bank, and a resident individual can make overseas direct investment only in an operating entity not engaged in financial services activity, so that question needs advice first. A founder who is resident and ordinarily resident reports the holding in Schedule FA, the foreign assets schedule of the income tax return. If the company's place of effective management is in India, it can be treated as Indian-resident and taxed in India on its worldwide income, and running it from India can also create a taxable presence. The FSC registration changes none of this.

Is it worth it?

For a business that exchanges, transfers or holds crypto for customers, a registration is likely to be needed somewhere; the practical question is which jurisdiction fits, and which other markets will need their own registration. BVI application fees are relatively low, but a BVI registration gives the founder no residence or banking relationship, and the BVI has no tax treaty with India. Founders who will run the business from the Gulf can compare it with a UAE route — VARA in Dubai, ADGM or DIFC — covered in our note on moving a Web3 company to Dubai.

Questions we are asked

Is a BVI VASP licence the same as a VASP registration? In substance, yes. The BVI Act uses the word registration, granted by the Financial Services Commission, with separate approval for custody and exchange businesses, and it requires registration to carry on a virtual assets service in or from the BVI.

What is the penalty for running an unregistered crypto business from a BVI company? The Act provides for a fine of up to US$100,000 for a company or US$75,000 for an individual, imprisonment of up to five years, or both.

Does a BVI company serving only non-BVI customers need VASP registration? On the Act's wording, yes, if it provides virtual asset services as a business for or on behalf of others, because a BVI business company providing those services outside the BVI is treated as doing so from within the BVI. Confirm the position with BVI counsel.

How can I check whether a crypto platform is registered in the BVI? Check the Financial Services Commission's published list of registered virtual assets service providers, which shows each entity's name, category and, for most, approved activities. A firm listed only as an authorised representative is not itself a registered VASP.

Does BVI VASP registration allow a platform to serve users in India? No, not on its own. A platform providing exchange, transfer or custody services to users in India also needs FIU-IND registration under India's anti-money laundering law, and the 1% TDS under section 393 (194S) on payments to Indian residents for virtual digital asset transfers has to be dealt with.

Ibrahim Khan · I. H. Khan and Associates
Tax, GST and business setup advisors — Mumbai and Thane. Contact us to discuss your situation.

Related articles

• A BVI company for a crypto business: when VASP registration applies, and the Indian side
• Moving your Web3 company to Dubai: VARA, DMCC, residency and the Indian exit
• Using Binance, Bybit or Kraken from India: FIU-IND registration, TDS and what you must report
• Crypto tax in India for FY 2026-27: the 30% rate, 1% TDS, the loss rule and Schedule VDA, with examples

How we can help

• Crypto tax consultant
• International business setup from India